With Kemper Funds' sales through banks rebounding from a dizzying downturn a few years ago, the company's new president is sending a message to banks: "Thanks for giving us a second chance."
The Chicago-based fund firm is engineering a comeback thanks to an infusion of capital from Zurich Insurance Group, its parent, and the sale of noncore businesses, company executives say.
"We feel we have the ingredients to be a major, major player" in the bank distribution channel, said Thomas A. Littauer, Kemper's president, in an interview here last week during the Investment Company Institute's annual meeting.
Mr. Littauer took the reins at the Chicago-based mutual fund company early this year after his predecessor, John Neal, resigned.
As recently as 1992, Kemper, one of the earliest entrants into the bank marketplace, could claim to be the biggest, with $2.7 billion in sales.
But the bond market crash of 1994, poor equity fund performance and management turnover arising from a drawn-out attempt to sell the company combined to depress overall sales.
Companywide, sales went from $2.6 billion in 1994 to $1.97 billion in 1995 before beginning to rebound. Bank sales plunged as low as $500 million in 1995.
The tide started to turn after Zurich bought Kemper early in 1996. Overall sales last year were $6.75 billion and could reach $8 billion this year, the company projects.
Last year, bank sales exceeded $1.3 billion and this year they could flirt with, but probably will not match, the 1992 record of $2.7 billion, said Henry Schulthesz, executive vice president in charge of bank sales.
For Kemper, which has $53 billion of assets under management, re- emerging as a top-tier bank distributor will be no easy feat, said Geoffrey H. Bobroff, a mutual fund consultant in East Greenwich, R.I.
"I don't see shelf space expanding at banks, and with the merger phenomenon continuing in retail banking the number of outlets is going to shrink," Mr. Bobroff said. "And to displace the top five or six firms today is truly an uphill battle."
Indeed, Putnam Investments, the top bank seller, racked up $10 billion in sales last year, while No. 2 Franklin Resources sold $4 billion.
Zurich's cash allowed Kemper to add four bank wholesalers for a total of 11, and there are plans to add two this year. Focusing on about 10 big banks where sales have slumped, Kemper has successfully gotten its funds back onto the institutions' A list in about half the cases.
Relationships have been revived at Chase Manhattan Corp., U.S. Bank Corp., First Bank System and Washington Mutual, Mr. Schulthesz said.
The company's advertising budget has also ballooned by 400%, said Mr. Schulthesz. And Kemper's fund selection is growing, thanks in part to Scudder Investments, which became a sister company last year after Zurich bought Scudder, Stevens & Clark Inc.
Three Kemper funds rolled out in April had previously been marketed under the Scudder Funds name and sold directly to investors. Those funds are among 10 equity, bond, and mixed funds that Kemper has rolled out this year. They include one subadvised by well-regarded value investor David Dreman.
The fund company has also benefited from a clearer focus on being a manufacturer and leaving the distribution to others, its executives say.
In 1995, it sold Kemper Securities, a brokerage firm, and Invest Financial, its third-party marketing arm.
While Kemper distributes 20% of its funds through banks and splits the remainder evenly through nonbank brokerages and financial planners, the company wants to spread distribution evenly, Mr. Littauer said.
Bank distribution as a share of overall sales hit a high water mark of 28% in 1992 before sliding as low as 11% in 1994 and 1995, Mr. Schulthesz said.