Cloning mutual fund families is not just for giants anymore.
Lord, Abbett & Co., a $10.5 billion-asset manager, is adding five "level-load" funds to its lineup by replicating four existing funds and attaching the new pricing feature. And the New York company is planning to do this with four other funds.
Some major fund companies, including Oppenheimer Management and Alliance Capital, have successfully cloned some of their funds. But few smaller companies are known to have tried the technique.
Lord Abbett - an active player in selling funds through banks - is to launch level-load growth and income, bond debenture, limited duration, and global income trust funds by Jan. 3.
Lure for Bank Customers
Creating clones of front-end-load funds "allowed us to launch a new pricing structure without creating a new class of shares," said Mike McLaughlin, manager of Lord Abbett's bank program.
Level-loads enable investors to spread out commission payments over several years. That is especially attractive to bank customers, because they are generally averse to paying sales fees up front, experts say.
Although he's hopeful that having level-load versions on nine funds will boost sales, Mr. McLaughlin said he does not know yet how these products will sell through banks
Lord Abbett estimated that it sold $300 million through banks in the 12 months through July. During the same period, total sales were S2.3 billion. Mr. McLaughlin would like to see sales through banks grow 30% to 40% in the next two years.
Much of Lord Abbett's success will depend on its ability to win spots on to banks' preferred-products lists. It's name is already on the "short list" at banks ranging from Philadelphia-based CoreStates Financial Corp. to Chemical Bank in New York City. Citicorp also includes seven of Lord Abbett's funds on its due diligence list.
Before cloning its entire 21-member fund family, Lord Abbett sent up a trial balloon. On June 1 it introduced a level-load clone of its best seller, the U.S. Government Securities Trust. In October it added versions of its New York, California, Florida, and national tax-free funds.
Lord Abbett ranked 34th among mutual fund companies last year, according to Strategic Insights, a New York-based firm that tracks the industry.