Putnam Investments expects its mutual fund sales through banks to rise about 6% this year despite the stock market's troubles and an increasing challenge from bank proprietary funds.
"The competition has never been more fierce," said David Edlin, Putnam's managing director for bank sales, in a recent interview.
But Boston-based Putnam, long the leading nonbank fund company in selling through banks, should have $8.5 billion of sales this year, Mr. Edlin said, up from $8 billion in 1997.
The projection, which would mean the best year yet for Putnam's bank sales division, might have been higher but for the increased competition, he said.
Banks' proprietary funds captured a 19% share of bank mutual fund sales in the second quarter, up from 13% in the previous quarter and 14% in the year-earlier quarter, according to Kenneth Kehrer Associates in Princeton, N.J.
Banks are selling more proprietary funds because they have gotten better at marketing them, and the performance of those funds has improved in many cases, Mr. Edlin said.
Kenneth Kehrer, head of the consulting firm, said that banks are increasingly licensing platform employees to sell mutual funds. These employees are more likely to promote proprietary funds, he said, than are the dedicated brokers in banks' retail broker-dealers.
It is not just bank proprietary funds that are soaking up market share, Mr. Edlin said.
Mutual fund companies across the board have been adding bank wholesalers at a fast pace in recent months as more companies bet on demand for funds sold through intermediaries.
Banks account for 28% of Putnam's mutual fund sales and 50% of its variable annuities, which are mutual funds in an insurance wrapper.
Putnam sold $1.5 billion of variable annuities through banks last year and expects to sell $2 billion this year, Mr. Edlin said.
Though competition is one factor affecting Putnam's sales, he said, the stock market's troubles also have cut demand for mutual funds.
Indeed, the fund industry as a whole had net outflows of $11.2 billion in August, according to the Investment Company Institute.
"The whole industry has slowed down," Mr. Edlin said.