Chase to Widen Texas Portfolios' Distribution

Special to American Banker

Chase Manhattan Bank and its affiliate, Texas Commerce Bank, are planning an overhaul of the Houston bank's mutual fund family that would make more funds available to retail investors.

Chase is also considering offering Texas Commerce's Avesta funds through the same distribution channels as Chase's Vista funds. The Avesta portfolios currently are available only to retirement plans and rich retirees.

With $468 million of assets under management, the relatively unknown Avesta family is dwarfed by Chase's $29.6 billion Vista empire. But Avesta has proven itself a highly talented organization, with big ideas for managing money.

Most of the 13 Avesta portfolios have outperformed their one-year and three-year benchmarks.

Its four stock funds have shone particularly brightly in recent years: The small-capitalization fund, for one, boasts a return of 23.11% for the year through June 26, compared with 6.43% for Lipper Analytical Services' small-cap fund index.

Henry Lartigue, chief investment officer of the Texas Commerce private bank's investment management group, said he's working with Chase's global mutual funds group to register the Avesta equity funds fully so that they can be offered to retail investors. He also wants to shave the minimum investment required, to $5,000, from $100,000.

"These are our stars," he said of the stock funds. Plans are in the works for a nationwide ad campaign touting their performance.

All of this looks good for Chase, which is ever eager to bolster its asset management business. Texas Commerce is a sparkling little gem inherited by Chase in last year's merger with Chemical Bank, which had bought the Houston bank 10 years ago.

Avesta has been independent of the Vista family. Analysts say it's inevitable, however, that Avesta will be folded into the Vista name once the Texas bank's funds are distributed beyond state borders.

"The name is being looked at," said Sarah Jones, chief operating officer of Chase's New York-based global mutual funds division. "We don't want to be wedded to any of the predecessor organization's solutions. We have a tremendous amount of equity in the Vista name.

"The brand recognition of Avesta is really around the retirement platform built in Texas," she added, "so that the real value of that name is in that marketplace down there."

For now, Ms. Jones said, the plans, which do not include a time frame, are: to fully register the funds, distribute them among retail networks in the Texas market, and later distribute them in New York. It's too early to say whether the funds' management would change, she said.

Analysts said an Avesta integration would require much more planning than Chase's absorption of Chemical's Hanover family of money market funds.

For one thing, there may be some overlap between Vista and Avesta. Mr. Lartigue said some of Avesta's balanced funds may be discontinued and other products may be added to the family.

"We're not sure the rationale used to set up those (balanced funds is) consistent with what we'd want to do today," Mr. Lartigue said.

For another, cultural differences exist between the New York and Texas organizations. Some analysts speculate that the latter issue is causing much of the delay. After all, it took only two months for Chase to absorb Chemical Banking Corp.'s Hanover funds in 1996.

Michael Lipper, president of Lipper Analytical Services, said: "The question (for the AVESTA makeover) is the integration of people and systems and whether any clients will feel disrupted or disenfranchised."

If marketing and strategy decisions are shifted to New York, Mr. Lipper said, Chase might want to move the Houston money management talent to the Northeast in order to retain Texas customers while expanding the funds' distribution. Ms. Burns is a freelance writer based in New York.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER