American Century Investments has gained a foothold in the bank distribution market by selling through trust departments.
The Kansas City, Mo., fund company, which is best known for its direct sales, has forged relationships with 55 banks since formally launching its bank sales division in October, said David Larrabee, vice president and director for bank trust sales.
It has signed up 14 so far this year, including BankBoston Corp., Michigan National Corp., and PNC Bank Corp., and plans to add 16 before the year is out, Mr. Larrabee said. "Our overall strategy was to get in where it makes the most sense," he said.
That means the trust side, where no-load funds with a recognized brand name are a natural fit, he said. From there, the fund company has expanded sales to banks' retail brokerages, which now bring in about 10% of its bank sales.
And American Century's partnership with J.P. Morgan & Co.-the bank bought a 45% stake in the fund company a year ago-is opening new areas of banks to its products, including the capital markets, corporate trust, and cash management areas, Mr. Larrabee said.
Most of American Century's trust sales are for 401(k) plans, with a small but growing portion of sales to personal trust and corporate trust clients.
For the year to date, sales under Mr. Larrabee's division account for about 5% of American Century's volume. The company's bank wholesaler ranks have been growing along with its bank business: It now has five "territory managers," including one added this year.
Kenneth R. Hoffman, president of Optima Group Inc., a Fairfield, Conn., consulting firm, said the good news for American Century is that bank trust customers are demanding more choices of outside money managers.
But the fund company faces a challenge in grabbing market share from companies like SEI Investments, Federated Investors, Fidelity Investments, and Frank Russell Co., which are well established in bank trust departments, he said.
"The market for organizations like American Century is there," Mr. Hoffman said, but "the total size of the available opportunity is limited through the trust market."
Mr. Larrabee said that his company has an edge because it offers banks the services of a consultant, including studies on how banks should position their products and how they can capture rollovers from investment products.
"We don't want to be looked at as just another fund vendor," he said. But Mr. Hoffman said players like SEI and Fidelity offer a range of services as well. And in looking to break into the bank marketplace, American Century faces competition from companies like Scudder Funds, Dreyfus Corp., and PIMCO.
In addition, said Mr. Hoffman, the bank trust executives who decide which fund companies to do business with are conservative, and it's hard to convince them to add funds with which they lack experience.
American Century has $71.5 billion of assets under management. The bulk of its sales-41%-are direct; 34% are through intermediaries like wire houses, insurers, and banks; and the rest come through defined-contribution business and other sources.
