First Union Corp. is assembling an expansion team it hopes will be as hot as this football season's Carolina Panthers.

The $139 billion-asset Charlotte, N.C., bank has been polishing its image as an innovator in investment product development and marketing since 1990.

Today, with $16 billion of assets, its 38 Evergreen funds are among the largest bank-managed fund families. And at the closing of its acquisition of Keystone Investments Inc. of Boston, its $27 billion-asset total will rank it third among bank-managed groups.

But top First Union executives have boldly stated their desire to amass $100 billion of assets by 2000. Their ambitions include ranking among the 10 largest complexes in the fund universe. Fidelity Investments currently is the largest with assets of just over $400 billion.

Until now, executives in the bank's capital management group - the unit that oversees trust, private banking, brokerage, and portfolio management - have followed a strategy of building assets in the Evergreen family by acquiring key marketing talent from the mutual fund industry as well as swallowing the portfolios of smaller fund firms.

Indeed, First Union is adding several dozen marketing and portfolio management executives and $11 billion of assets this year with the Keystone acquisition.

The game plan is changing, however. Donald A. McMullen Jr., president of the capital management group, and William M. Ennis, president of Evergreen Investment Services, have vowed to emphasize internal growth to advance toward the $100 billion-asset goal line.

Together, the two alumni of the mutual fund industry are developing a national brand image for the Evergreen name, tweaking their product lineup, distributing through a growing list of outside brokerages, and taking advantage of new distribution through territories added in the company's 1995 merger with First Fidelity Bancorp. of Lawrenceville, N.J.

But by many accounts, this game plan will not be easy to execute. The Evergreen Fund group is still trying to shake the stigma of being bank- managed. And several industry observers note that the funds will need more than a handful of star performers to capture the attention of the broad investing public.

To Mr. McMullen and Mr. Ennis, it is a fundamental issue. "We don't look at ourself as a bank mutual fund organization," said Mr. Ennis. "Those organizations specialize in mediocrity. We specialize in excellence."

Arguably, the group's most important victory came in 1993 with the $130 million acquisition of Lieber & Co., Purchase, N.Y. The no-load mutual fund boutique not only added $3 billion of assets to the bank company's mix but also brought a star manager, Stephen A. Lieber, and a stable of portfolios with solid performance histories.

Since that acquisition, First Union has gathered an additional $6 billion of assets from Palm Beach Capital Management in Florida and from First Fidelity's FFB Lexicon funds. Mr. Ennis noted in an August interview that $10 billion had resulted from "pure, internal growth."

But the Lieber funds remain at the heart of the Evergreen name and reputation today.

First Union executives pointed proudly to their relative success in distributing the Evergreen portfolios beyond their branch territory. More than 800 brokerage offices, including national chains like Merrill Lynch & Co. and fund supermarkets like Charles Schwab & Co., sell the funds at a rate of $30 million a month, said Mr. Ennis.

The funds' variety of equity and balanced portfolios - the bank manages $8 billion of fixed-income and another $6 billion of equity funds - is credited for the family's popularity. "We think they differentiate us from the rest of the pack," said Mr. Ennis.

The biggest sellers in those categories are the Evergreen Foundation Fund, Evergreen Growth and Income Fund, Evergreen Fund, and a newly minted Global Leaders Fund. Single-state municipal offerings, particularly a Florida fund, are also popular.

With its acquisition of Keystone, the company will gain a new corps of experienced salespeople to sign up additional brokerage outlets. "Keystone provides a complete marketing infrastructure that First Union would have taken years to build," noted Burton Greenwald, a Philadelphia mutual fund consultant.

First Union will also spend "millions" during the next year to advertise the Evergreen name in publications such as Smart Money and Individual Investor that reach the self-service investor. "We want the tree to be everywhere," said Mr. Ennis.

Beyond attempts to stoke interest in the Evergreen name outside the bank, the group is also busy creating products that package the funds in a way that will attract assets from existing customers.

First Union branches began selling the CAP account, a systematic savings plan, in January and had signed up 30,000 investors by the end of August. "It's bringing in young investors and older investors who are new to the process," said Mr. Ennis.

The bank also launched a proprietary variable annuity in April that has amassed $35 million of assets among the various fund subaccounts, he said.

And fund portfolios are being added to the roster. In June, a global fund entered the mix and has attracted $50 million of assets.

Next year, the group plans to add several funds of funds, a slate of institutional money market funds, and a 401(k) product packaged specifically for companies with fewer than 250 participants.

"There is nothing really earthshaking about these refinements," said Mr. McMullen. "But when you start refining off your core base, you start adding some real value."

Many outside observers warned, however, that Evergreen's carefully crafted brand image might ultimately suffer from a dependence on the fates of a handful of portfolios.

These observers said they look at First Union's offerings as falling within two distinct groups - the Lieber funds and all the rest. "Right now, their reputation rides on Steve Lieber," said Patrick Regnier of Morningstar Mutual Funds in Chicago. "And the whole family ebbs and flows with Lieber."

As an autonomous unit of the capital management group, Lieber & Co. manages 18 Evergreen portfolios and three variable annuity subaccounts.

These portfolios attract the most assets, according to Lipper Analytical Services, Summit, N.J. The Evergreen Fund holds $1.1 billion; Evergreen Value Fund, $1.3 billion; and Evergreen Balanced Fund, $946 million.

Mr. Lieber, with a long and fabled track record of investing in small capitalization value stocks with an eye to growth, has stumbled lately. Indeed, the bank company's flagship portfolio, the $1.4 billion- asset Evergreen Foundation Fund, dipped into negative territory this year, largely as the result of a miscalculation on the direction of interest rates.

The portfolio manager maintained that the fund will recover. "I happened to make a mistake," he said. "But it has been a powerhouse, and I have no doubt that the long-term performance will be strong."

But this stumble is what many observers point to when talking about the marketability of the Evergreen name outside First Union's branch territory.

"They are going to have to have another manager other than Lieber to attract attention, especially during down times like this," said Mr. Regnier of Morningstar. "Or they're going to have to have another star fund."

Some observers are skeptical about the strength of Keystone's performance as a means of achieving this. "They have a solid menu of funds," said Mr. Greenwald, the Philadelphia consultant, "but they are not a hot shot."

Nevertheless, Mr. Ennis said, he believes the long-term performance of the bank's collection of portfolio managers will win investors' allegiance.

And the group has very clear ideas about what it will not do to impress the public. Setting up its own mutual fund supermarket - as crosstown rival NationsBank Corp. announced in August it would do - is one of them.

"I don't know anyone that's asking for a supermarket," said Mr. McMullen. "It's really just a service issue. And we have been successful by doing what we're doing now."

First Union will also steer clear of the increasingly popular no- load mutual funds. "Sticking with the loads shows our clarity of purpose," said Mr. Ennis. "People need investment advice. We have to stick to our guns in terms of who we are, and broker-dealers will continue to be the dominant delivery channel."

With the $100 billion-asset goal line far from crossed, First Union executives are digging in for a push.

"We want to be the best," said Mr. McMullen. "As a core strategy, it is important to the bank. There are more mutual fund assets out there than bank assets. The consumers have already voted."

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