William M. Ennis, head of First Union Corp.'s flagship Evergreen Funds, bristles at the notion that he is running a bank proprietary mutual fund family.

"I don't even look at other banks," Mr. Ennis said. "I look at Fidelity, Putnam, Massachusetts Financial Services, Oppenheimer."

This decidedly unbankerly outlook is one reason why First Union Corp. is closing in on its goal of amassing $100 billion in mutual fund assets by 2000. As of mid-September, it had $63 billion under management in two mutual fund families, nearly double its level of a year earlier.

Observers say First Union has a commitment to the mutual fund business that sets it apart from most banks in the field.

Through a string of savvy acquisitions, the Charlotte, N.C., banking company has built one of the nation's 25 largest mutual fund companies. By recruiting executives straight from the fund industry - an unusual strategy for a bank - First Union has helped that business thrive.

And despite its sharp focus on expanding its proprietary funds, First Union has remained an important sales outlet for many nonbank fund companies.

"They've got great vision and leadership from the top down," said Michael C. Vessels, who heads bank sales for AIM Management Group. The Houston fund company's products are among the top sellers through First Union's brokerage.

The bulk of First Union's mutual fund assets - $52 billion - is in the Evergreen Funds. The remaining $11 billion is in the Monitor Funds, which First Union acquired in February as part of its purchase of Wheat First Butcher Singer Inc., a Richmond, Va., investment bank.

The recent downturn in the equity markets could slow First Union in its pursuit of its $100 billion goal, said Richard X. Bove, an equity analyst with Raymond James Financial Inc., St. Petersburg, Fla. But, he added, the bank's mutual fund effort is clearly moving in the right direction, as evidenced by its 100% growth rate. "You can't show that type of growth if you're doing a bad job."

First Union has made a mark in the mutual fund business as a steady acquirer, both of asset management companies and of banks that happen to sponsor fund families.

"We would not be where we are today if we didn't have the engine of First Union behind us," Mr. Ennis said.

The bank was a pioneer in mutual fund acquisitions. It unveiled its $127 million deal for Lieber & Co., the investment manager of the Evergreen Funds, in October 1993. That deal was overshadowed two months later when Mellon Bank Corp., announced its agreement to buy Dreyfus Corp. for $1.8 billion.

In a bow to the superior reputation of the Evergreen Funds, First Union eventually made them the centerpiece of its investment products effort, supplanting the fledgling First Union Funds.

In the past 12 months, First Union's fund effort has gotten a further lift from the acquisitions of Signet Banking Corp. and CoreStates Financial Corp. The deals added $6.3 billion of mutual fund assets.

Brisk sales of long-term funds and - until recently - a strong equity market also boosted the bank's proprietary fund assets.

The desire to put the Evergreen Funds on a par with the whole mutual fund industry comes directly from First Union's chairman, Edward E. Crutchfield.

To foster the growth of First Union's investment business, Mr. Crutchfield has allowed a mutual fund culture to take root within the banking company. While many other banks have put veteran bankers in charge of mutual fund efforts, he has staffed First Union's Capital Management Group - which oversees trust, brokerage and asset management - with professionals straight from the asset management world.

One of the first was Mr. Ennis, 38, a fund industry veteran who joined First Union from Colonial Investment Services, Boston, in 1994. Around the same time, Mr. Ennis' boss, Capital Management Group president Donald A. McMullen Jr., came from American Capital Management and Research, in Houston.

The Capital Management Group enjoys high status and considerable autonomy at First Union. Perhaps it helps that neither Mr. Crutchfield nor John R. Georgius, First Union's president, took the traditional path - via commercial lending - to the executive suite.

"Ed's roots were in the capital markets business, while John Georgius was in the trust area," said Mr. McMullen. He said their strong commitment to the investment business encouraged him to accept a post at the bank.

"The idea, starting with Ed Crutchfield, was to invest in and build the type of business that our customers said was important to them," he said. Those customers, heavily baby boomers, wanted mutual funds, brokerage, and trust services, said Mr. McMullen.

At First Union Brokerage Services, mutual funds - including the Evergreen products - account for 45% of all investment products sold, a spokesman said. Fixed and variable annuities are the next biggest sellers, making up 35% of volume. Individual stocks and bonds make up the remaining 20%.

First Union Brokerage sells a range of third-party mutual funds along with its own, but the bank declined to say how sales of bank versus nonbank funds stack up. A spokesman did say that the Evergreen Funds are among the sales leaders, along with funds from AIM, Franklin Resources, Massachusetts Financial Services, OppenheimerFunds, and Putnam Investments, among others.

"They're fair," said Maryann Bruce, bank sales chief at Oppenheimer Funds, New York. "I don't sense that they push one over the other. Evergreen has to earn its place in the system.

"They want to be a top flight fund company competing with us," Ms. Bruce added.

If First Union were to reach the $100 billion mutual fund asset target set by Mr. Crutchfield in 1996, it would rank among the top 15 or 20 fund companies, according to industry data for midyear 1998. Evergreen is currently ranked 22d nationwide.

Mr. Ennis acknowledged that the market downturn won't help First Union reach its goal any faster - but he isn't worried. The mutual fund industry would be thriving even if its growth, which has been running at an annualized rate of 24% for 18 years, were cut in half, he said.

"Five years ago, people said it couldn't grow much further than $1.5 trillion. Today it's $5 trillion," Mr. Ennis said. In five years, even at a 12% growth rate, the market would top $8 trillion.

And First Union's mutual fund customers are not panicking, he said. "Today you're in a correction," he conceded. "But, I think people have accepted that the S&P doesn't go up 25% a year forever."

He added that Evergreen, like the rest of the mutual fund world, advises customers to take a long-term perspective on the market and sells products with a "good risk-return matrix."

First Union is certainly getting its share of the action. During the first half of 1998, before the equity market stumbled, total sales of the Evergreen Funds - through First Union and other channels - stood at $3.8 billion, the company said. Evergreen's sales of long-term funds for 1998 are on track to eclipse 1997's total of $4.15 billion, and have already surpassed the $3.03 billion total for 1996.

Currently, 70% of all Evergreen Funds sales are made through First Union's own broker-dealer network. However, Mr. Ennis said that going forward he would like half of all sales to be conducted through third parties, including other banks.

First Union has relationships with approximately 3,500 broker-dealers of varying sizes, including such giants as Merrill Lynch & Co. and Salomon Smith Barney.

Some bank brokerages are selling First Union's funds, among them, Cleveland-based KeyCorp, which has a reciprocal arrangement with First Union.

Mr. Ennis said he would like to sell the funds through "all banks." To that end, Evergreen will shortly appoint a national sales manager to deal solely with boosting sales of the funds through the bank channel.

As important as acquisitions have been for First Union, "the biggest component you want is strong organic sales," Mr. Ennis said. "By organic I mean both from our internal distribution platform and our external sales network."

Evergreen is also getting in front of investors with a $4 million advertising campaign. In the spirit of driving home that Evergreen is not just another bank-owned fund company, the campaign is entirely separate from one touting First Union, the bank.

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