HSBC Holdings PLC's planned acquisition of Republic New York Corp. would help it gain ground among banks that manage mutual funds.
The combined fund assets, at about $2.9 billion under management, would be relatively small beside some bank-managed funds. But the deal, expected to close in the fourth quarter, would increase HSBC's fund assets by three and a half times, giving it more scale and greater distribution possibilities.
The combined assets would leapfrog HSBC about 25 places, to 43d among banks managing U.S. funds, according to Lipper Inc. of Summit, N.J.
"It still doesn't make them a major" player, said A. Michael Lipper, chairman of the fund rating company, "nor is there an indication that they will go beyond their deposit base in trying to solicit deposits for the funds."
However, the banking companies could increase their assets under management by combining their private banking and trust units and boosting marketing, Mr. Lipper said.
The HSBC Family of Funds had $825.4 million of assets under management in eight funds on April 30, and the Republic Funds had $2.07 billion in nine funds, according to Lipper. HSBC also manages $2.07 billion of fund assets outside the United States.
HSBC manages $553.5 million of money market assets, $86.2 million in fixed-income portfolios, and $185.7 million of equity funds.
Republic has $1.35 billion of assets under management in money market funds, $147.6 million in fixed-income portfolios, and $574.6 million of equity funds, according to Lipper.
Republic also has a handful of newer funds, including a bond and small- capitalization stock fund, that Lipper has not begun tracking.
"Republic has been a little more aggressive in terms of its fund offerings," said David Huber, the president of Columbus, Ohio-based Bisys Fund Services, which distributes both fund families.
Republic has sold the funds through its retail brokerage and private banking channels, he said, but HSBC's funds have been more of a "pure trust product."
There is not much overlap, except in the banking companies' New York municipal bond offerings, said Scott Cooley, a domestic equity analyst for Morningstar Inc. in Chicago.
"It seems like a no-brainer that they'd want to combine those" tax-free funds, he said. "With the other funds it's a little bit harder to say."
It is too soon to tell how the banking companies' business lines will be consolidated, spokeswomen for both companies said.
"We are cataloging what everybody has," the HSBC spokeswoman said.
