Kemper Funds Snapping Up Spots on Bank A-Lists

KemperFunds has won places on the preferred provider lists at Citigroup Inc. and other banks in recent months and is planning a marketing drive to target bank trust departments.

Kemper was added to Citigroup's A-list two months ago, said Gary Kocher, head of business development for the Chicago mutual fund company.

Within the last three months, Mr. Kocher said, the company was added to the A-lists at Regions Financial Corp. of Birmingham, Ala., Amsouth Bancorp, also of Birmingham, and Harris Bankcorp of Chicago.

And it signed selling agreements with the third-party marketers Bisys Group Inc. of Little Falls, N.J., in January and PFIC Corp. of Nashville this spring.

Kemper has 40 to 45 banks that are major sellers of its products, and it is on the A-lists at more than 100.

Because of its growth the company plans to add two wholesalers, one in the Northeast and one in Northern California, Mr. Kocher said. "We're eager to expand our capacity."

Kemper also wants to add dedicated wholesalers and a dedicated marketing program to drum up business at bank trust departments, he said. That effort is to be kicked off in the fourth quarter.

Mutual fund companies are increasingly turning their attention to trust departments. "We all finally realized that this represents a huge new potential," Mr. Kocher said.

Trust departments have long been the domain of a few big companies like Federated Investments of Pittsburgh, SEI Investments Co. of Oaks, Pa., and Fidelity Investments of Boston.

But the emergence of fund supermarkets has emboldened their rivals because the supermarkets eliminate the need for individual selling agreements.

In addition, the "prudent man" rule that had long dictated that trust departments take very conservative investment postures has been replaced in many states by the "prudent investor" rule. This lets clients select a more aggressive investment approach.

Jim Kemp, principal at Antaean Solutions, a trust consulting firm in Dallas, said managing money for bank trust accounts is "more open to competition than it ever has been before."

That's partly because of industry acceptance of outside management, he said.

"If the guy down the street has outsourced his, it makes it easier for you to do it," he said. In addition, "trust money is being treated more as investment money than something to be parked there for safekeeping."

Within two to three years trust sales could account for 10% to 20% of bank sales at Kemper, Mr. Kocher said, and within three to five years trust sales could account for 5% to 10% of companywide sales.

Kemper said it plans to create a trust wholesaling department despite the increased use of fund supermarkets such as those offered by Charles Schwab & Co. and Fidelity.

That is because a large percentage of sales through trust departments still come through direct sales agreements. And sales through supermarkets can be increased by having fund company representatives personally call on the chief investment officers or personal trust officers at banks, Mr. Kocher said.

Kemper had $1.2 billion of bank sales last year.

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