Massachusetts Financial Services was one of the first U.S. fund companies to build its own portfolios offshore. But it is also relying on a joint venture to help it gain access to investors overseas.

The Boston-based fund company inked an agreement in March 1995 with Germany's Hypo Bank, and Hypo's partner, London-based Foreign & Colonial. Established in 1868, Foreign & Colonial is an investment management firm in which Hypo owns a 65% stake.

Under the alliance, MFS acts as a subadviser on several Hypo funds, while Foreign & Colonial performs a similar role for MFS. In September, Munich-based Hypo began selling a version of the Massachusetts Financial Services Research fund in Germany.

The Research fund marks the first distribution component of the relationship.

"It's pretty much a clone of their MFS fund in the U.S.," said Heiko Glander, senior vice president and head of global strategic planning at the German bank.

Right now, the new fund has only $10 million of assets, but Mr. Glander said that the bank hopes to have gathered roughly $50 million by early next year.

The MFS U.S. Research fund aims to provide long-term growth of capital and future income where securities are selected by a team of investment research analysts.

Hypo Bank is about to merge with Bayerische Vereinsbank, also based in Munich, which should more than double the bank's distribution capabilities, giving it 1,300 branches around Germany.

Back in 1995, MFS' initial negotiations were with Foreign & Colonial because both are investment mangers, Mr. Glander said.

MFS currently has $67 billion of assets under management, compared to Foreign & Colonial's $48 billion.

At the outset, Foreign & Colonial "wanted us to take an interest in it, but we did not," said Mr. Laird. "London money manager values are high, in terms of prices being paid for them, and it would have been a minority stake."

F&C manages "all of our emerging market equity portfolios," said Mr. Laird. MFS has roughly $500 million in emerging markets assets under management, a spokesman said.

"At the moment, dollar-wise they are managing more money for us than we are managing U.S. dollar assets for Hypo, but it happens that fund-wise, we're managing more funds for them," he said.

Aside from accessing retail investors, MFS has also met potential institutional clients through its relationship with Hypo Bank.

But MFS has not neglected its internal focus on the international fund business

"They were one of the early fund families to build an offshore product, MFS Meridian, which was basically flight capital," noted Rhode Island-based mutual fund consultant Geoffrey H. Bobroff.

Apart from MFS Meridian, that capability includes MFS International Funds designed for investors in Europe and registered in Luxembourg. Also boasting an international flavor is MFS Architect, an offshore fund combining fixed and variable annuities.

And what of the future of the joint venture? "It's like a dating relationship," said Heiko Glander. "We'll have to see how things work out."

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