Two months after its asset management arm touted bold plans for expansion, Countrywide Credit Industries Inc. said it is selling the unit, along with its mutual fund servicing and fund accounting businesses.

Countrywide Financial Services Inc. is being bought by Western and Southern Life Insurance Co. of Cincinnati. Terms of the deal, announced Aug. 27, were not disclosed. The unit comprises Countrywide Investments Inc., which has $1.3 billion of assets under management, Countrywide Fund Services, and CW Fund Distributors.

"The decision to sell Countrywide Financial is predicated on a shift in corporate strategy," a spokesman said.

The loan origination and servicing company will offer third-party funds, an approach it had previously abandoned.

In 1997 the Calabasas, Calif.-based company ventured into the proprietary fund business, when it purchased Leshner Group. There were 16 Countrywide Mutual Funds, with $1.017 billion of assets under management on July 31, according to Lipper Inc. of Summit, N.J.

In late June, William E. Hortz, executive vice president and director of sales at Countrywide Investments, said the unit planned to increase its proprietary fund assets to $5 billion under management by 2002. He also talked about buying an asset management firm and said there had been "a lot of discussion" about making a deal.

Mr. Hortz could not be reached for comment. But the Countrywide spokesman said "serious negotiations" with Western and Southern Life did not begin until after Mr. Hortz spoke to American Banker in June.

Selling investment products is an important component of Countrywide's strategy to become "a one-stop financial shop," the spokesman said. However, the company decided it would be better to form alliances with multiple fund companies, he added.

He said he was not aware of Countrywide's earlier efforts to sell third-party funds.

Observers said Countrywide probably decided to abandon the proprietary fund business partly because it would have to inject large amounts of capital to become a significant player.

Paul A. Mackey, an analyst with Buckingham Research Group in New York, said the mutual fund arm was an "underperforming unit" and "not worth management's time and effort."

Thomas Hain, an analyst with Lehman Brothers, said Countrywide executives had expected more cross-selling opportunities for its proprietary funds, an opinion other analysts echoed.

Gary Gordon of PaineWebber said Countrywide has had success cross-selling insurance products to its loan-origination customers because "it's a natural sale at that point."

Once the loan is in place, however, selling products such as mutual funds is difficult, because investors can buy them from so many other sources, he said.

The deal for Countrywide Financial is expected to close during the fourth quarter.

A spokesman for Western and Southern Life Insurance said the investment adviser to its proprietary family, the Touchstone Funds, has formed a transition team with Countrywide to discuss options for the funds' future.

The Touchstone Funds had $104.8 million of assets under management on July 31, according to Lipper.

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