Charlotte, N.C.-based Nations-Bank Corp. is teaming up with Charles Schwab & Co. to market two new managed index funds.
The relationship-the first of its kind between the San Francisco-based discount brokerage firm and a bank-will see Schwab help Nations Funds market the Nations Managed Value Index Fund and the Nations Managed SmallCap Value Index Fund to retail and institutional investors.
The no-load funds entered a subscription period Monday and should debut toward the end of next month, said Mark H. Williamson, president of NationsBanc Advisors Inc., a subsidiary of NationsBank.
The two funds will be slotted into Charles Schwab's OneSource fund program, as well as made available through independent financial advisers, said Jeffrey Lyons, a senior vice president in mutual fund marketing at Charles Schwab. "Basically what we're doing is giving them access to our customers," said Mr. Lyons.
Nations Funds expects the deal to help it reach "a large number of independent financial planners that clear through Schwab," said Mr. Williamson.
Schwab's customers, meanwhile, get in on the ground floor of a new fund. And Nations Funds are expected to be able to gather more assets than if the bank marketed the portfolios on its own, Mr. Lyons observed.
The San Francisco firm has done similar marketing for Janus Funds, Steinroe, and Baron in the past, said Mr. Lyons.
The Value Index Fund will track Standard & Poor's Barra Value index, an unmanaged market capitalization weighted index following roughly 340 stocks from the S&P 500. The Nations Managed SmallCap Index Fund, meanwhile, will track the S&P Barra SmallCap Value index, an unmanaged but similarly weighted index consisting of 375 of the 600 companies in the S&P SmallCap 600.
"These two funds are going to have a value tilt to them," said NationsBanc's Mr. Williamson. He noted that there are several benefits for the investor in the managed index fund area.
First, Nations Funds' use of its "elaborate proprietary system" helps weed out the stocks that are likeliest to be the worst-performing in the future, he said.
Second, Nations Funds will enable investors to minimize portfolio turnover, thus cutting down on capital gains taxes, he said.
"There's a lot of enthusiasm and interest in index funds," Mr. Williamson said. "We just think this takes it to the next level."
Schwab and Nations Funds will work on the marketing together, using direct mail, public meetings, and phone conversations, said Mr. Williamson.
Schwab levies a flat fee from NationsBanc plus a charge based on the value of assets gathered, said Mr. Lyons.