Once again, First of America Bank Corp. has snared some of the highest honors in a test of investment performance by bank-managed mutual funds.
The Kalamazoo, Mich., banking company - a perennial winner among bank fund managers - boasted the top bank-managed domestic stock fund in the third quarter. Its Parkstone Equity Fund, which has $650 million of assets, returned 8.59% during the period, while the benchmark Standard & Poor's index of 500 stocks returned 3.05%.
"In the Midwest, the Parkstone funds have some visibility, and that's due to their performance," said Richard B. Ross, head of Investment Marketing, Glencoe, Ill. "They do the Morningstar stars bit in their advertising." Chicago-based Morningstar's star system is a well-known gauge of mutual fund performance.
The rankings, compiled for American Banker by CDA/Wiesenberger, Rockville, Md., measure third-quarter results of bank-run funds with assets of at least $25 million, grouped into six categories by investment objective. While quarterly results are not the ultimate measure of how bank-managed funds are faring, they are taking on new meaning for banks seeking critical mass in their mutual fund management businesses.
"There is some correlation between good performance and sales," said Michael C. Baker, a senior executive vice president and head of the capital management group at Amsouth Bank, Birmingham, Ala. "A lot has to do with how good of a job a bank sponsor does at promoting those funds that perform well."
Amsouth's Regional Equity Fund, which has $96 million of assets, was ranked 21st among banks' domestic stock funds in the third quarter, producing total returns of 5.68%. While Amsouth has yet to advertise that result to the investing public, it plans to do so soon, Mr. Baker said.
"Banks have been reluctant to spend marketing money to promote good performance," he said. But, he added, "you can't play in this business without promoting your performance."
At SunTrust Inc.'s STI Capital Management, president James R. Wood said consistently healthy returns have made his unit's funds a favorite among SunTrust's customers.
"Over 50% of the funds we sell are our own," Mr. Wood said. "Part of that is, we have strong performance, and our people are longtime employees."
SunTrust's Classic International Equity fund, with $233 million of assets, was ranked eighth among banks' international stock funds in the third quarter, returning 1.22%.