Amsouth Bancorp.'s planned deal for First American Corp. would nearly double its assets under management.
The combined fund assets, at $6.66 billion, would boost Amsouth's ranking to approximately 26th among banks that manage mutual funds, according to Lipper Inc., a fund tracking firm in Summit, N.J.
Birmingham, Ala.-based Amsouth is ranked 35th, and Nashville-based First American is 43d.
Though neither banking company is a powerhouse of fund assets, observers said, the families do complement each other. For example, $20 billion-asset Amsouth does not offer an international equity fund or a Tennessee tax-free municipal bond fund. First American, which is also a $20 billion-asset company, has both.
Still, there would be some overlap, particularly in their large- capitalization funds, and observers said they expect some consolidation.
"When you have a large-cap fund, it doesn't really benefit you to have a small amount of assets, as it would in a small-cap fund," said Hap Bryant, an analyst with Morningstar Inc. in Chicago.
The Amsouth Mutual Funds had $3.80 billion of assets under management in 17 funds on April 30, and First American's ISG Funds had $2.85 billion of assets under management in 20 funds, according to Lipper.
Amsouth manages $1.72 billion of equity fund assets, $1.2 billion of money market assets, and $884.3 million in bond funds.
First American manages $1.21 billion of assets in equity funds, $881.7 million of assets in money markets, and $760.4 million of assets in bond funds. First American also has two newer money market funds that Lipper has not begun to track.
Both companies use subadvisers, and both fund families are distributed by Bisys Fund Services of Columbus, Ohio.
Like most banks, the majority of funds have been converted from common and collective trust funds.
For example, 93% of ISG Funds' long-term assets under management and 89% of Amsouth's are in institutional share classes, said J. Mark Naber, a managing director at Optima Group, a Fairfield, Conn.-based consulting firm.
Amsouth's funds are distributed mostly internally through trust and brokerage. The funds are also sold through a few regional brokerage firms on a limited basis, said Michael C. Baker, the senior executive vice president who heads Amsouth's capital management group.
Amsouth has 75 full-time brokers and about 15 junior brokers. And about 520 bankers are licensed to sell fixed annuities, Mr. Baker said.
First American has about 100 full-time brokers and more than 500 bankers that sell annuities and mutual funds, said Robert A. McCabe Jr., the vice chairman of First American.
First American sells its funds through trust, regional broker-dealers, and 401(K) plans that it administers.
The ISG Funds are also offered through IFC Holdings, which provides investment products to banks through Invest Financial Corp. and Investment Centers of America.
"Amsouth is very interested in the third-party marketing industry as an investment strategy," IFC Holdings said in a memo to product providers.
Kenneth Kehrer, principal of a Princeton, N.J.-based consulting firm, said IFC Holdings could help boost distribution of the combined banking company's funds, but it could also deter small banks from partnering with Invest or Investment Centers.
"This new Amsouth might be viewed as the same kind of competitor that First Union and Bank of America are in the region," he said.
