Armed with more equity mutual funds to sell, Colonial Group Inc. is rebuilding its sales through banks.

The Boston-based fund company, historically known for its bond funds, stumbled in part because of the 1994 bond market crash but also had to contend with the "turmoil" that came with being acquired by Liberty Financial Cos. in 1995, said Stephen E. Gibson, Colonial's president.

Colonial should sell more than $750 million in mutual funds through banks this year, including its own funds and those of its new sister companies, Newport Pacific Management and Stein Roe & Farnham. Stein Roe had traditionally been a direct seller but recently created an adviser fund group that is sold through banks.

Over the last six months the company's top selling banks have doubled their sales, Mr. Gibson said. Colonial does most of its sales through 15 banks, including BankAmerica Corp., Banc One Corp., and PNC Bank Corp.

Colonial's bank sales, which now account for 25% of its volume, could grow to one-third by yearend, said Mr. Gibson. He was responsible for developing bank sales operations at Kemper and Putnam Investments before joining Colonial in 1996.

The $750 million sales mark would be a big step toward returning to the $1 billion plateau the company occupied in 1993 and would be a big jump from years like 1994, when it sold just $300 million through banks. Colonial's bank sales should get back to $1 billion by next year, Mr. Gibson said.

The improvement can be traced to several factors. Liberty Financial's 1995 acquisition of Newport, an investment management firm specializing in Asian equity markets, gave Colonial more equity funds to sell at a time when the market momentum had shifted to equities and away from bonds.

And the Stein Roe Advisor Funds have given Colonial clients a value- investing option for the first time.

Meanwhile, sales of Colonial's own growth-oriented equity funds have been spurred by improved performance and aggressive marketing by the company, Mr. Gibson said.

Thanks to the wider selection of equity funds, bank sales now run at a 70% ratio for equity funds and 30% for fixed-income funds, the reverse of the ratio five years ago.

Industry experts credit bank distribution chief Louis Tasiopoulos with helping engineer the improvement. Mr. Tasiopoulos, who joined Colonial in February 1997, is the former head of bank sales for Putnam Investments, the largest seller of funds through banks.

"Liberty has enabled them to broaden their line of investments to the point where they're certainly a broad and credible investment provider," said Mike Mortensen, president of PNC Brokerage Corp., Pittsburgh. "They've gone out and hired some good talent. I think they are going in the right direction."

And Liberty's purchase of Independent Financial Marketing Group in 1995 has given Colonial additional distribution. The huge third-party marketing firm should sell $4 billion worth of investment products through banks this year, Mr. Gibson said.

Colonial is also rebuilding its own wholesaler corps, which numbered 10 in the past but fell as low as four in 1994 as the company shifted its emphasis to brokerage sales. It now has eight wholesalers and is looking to hire two more.

Additional sales of Colonial funds through banks come via Keyport Life Insurance Co., another Liberty Financial company, which uses Colonial funds in its annuities.

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