WASHINGTON -- A wave of mutual fund takeovers is coming, and a major U.S. bank is likely to take home one of the first prizes, a prominent fund industry figure said last week.
"I think we will see an acquisition of a mutual fund management company by a large domestic bank holding company," said William J. Nutt, former president and chief operating officer of Boston Co.
Mr. Nutt said he expects to see such a deal within the next three years, even though it would require some maneuvering to cope with the Glass-Steagall Act's prohibitions on bank mutual fund activities.
A bank that acquired a fund company would have to turn over the job of marketing its funds to an unaffiliated distribution company, Mr. Nutt said during a panel discussion at the Investment Company Institute's annual convention here.
However, that would not be much of an obstacle because banks that manage homegrown mutual funds already maintain such relationships with distributors. More than 100 banks have their own families of mutual funds.
Banks typically get into the business of managing mutual funds by starting their own funds. But it can take a long time to build these so-called proprietary funds, which generally are created through conversions of trust assets.
In the past year, as the mutual fund business has heated up, banks have been searching for quicker ways to build critical mass.
One approach favored by banks is the formation of strategic alliances. The joint brokerage formed by NationsBank and Dean Witter Financial Services is the best example.
Some banks have been talking about acquiring mutual fund assets outright, but so far the strategy has been tried only on a modest scale.
Earlier this year, for instance, Chase Manhattan Bank's Vista family of mutual funds took over the tiny Olympus family of funds.
That deal, coupled with the smattering of strategic alliances, has raised expectations of more ambitious transactions.
Laying the Groundwork
Elaborating in an interview, Mr. Nutt said he thinks banks regard mutual fund acquisitions as an attractive way to deploy capital and a quick way to step up their presence in the fund business.
He said banks are laying the groundwork for more ambitious involvement in the funds business.
"Banks are practicing by swinging at a slow-pitch softball," Mr. Nutt said. "But they're going to get into the game."
He declined to speculate on which banks would become acquirers, or which mutual fund companies would be up for grabs.
Mr. Nutt knows firsthand about acquisition-minded banks. He resigned his post at Boston Co. last Friday, the day Mellon Bank Corp. completed its acquisition
of the money management and fund-servicing concern.
Boston Co. provides a range of services to 45 mutual fund companies with 115 billion in aggregate assets under management.
Mr. Nutt said he stepped down because he didn't like the way his responsibilities were shaping up on the new organizational chart.
Describing himself as a "free agent," Mr. Nutt said he will remain at Boston Co. for several more weeks while he decides what to do next.