CoreStates Institutional Unit Little Changed

Three weeks after buying CoreStates Financial Corp., First Union Corp. laid out a blueprint for institutional investment management that keeps much of CoreStates intact.

The combined business will be run out of First Union's Charlotte, N.C., headquarters. But many CoreStates portfolio managers remain in Philadelphia running accounts.

CoreStates added $17 billion of assets to the $33 billion managed by First Capital Group, First Union's institutional investment arm. The assets are split evenly among equity, fixed income, money market, and other limited-duration investments.

Previous acquisitions, including that of First Fidelity Bancorp. of New Jersey, had stretched First Union's market along the Atlantic coast from Florida to Connecticut. But due to the CoreStates deal, half of the institutional investment clients are now in the North.

"Strategically, it's big-time for us," said Peter R. Nagle, managing director of First Capital and head of marketing, sales, and client service. CoreStates' "presence is something we can really build on."

First Capital has benefited from more than just acquisitions. Mr. Nagle said his salespeople have brought in $840 million in separate accounts from 21 new clients since August. An additional $680 million came from existing clients.

The unit now has 127 portfolio managers and analysts and more than 45 institutional trust, employee benefit, and charitable fund salespeople. CoreStates brought 44 investment professionals and six salespeople to the mix.

Only three portfolio managers have left CoreStates' institutional business since the deal with First Union was announced. Also, an administrator on a money market desk departed.

Most of the new group's portfolio managers work in Charlotte or Philadelphia; smaller offices are in Jacksonville, Fla., and Morristown, N.J.

"For the vast, vast majority of their clients, they're going to get different letterhead, and that's about the extent of the changes that they're going to see," said David C. Francis, managing director and chief investment officer of First Capital.

"By keeping these teams independent and small," he added, "they are lean and mean."

Mr. Francis and Mr. Nagle oversee First Capital from Charlotte along with Glen Insley, managing director of fixed income.

The line executives of CoreStates' asset management division, Peter M. Welber and Mark E. Stalnecker, have moved to First Investment Advisers, First Union's portfolio management arm for private clients. That unit is headed up by Alan R. Adelman, chief investment officer and managing director.

First Union executives have also decided to leave CoreStates' Meridian Investment Co. undisturbed. CoreStates picked up the quantitative manager two years ago when it bought Meridian Bancorp, Reading, Pa.

Meridian manages about $4 billion of assets in two equity products and a balanced product.

First Union plans to consolidate the CoreStates institutional investment management business completely by September. Overlapping products and teams are being brought together. For instance, CoreStates' cash investment service and First Union's speciality fixed income are meshing to manage about $10 billion of assets in Philadelphia.

Some CoreStates offerings, such as an equity growth product, are new to First Union.

At least one client said the banking companies' consolidation has not been at all disruptive. The Bucks County Employee Retirement Fund, a $280 million plan in Doylestown, Pa., has been a client of Meridian, CoreStates, and First Union.

Service has "been consistently going up," said Donna Werner, the county's first deputy treasurer. "There have been no glitches."

The plan dropped CoreStates last year due to poor performance but still uses the other two managers, she said. At First Union, the account is still handled by the portfolio managers the county started with when it did business with Fidelity Bank.

"That's important too. You make a relationship over the years," Ms. Werner said. "It's scary when there's a revolving door and they send a new person every month."

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