Sanford C. Bernstein & Co. is known in banking circles for its investment management and financial research prowess.

But the New York-based firm would like to be regarded in a new light - as a sub-adviser to bank-managed 401(k) plans.

Six months ago, Sanford C. Bernstein, which directly manages $26 billion for clients ranging from pension funds to the wealthy, started acting as a sub-adviser to pooled funds managed by a unit of U.S. Trust Corp.

The alliance teamed a firm known for some of the best research on Wall Street with the country's oldest trust and investment management company.

Bernstein officials did not respond to several telephone inquiries about their foray into the sub-advisory business.

But the move clearly signals the firm's desire to broaden its role as a money manager. To that end, the company has been included in many investment programs that bundle multiple money managers.

"Sanford C. Bernstein has already been successful in wrap programs. It's a parallel distribution strategy," said Peter L. Bain, a principal of the investment banking firm Berkshire Capital Corp.

It's easy to see why Sanford C. Bernstein is looking at 401(k) accounts. Retirement plans are a hotbed of growth. Defined contribution assets have grown from $74 billion in 1975 to $1.1 trillion in 1995.

Banks have also become major players in retirement plan administration because their well-grounded trust capability makes them very attractive to plan sponsors and, in turn, to sub-advisers looking to get in on the action.

In August, Sanford C. Bernstein's trust advisory group started sub- advising pooled funds managed by U.S. Trust of the Pacific Northwest, a subsidiary of the New York-based banking company.

Institutional investment management is the bailiwick of the Portland, Ore.-based subsidiary, and it provides the administration and operations of the parent's new 401(k) product for plans with more than 300 employees.

Banks have grown more willing in recent years to hand over the investment management reins, and outsiders see Sanford C. Bernstein as a natural pick.

"That makes sense. Banks have been obsessed with doing it themselves because that's where the real margins are," Mr. Bain said.

The long-term benefits for banks that align with money managers such as Bernstein are worth the short-term sacrifice of some profit margin, Mr. Bain added.

Bankers agree that working with a firm such as Sanford C. Bernstein is a way to add some marketing clout.

"When starting up a fund, you really want a name brand there," said Marietta Castellano, vice president of institutional trust at CoreStates Financial Corp.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.