A Danish bank is getting its feet wet in the U.S. mutual fund market to prepare for the onslaught of American competition in Europe.

Copenhagen-based Unibank, a $67 billion-asset banking company that manages $16 billion at home, was recently hired as a subadviser by Undiscovered Managers, a Dallas investment company.

The Danish company is subadvising two portfolios: the UM International Equity Fund and the UM International Small Cap Equity Fund.

The funds, launched in December, have a $250,000 minimum investment and are advised by a team of 20 portfolio managers at Unibank Investment Management in Copenhagen.

Unibank is aiming to kill two birds with one stone: gain U.S. clients and study U.S. investment companies.

"We are here to pick up assets, but also here to learn," said Henrik Bak, president of Unibank Securities Inc., Unibank Investment Management's operation in New York.

Undiscovered was founded in 1997 by its president, Mark P. Hurley, who formerly researched the investment industry for Goldman, Sachs & Co. It also offers nine subadvised mutual funds, which are sold primarily to retirement plans or through intermediaries such as financial planners.

Before approaching retail investors with the UM funds, Unibank gathered $80 million of assets to manage for corporate and public pension plans. When Mr. Bak started knocking on the doors of consultants and institutional investors in 1997, he said, he found them to be more concerned with performance than most Europeans have been.

But the landscape is changing in Europe as the privatization of public pension plans creates a need for mutual funds and encourages U.S. investment companies to set up shop there. Mellon Bank Corp.'s Dreyfus Corp. investment unit is one such manager and last year gained a European foothold by taking a majority stake in a British asset manager.

"Demands we are getting here are demands that will move our organization toward being prepared for the European battle with a lot of American managers moving to Europe," Mr. Bak said.

Meanwhile, American investors' demand for international equities is growing, according to Michael Levy, managing director of the BT Funds Management unit of Bankers Trust Corp.

The BT Investment International Equity Fund had the highest inflow of assets-$1.6 billion-in its category of 224 international mutual funds, according to Avi Nachmany, director of research at Strategic Insight in New York.

However, many of the portfolios shrank last year because of performance problems, leaving the category with a net inflow of $2.2 billion, Mr. Nachmany added.

Nevertheless international funds are proliferating, according to Lipper Analytical Services Inc. of Summit, N.J. U.S. fund companies offer 609 international funds, including multiple share classes, compared with 147 five years ago.

Most Americans typically put less than 10% of their investments abroad, but will allocate one-fourth internationally over the next five years, estimated Mr. Levy, who is a co-lead manager of the BT Investment International Equity Fund.

"As the 'Eurozone' becomes a major economic force, it will grab the attention of American investors," he said. "They will realize that there are companies that excel in the field and endeavors that can really leave their U.S. counterparts in the dust."

Mr. Levy specifically cited telecommunications - especially cellular communications, which is big business in Europe - as an area where the United States is "clearly not participating."

Mr. Bak agreed, describing how the Unibank team enjoyed strong returns after investing in advertising agencies retained by telecommunications companies establishing brand names.

The Unibank team invests with a so-called thematic approach, selecting securities affected by economic and regulatory changes that spill across borders rather than focusing on high-performing stocks in specific countries. The managers are Danish, Finnish, German, Polish, and Swedish.

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