B of A Eyes Public-Sector Retirement Plan Market

BankAmerica Corp. wants public-sector retirement plans to become a source of assets for its proprietary mutual funds.

The San Francisco-based banking company has begun offering its Pacific Horizon Funds in 403(b) plans administered by Legend Group, a leading manager of retirement plans for public schools, universities, and nonprofit organizations.

"We are going after a market that has been virtually untapped by bank- managed mutual funds, and historically dominated by insurance companies," said Debra McGinty-Poteet, managing director of BankAmerica's funds management division.

BankAmerica's alliance with a leading retirement plan company comes at a time when banks are scrambling to find new sales outlets for their proprietary funds.

Ms. McGinty-Poteet said the bank is also exploring other sales channels for its mutual funds, including a bundled 401(k) plan currently in development and products - known as 457 plans - for government employees .

Legend Group's alliance with BankAmerica follows similar deals that the Palm Beach Gardens, Fla.-based firm struck with First Union Corp., First Chicago NBD Corp., and Mercantile Bancorp.

U.S. Bancorp also signed on last Friday, and Legend president Michael J. Provines said he expects seven other banks to come aboard in the next 90 days.

Traditionally, 403(b) plans have been largely repositories of fixed annuity investments. But as investors in these plans increasingly clamor for other investment options, including mutual funds, banks like BankAmerica see an opportunity to sell their proprietary offerings.

"People are demanding more of a choice in their investment options," Mr. Provines said.

Still, it's an uphill battle. One company, Teachers Insurance and Annuity Association/College Retirement Equities Fund, controls about 40% of the 403(b) market, according to Access Research, a Windsor, Conn., retirement plan consulting firm.

Geoffrey R. Bobroff, a mutual fund consultant based in East Greenwich, R.I., said that instead of the education field banks should concentrate on "the second-largest market: nonprofit hospitals" and other health care organizations that are "more lucrative and less locked-up."

Legend, which manages more than $2 billion of 403(b) assets, will deploy 60 to 80 salespeople for BankAmerica's California market. The banking company also hopes to compete for business in Washington, Arizona, Texas, Hawaii, and Oregon.

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