When it comes to selling mutual funds, performance is king. That's one of the hard facts banks have begun to face in the drive to establish themselves as serious players in the mutual fund business. A few years ago, when banks were brand new to fund management, most were preoccuppied with amassing fund assets by boosting sales forces and converting trust assets. Investment results, it seemed, were a secondary consideration. Returns on bank-managed funds frequently lagged those of funds run by mainstream managers. One reason: Banks' generally conservative investment style meant they didn't participate in the robust bull markets of the past decade, where aggressive investing was richly rewarded.
But as banks settle into the job of running their own mutual fund companies, they are becoming more focused on producing the steadily-above- market returns needed to win customers. Indeed, in a recent analysis, the American Banker found evidence that the handful of bank funds with at least a five-year track record stack up favorably against their nonbank rivals. That analysis, based on data from Lipper Analytical Services, Summit, N.J., also showed a strong correlation between bank funds' performance and their ability to attract assets from beyond the bank lobby.
Now the American Banker has teamed with Lipper again to identify the banking industry's leading mutual fund managers. The honor roll on page 2A of this special edition lists Bank Mutual Fund All-Stars evenly split between managers who led their investment-objective category for one year and for five years. Among those recognized are one of the biggest and best known bank-managed funds Chase Manhattan's Vista Growth and Income Fund and one of the smallest and least visible Texas Commerce Bank's Avesta Trust U.S. Government Securities Fund. While only a dozen mutual fund managers could be profiled in this issue, all 30 deserve congratulations. Leading the league among bank-run funds is surely a feather in the cap. But as portfolio managers at banks are quick to point out, their real competition is all fund companies. The ranking on page 2A also includes details on how the top bank-run funds stacked up against the wider competition. It's worth noting that four banking companies Bankers Trust, SunTrust, U.S. Trust, and First Union had mutual funds that beat all comers.