Bankers Trust Co., which has aggressively pursued a leading position in the 401(k) business - second only to Fidelity Investments - is looking to corner the market.

The big bank already provides retirement products to over two million individuals and 300 of the nation's largest corporations, and it wants to do more.

"We think that long-term success is a balanced process between having our core competencies as a processor and a very competitive investment product array," said Timothy F. Keaney, managing director, who oversees the bank's defined-contribution business.

To that end, Bankers Trust is touting both its investment management and its technology prowess.

On the investment side, the bank has been emphasizing its own family of mutual funds.

Along with the its three life-cycle funds, money market funds, and two index funds, Bankers Trust has been promoting two actively managed funds - a small-cap fund and an international equity fund.

The two-year-old small-cap fund, an aggressive stock fund that invests in small companies with superior growth potential, is managed by well-known manager Mary Lisanti and has almost tripled its asset holdings since last year, to about $80 million.

"Bankers Trust has been known as a great manager of index funds," said John A. Huttlin, a vice president and product manager in the investment product area of the bank's retirement services unit. "But we also have actively managed funds, which a lot of people don't know about. They show we have an extremely well diversified asset management business."

Even so, Mr. Huttlin acknowledged that mutual funds do not yet make up a significant portion of the overall assets that Bankers Trust manages.

Of the $180 billion in assets the bank manages -- of which $155 billion are tax-exempt, only $5.8 billion are held in mutual funds.

"Mutual funds are still a fairly small percentage of our overall assets, but they are growing faster than any other structures," Mr. Huttlin said.

According to Mr. Huttlin, assets in mutual funds have grown by $1 billion since the end of last year.

"We have been aggressively gathering assets," Mr. Huttlin said. "Across the board at Bankers Trust, there is the recognition that mutual funds are an extremely important product for us."

Part of that recognition, according to Mr. Keaney, comes from a shift in the retirement arena toward more defined-contribution plans, including 401(k) plans.

Mr. Keaney said changing consumer attitudes about saving for retirement and a regulatory environment that has encouraged the trend, have helped fuel the move toward 401(k) plans.

Another factor is a trend toward daily valuation, which permits plan participants to monitor their funds on a daily basis and to shift them from one fund to another.

As recently as three years ago, valuation was done only on a quarterly basis.

Bankers Trust says that following trends may be helpful, but that anticipating customer needs is also important in shaping strategy.

It has developed some innovative approaches to satisfy those needs. One technological "first," for instance, is the recent introduction of customer voice recognition in the 401(k) administration area.

The system, created as part of a voice response unit for participants in Texas Instruments' 401(k) plans, enables customers to access their plans from anywhere. The system has been created with two types of customers in mind: older people, who either do not like to use touch-tone telephones or don't have access to them, and people who travel frequently.

Bankers Trust's system, introduced in March, is being used for one major client and has already become popular; the bank hopes it can convince other plan sponsors to adopt it. Meanwhile, State Street Bank and Fidelity are reported to have followed Bankers Trust's lead by introducing voice recognition.

Another first, according to Mr. Keaney, who joined the bank last year from Mellon Corp., has been the recent introduction of individual rates of return on employee statements, so that in addition to fund performance, customers will be able to see how much their contributions have yielded.

That development, according to Mr. Keaney, came about as a result of a request from a major client that wanted to show its participants the benefits of diversifying and asset allocation - shown in higher returns on statements.

Bankers Trust hopes it will be able to extend its market share by perfecting its technological and administrative facilities and farming them out.

Mr. Keaney has been promoting such outsourcing as the wave of the future, preaching Bankers Trust's client/server technology that combines existing capabilities and new developments - like voice recognition - and an enhanced reporting system.

He said most retirement plan managers are considering such outsourcing, and that Bankers Trust is hoping to join the trend and apply his firm's 401(k) capabilities to other areas of retirement processing.

"We find that companies want to do more business with fewer organizations," Mr. Keaney said. "We don't want our competitors nipping away at our master trust business and our defined-contribution business, so we want to be in a position to provide more solutions to our clients."n

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