Banks stayed a step ahead of the mutual fund pack in the three-month period that ended June 30, slightly boosting assets under management despite a sluggish market.
Mutual fund assets managed by banks grew 1.1% in the second quarter, to $227 billion, according to data compiled for the American Banker by Lipper Analytical Services, Summit, N.J.
As a group, banks outpaced the fund industry as a whole, which eked out just a 0.1% gain in assets to close the quarter with $2.086 trillion under management, according to the Investment Company Institute.
There were some notable exceptions to the trend, however. For instance, BankAmerica Corp.'s fund assets dropped 20%, to $8.4 billion, pushing the San Francisco banking company from second place to fifth in the rankings.
Heavy redemptions in the Pacific Horizon Prime Fund Horizon Shares, a money market portfolio, were largely to blame, according to Lipper. Assets in this fund dropped to $2.8 billion in June, down from $11.1 billion a year earlier. BankAmerica officials did not respond to requests for comment.
Banks are relative newcomers to mutual fund management, and controlled just 11% of all fund assets on June 30. But in recent years, as they have raced to build their investment management units large enough to be profitable and efficient, banks have been outdistancing rival fund companies in asset growth
Over the past 12 months, for example, bank fund assets have grown 13.7%, versus 12.2% for all mutual fund companies.
Trust Assets Reorganized
Banks have amassed mutual fund assets largely by reorganizing trust assets and, more recently, by acquiring other fund companies, said Lipper's president, A. Michael Lipper.
In the second quarter, for instance, First Union Corp.'s fund assets leapt to $6.9 billion, from $3.8 billion on March 31, through its purchase of Lieber & Co., manager of the $3.1 billion-asset Evergreen Funds. In the process, the Charlotte, N.C., banking company jumped from 19th place to seventh place in the rankings.
And Northern Trust Corp. boosted its mutual funds to $8.4 billion, from $7.1 billion on March 31, by converting trust assets to create a new line of funds for individual investors, the Northern Funds.
The Chicago banking company manages a separate fund family for institutional investors, the Benchmark Funds.
That's not to say that fresh sales are not a factor.
For instance, new investors accounted for about $100 million of the $1.8 billion in Northern Funds, which were launched April 1.
That is an "encouraging amount," said Sheila A. Penrose, executive vice president of Northern's personal financial-services unit.
But Mr. Lipper wonders whether banks will be able to keep up the momentum now that the mutual fund market has turned bearish.
Last year, when interest rates were much lower, banks made a good start by introducing depositors to mutual funds, he said. But they can accomplish only so much by "running through their maturing CD lists a couple of times," he said.
"That was preschool. Now they've got to go out and sell," Mr. Lipper said. "Just putting up your shingle is not enough."
What's more, he said, some banks may become less supportive of their mutual fund businesses as their appetite for deposits increases. "At least some of the banks want to be in the lending business again," Mr. Lipper said.
Top honors during the second quarter went to PNC Bank Corp., which had $20.4 billion in mutual fund assets under management. That is a 3% gain from $19.8 billion in the second quarter, and a 9% increase from $18.8 billion in June 1993.
PNC is expected to cede the top spot before yearend to its Pittsburgh rival, Mellon Bank Corp. Mellon's pending acquisition of Dreyfus Corp., which has more than $70 billion in mutual fund assets, is slated for a vote by the two companies' stockholders on Aug. 23.
NationsBank Corp. snared the second-place position vacated by BankAmerica, despite a slight decline in its fund assets.
The Charlotte, N.C., banking company's managed $14.1 billion in mutual funds on June 30, down from $14.3 billion the previous quarter.
A $200 million erosion that reduced its money market mutual fund assets to $8.3 billion accounted for the decline. Assets of stock and bond funds were unchanged at $5.8 billion.
Solid gains were reported by Banc One Corp., which moved up one notch to third place. The Columbus, Ohio, banking company's mutual fund assets totaled $8.6 billion on June 30, a 4.5% increase from $8.2 billion on March 31 and a 72% gain from $5.3 billion in June 1993.
Richard R. Jandrain, senior managing director of equity securities for Banc One Investment Advisors Corp., in Columbus, Ohio, said the lion's share of its asset growth came from trust fund "consolidation."
This included changing investments for some trust funds managed by Banc One Investment Advisors from money market funds run by other companies, to Banc One's proprietary money funds.