Mellon Bank Corp. is launching a joint venture with Frank Russell Co. to deliver investment performance analysis to custody and personal trust clients.

The new company, Russell/Mellon Analytical Services Inc., will be set up within six months. Ownership of the joint venture, which was announced Monday, will be split equally between the Pittsburgh-based banking company and Frank Russell.

Based in Tacoma, Wash., Frank Russell is well known for its stock market indexes, including the Russell 2000. It already provides performance measurement services for $1 trillion of investment assets, while Mellon already provides the service for $500 billion worth.

Together, the partners say, they will have better, more competitive products and services.

"We bring some tools for doing (investment analysis) that have global acceptance. Mellon has systems to deliver that much more effectively," said Janice Harding, managing director of Russell Analytical Services.

The venture will combine products that report back to custody and trust clients on how their investments are performing against benchmarks such as indexes, and suggest how allocations should be made in the future.

William Pryor, manager of investment information services for Mellon Trust, agreed that each side brings strengths to the venture.

"We felt that forming this alliance would make Mellon trust and custody more competitive," Mr. Pryor said.

Mellon's administration, custody, and consultant business contributed close to one-fourth of the banking company's $2.4 billion of fee revenue last year.

One observer said the joint venture will also ensure that the performance evaluation Mellon provides to its custody clients-some of whom are also investment management clients-is objective.

Conflict of interest has been a issue for Mellon since its acquisition last year of Buck Consulting, an actuarial and employee benefits firm that has its own investment performance measurement group.

"In a way you've got one unit of Mellon evaluating another one," said Anthony R. Davis, an analyst at SBC Warburg Dillon Read Inc., New York.

"A cleaner way is to have a separate entity, as they are doing with Russell, that is divorced from the investment management operations of Dreyfus and Boston Co.," he added.

Geoffrey H. Bobroff, a mutual fund consultant in East Greenwich, R.I., agreed, adding that although the joint venture is set up for institutional clients, it could be brought to bear on retail mutual fund customers through 401(k) programs.

"They'll use Frank Russell as the backdrop, just as Schwab technically says 'we use Morningstar's stars," Mr. Bobroff said.

"It looks a lot better to the outside world. Frank Russell is steeped in the history of money-manager selection," he added.

Mr. Davis said Mellon will probably seek to divest Buck's investment performance measurement group. But a Mellon spokesman said the bank has no divestiture plans. "We feel there is adequate disclosure," he said.

The joint venture comes on the heels of another Mellon alliance in the custody business, CIBC Mellon Global Securities, which started last year. Under that arrangement, Mellon and Canadian Imperial Bank of Commerce bought the custody portfolio of Canada Trust.

Mellon has been joining forces with other money managers lately, by joint venture, alliance, or acquisition.

"It really depends on the market we're entering, the business lines involved, and the firms we're doing business with," the spokesman said.

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