Citicorp is joining the growing ranks of banks dropping the up-front fees on their proprietary mutual funds.

The banking giant plans to officially adopt a "no-load" policy for one of its two fund families, CitiSelect, a Citicorp Investment Services spokesman said. Citicorp had been waiving the sales fees as part of an introductory promotion, and now plans to make it a permanent policy.

"We intend to take the language concerning the load out of the prospectus," the spokesman said.

Waiving fund loads - the up-front fee customers pay for financial advice - has become an increasingly popular marketing ploy among banks looking to attract assets to their proprietary mutual funds. NationsBank Corp. and Barnett Banks Inc. waived the loads on their funds earlier this year, while executives at Norwest Corp. and Union Bank of California have said they are exploring the no-load strategy.

By dropping its sales loads, Citicorp is paving the way for its CitiSelect funds to be sold through the widely popular no-load fund "supermarkets" run by discount brokerages like Charles Schwab & Co. and Fidelity Investments. An industry source said the bank is also laying the groundwork to launch its own fund marketplace, as NationsBank did this month.

The CitiSelect funds, introduced in June, were designed to carry a load equal to 4% of a customer's investment. But during a special 30-day introductory period, the bank offered the funds load-free. That promotion proved so popular it was kept in place for another three months.

Indeed, the no-load policy helped the funds amass a mind-boggling $200 million of assets in the first six weeks of availability. The funds now boast $450 million of assets under management.

The decision to make the no-load policy permanent came after months of soul-searching at Citicorp. Peter Meenan, head of global funds at Citibank, told American Banker in a recent interview that charging a load for the funds is not unfair inasmuch as CitiSelect customers receive financial guidance. But, he also said the bank was open to officially adopting a no- load strategy if it would appeal to more customers.

Citicorp's other proprietary fund family, the Landmark Funds, were introduced several years ago with a no-load promotion. The mostly money market funds now charge investors a 4.75% front-end load, and will continue to do so, the spokesman said.

While some industry observers say offering a load and a no-load fund family is the best way to appeal to all customers, most say it is a difficult strategy to carry out.

"Distribution is one of the keys to success" when adopting a no-load strategy, said Joy P. Montgomery, a consultant at Money Marketing Initiative, Morristown, N.J. "And this is a totally different distribution system. Very few companies do both well."

The CitiSelect portfolios are asset-allocation funds that require a minimum $1,000 initial investment. The portfolios offer a mix of stocks, bonds, and money market instruments that varies as market conditions change.

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