When Bruce R. Laning took over Firstar Corp.'s investment management arm in February, the Milwaukee banking company was at a crossroads.
The departure of Mr. Laning's predecessor and four fixed-income managers had prompted the city of Milwaukee to pull its $298 million bond account from Firstar in February and forced Mr. Laning to rebuild the company's investment business and merge its three fund families. "At the beginning of this year we had quite a period of adjustment here. People came and people left, and it was important to keep things steady," Mr. Laning said. "We did what we could to put the best combination of people and funds together."
Six months later, Firstar's mutual funds are performing at record levels. In the first half, Firstar Funds, the newly consolidated fund family, had 11 of its 36 proprietary funds ranked in the top quartile by Lipper and 12 funds exceeding industry averages. Mr. Laning, who has worked at Firstar for 21 years, said the returns are the best in the company's history.
The unit is on a pace to far surpass last year's $806 million in sales. It has sold $706 million in the first seven months.
"You can tell from these results that I am feeling good right now," he said. "It was a tough six months, a tough adjustment, but these results tell the story."
Among the top-performing funds as of July 31 were the Firstar Select Real Estate Fund, with a 21.15% rate of return; Mercantile Small Cap Equity Fund, 17.85%; Firstar Special Growth Fund, 16.79%; Firstar MicroCap Fund, 15.87%; and Firstar Stellar Science and Technology Fund, 10.67%.
Mr. Laning said the funds' performance stemmed from a change in thinking. The investment management unit realized, he said, that if it wanted to compete it needed to broaden its research capability. At the end of the first quarter, Firstar doubled its research department, hiring six analysts.
"It is pretty simple," he said, "the more people you have looking into these companies, the better decisions you can make on which stocks to buy. Our analysts have helped us do a great job of stock picking across the board."
Mr. Laning said the fund family consolidation has also helped Firstar's performance. He said the bringing together of 36 funds and $17 billion of assets under management that had been scattered among the former Firstar Select, Firstar Stellar, and Mercantile families has made Firstar a bigger player on Wall Street.
"Our new size has companies coming to see us," he said. "When you meet with CFOs or CEOs face-to-face you learn more about their business strategies and the risks involved in buying in to a particular stock."
Mr. Laning said Firstar is confident that the growth does not stop here. Last week the company agreed to buy 41 First Union branch offices in Tennessee, he noted. By widening its footprint, he said, Firstar would be in a position to offer its customers additional value.