An interesting set of circumtances in bank mutual funds is likely to arise from the recently announced takeover of Liberty National Bancorp of Louisville by Banc One Corp.
Banc Once has the sixth-largest bank proprietary mutual fund family in the nation, with over $5.6 billion in assets spread among the
One Funds, of which there are 20. Liberty National's Trademark Funds, are tiny in comparison, with $270 million of assets in four funds.
An initial evaluation of the relative size of the banks' proprietary fund families would make one think that Banc One would simply absorb the Liberty funds into the One Funds after the acquisition takes place.
However, this overlooks the story behind Liberty's Trademark Funds.
Over the last year, Liberty has built an impressive proprietary mutual fund operation that focuses on providing mutual fund sales and advice to its bank customer from locally trained, locally based bank employee.
The bank has learned that Louisville bank customers prefer to do their banking with local banks.
Liberty saw what happened when Citizens Fidelity, a local bank, was bought out by Pittsburgh-based PNC Financial.
Citizens changed its name to PNC, a move that caused many of its customer to take their accounts out of the bank and move them to locally run Liberty.
With the Citizens episode fresh in its mind, Liberty uses local landmarks to market its mutual fund family.
Its ads also use cartoons to promote the funds, and emphasize the advantage of buying funds from a local bank.
Since the Louisville bank customer typically does not like dealing with strangers, Liberty trains its own branch personnel to sell investment products
By yearend, 900 of Liberty's 2,300 employees will have completed a training program that involves 10 weeks of mutual fund classes, homework, and tests. While many other banks depend on outside firms to provide an investment sales force, Liberty finds that using its own sales force is more appealing to its bank customers.
The results confirm Liberty's strategy. The Trademark Funds were launched in February 1993 with $160 million in converted trust assets. By the end of May, the funds had already reached $240 million in assets.
The bank is seeing customers from other banks close out their accounts and come over to Liberty to put their money in the Trademark Funds.
Another reasons for the success of the Trademark Funds is the fact that they are sold without a load, which is more attractive to bank customers who are not used to paying a fee for traditional deposits or CDs.
Taking into account the particular Louisville consumer banking market, the local popularity of the funds, and the overall success of its mutual fund family, Banc One will have a hard decision to make about the fate of the Trademark Funds.