Federated Now Offering Advice on Strategy, Too

Federated Investors, which has long played a supporting role for banks in the mutual fund business, now wants star billing as a strategic adviser.

The Pittsburgh-based investment management and services firm wants to offer its bank clients free strategic consulting on their proprietary mutual fund businesses.

The move is a departure for the firm, which has helped more than 30 banks launch proprietary funds by providing mostly technical, legal, and structural advice. It also comes on the heels of Federated's announcement last month that it is selling a portion of its back-office services for bank proprietary funds to State Street Corp., Boston. The deal is expected to close Jan. 1.

"Banks have created their programs, they've converted assets from trust and employee benefits into the mutual funds, and now it's 'what's next?,'" said Peter J. Germain, a Federated senior vice president.

Formerly Federated's senior corporate counsel, Mr. Germain took over the firm's proprietary funds group in September. Last week the unit was renamed mutual fund services to better reflect its new focus.

Mr. Germain is now bringing the unit's new mantra, "solutions and service for the next level," to clients' attention. His division, which has a staff of 40 people, administers $47.8 billion of mutual fund assets for 26 bank proprietary families.

In the past, Federated provided banks with sales and marketing support for investment programs designed internally. Now, Federated wants to help plan programs, such as asset allocation or 401(k) accounts.

It also wants to get more involved with marketing than it has been in the past. Mr. Germain said his group can offer advice on a variety of issues, from picking new brand names to appeasing trust clients who are unhappy with the performance of their mutual funds.

Within Mr. Germain's group is a product marketing team, headed by Peggy M. Donahue.

Federated clients said they appreciate the added services.

"They are more proactive since Peter has taken over that responsibility," said R. Edward Bowling, managing director of Wachovia Funds, the proprietary funds of Wachovia Corp. Richmond, Va.

"Most vendors have been reactive and offering 'we'll do this' rather than telling us 'this is what you want,'" he added.

Mr. Bowling said Wachovia, which rolled out an asset allocation account that uses both proprietary and Federated funds in September, is working on several initiatives with the firm.

Previously Wachovia, which manages $4.7 billion in proprietary mutual fund assets, would have planned a product and then called Federated into the project. Now it calls Federated in earlier.

"Rather than Wachovia figure something out, we have them on the front end. We have the benefit of their expertise in certain markets," Mr. Bowling said. "They've seen what's failed. They've seen what has failed in their own shop."

For smaller trust departments without proprietary funds, individual sales representatives work in a different Federated division, assisting with marketing on a informal basis.

Over all, Federated manages and administers more than $135 billion of assets, including its own brand of funds that many bank trust departments offer to their customers.

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