The imminent acquisition of U.S. Bancorp by First Bank System promises to bring a formidable mutual fund complex to a nearly national customer base.

The merged bank's program-combining the broad product spectrum of First Bank's First America Funds with the smaller but strongly performing Qualivest Funds at U.S. Bank-will rank No. 8 in assets among bank-managed mutual fund programs. First Bank ranked No. 11 in American Banker's yearend listing.

Merging banks face a host of decisions, including which mutual funds to keep and which to merge. Industry experts warn that in merging fund families, the sooner the better.

"The market is so intensely competitive they need to get back to the external focus on customers as soon as they can," said David Master, a consultant at Optima Group, Fairfield, Conn.

A bank mutual fund executive who is now wrapping up the merger of two fund families after a bank merger concurs.

"Start early," said R. Gregory Knopf, managing director of Union Bank of California's Stepstone Funds.

That advice, he said, applies to talking to the directors of both fund groups, grappling with legal and regulatory issues, and working with the surviving fund marketer, administrator, and distributor, all of which are instrumental in the conversion process.

Mergers are a good time to evaluate contracts with distributors, fund accounting services, lawyers, and marketing firms, said both Mr. Knopf and Mr. Master.

A First Bank spokesman said it will not be ready to discuss plans for what the combined fund family will look like until the merger is complete, and offered no further comment. Qualivest executives were unavailable for comment.

However, the name Qualivest is unlikely to survive the merger, said stock analyst Ben Crabtree at Dain Bosworth Inc.

Today's Union Bank of California combines the California banks of the Japanese giants that merged to form Bank of Tokyo-Mitsubishi Ltd. The new Union Bank offered companies that had worked for its predecessors' funds equal opportunity to re-bid for the business, Mr. Knopf said.

No matter which bank's distribution method survives, the merger can have a profound effect on a bank's proprietary fund family, industry experts say.

Branch platform sales programs tend to sell more of the bank's own funds, said Kenneth Kehrer, a consultant in Princeton, N.J.,

Three years ago, he said, Minneapolis-based First Bank moved away from a platform sales staff and sold most investments through its brokerage subsidiary. Around the same time U.S. Bancorp, which is based in Portland, Ore., shifted its strategy to the platform sales force and cut its broker staff. The surviving sales strategy would affect the bank's mutual fund sales volume, he said.

Mr. Kehrer declined to predict which sales method would survive the merger, but said that both banks have strong programs.

The acquirer's strategy is not automatically the chosen distribution method, he noted. For example, First Nationwide Bank adopted California Federal's practice of selling investments through its branch sales staff. Before the merger, First Nationwide primarily used brokers, Mr. Kehrer said.

Mutual funds might not be the priority of executives trying to merge two large banks, but merging their funds well couldn't hurt.

"Any merger gives the benefits of scale across many areas," said Optima Group's Mr. Master. "And the name of the mutual fund game is scale."

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