Losses this quarter in a big money market mutual fund. managed by a unit of BankAmerica Corp. rocked the small firm that administers the banking company's mutual funds.
The company, Concord Holding Corp., New York, has warned that because of a decline in assets under administration and fees it will incur an unexpected loss of 2 to 3 cents per share in the quarter ending June 30.
Previously, analysts had expected the firm to earn 14 to 15 cents per share.
The announcement, made after markets closed on Friday, June 17, caused Concord's stock price to drop 25% on Monday, June 20, to $6.25, well below its initial public offering at $13 in February.
Big Source of Revenue
The experience highlights the dependence of the largest administrator of bank mutual funds on business with BankAmerica.
It also sheds further light on the troubles earlier this year in BankAmerica's Pacific Horizon Prime Money Market Fund.
According to a company spokeswoman, Concord gets nearly half of its revenues from BankAmerica, which retains Concord to distribute and administer its $10.4 billion proprietary mutual fund complex.
She added that the loss in assets and fees came principally from redemptions in the institutional portfolio of the Pacific Horizon Money Market Fund.
She did not disclose the volume of redemptions.
$7 Billion in Redemptions
But Richard K. Weingarten, a vice president and senior equity analyst with Montgomery Securities in San Francisco, estimated that funds administered by Concord suffered from nearly $7 billion of redemptions in the quarter.
A large portion of the redemptions were from the BankAmerica Pacific Horizon money fund, he said. The Concord spokeswoman said the estimate was
"In the ballpark."
Mr. Weingarten said the redemptions cost Concord about $1.5 million in fees, mostly because Concord waived administrative fees for the Pacific Horizon fund to help it out financially.
BankAmerica acknowledged earlier this month that it put $17.4 million of capital into the fund in May to keep its share price from dipping below $1.
Shift to Short-Term Paper
The fund lost money when interest rates rose and institutional investors sought higher returns from short-term securities.
Currently, Concord administers $30 billion of assets from 100 mutual funds.
Other clients include Barnett Banks Inc., Boatmen's Bancshares, and Chase Manhattan Corp.
Problems Seen Easing
Concord's net income for the fiscal year ended in March was $4.6 million, or 77 cents per share, on revenues of $29.7 million.
Concord's chairman, Richard E. Stierwalt said in a prepared statement that the problems this quarter were not expected to persist.
"The outlook for Concord's core business for the remainder of the year looks positive," he said.
Mr. Weingarten, the analyst, agreed. He noted that new business cushioned the blow from the redemptions, and that when interest rates stabilize, institutional investors will return to money funds.