Bank mutual fund assets at the top 15 companies that administer these portfolios grew 10% in the second quarter, thanks to an improved investment climate.
Fund administrators, whose clients include some of the biggest bank funds, reported $273.7 billion of assets as of June 30, up from $249.5 million three months earlier, according to data prepared for American Banker by Lipper Analytical Services, Summit, N.J.
Bank fund administrators offer a variety of back-office services for funds, including fund accounting, bookkeeping, tax filing, compliance, marketing, and the preparation of daily asset values.
The companies also often act as "distributor," handling fund underwriting and other tasks that are off limits to banks.
A $5 billion boost in assets helped the Bisys Group's investment services division remain the top administrator of bank run mutual funds in the second quarter.
Bisys, a Little Falls, N.J., company whose largest clients are Banc One Corp. and BankAmerica Corp., was administrator for $54.9 billion of assets as of June 30.
Boston-based Shareholder Services Group was the second largest bank administrator, with $43.7 billion worth of fund assets, while SEI Corp., Wayne, Pa., was third with $30.9 billion.
Bisys executive vice president Stephen G. Mintos credited the strong stock market and higher interest rates for attracting investors to long- term and money market funds.
Mr. Mintos, whose company represents 38 bank fund families, said banks and their administrators are doing a better job marketing funds. "We're seeing great success in clients' retail programs," he said.
One industry expert said banks can get the most from their administrator by carefully scrutinizing contracts and holding frequent meetings.
"Look closely," said A. Stewart Rose, a former Fidelity Investments executive who now heads Alexander S. Rose & Co., a Duxbury, Mass., consulting firm.
"Settle on a plan and watch the implementation of that plan," Mr. Rose said.
Administration and distribution services require large investments in technology and depend on volume for decent returns. The industry, which grew up around bank mutual fund activities over the past few years, is already seeing consolidation.
In fact, this past winter saw two deals completed among large firms. Bisys purchased Concord Holdings, a New York administrator that served BankAmerica.
And First Data Corp., parent of the Shareholder Services Group, bought 440 Financial, Worcester, Mass., which counted Fleet Financial Group among its clients.