Sanwa to Package Its New Funds in 401(k) Plans

Sanwa Bank California plans to enter the 401(k) business via its fledgling proprietary Eureka fund family.

Sanwa, an $8.1 billion-asset subsidiary of Osaka, Japan-based Sanwa Bank Ltd., opened its retail proprietary fund group last month, after the conversion of its common trust funds. Assets in the mutual funds now total about $650 million.

In a board meeting last week Sanwa approved a plan to begin packaging the Eureka Funds in 401(k) plans aimed at its middle-market corporate customers, said Richard A. Weiss, chief investment officer and a Sanwa senior vice president.

This summer Sanwa will start targeting companies that already bank with it, focusing on those with 50 to 250 employees, Mr. Weiss said. The board of directors has approved the hiring of seven salespeople dedicated to that market, he said. The program would be administered by a third party, he added.

Sanwa is already using the Eureka Funds as part of an asset allocation account, which was unveiled last month. The account, which Sanwa is rather boldly touting as the investment management account "for the masses," requires a minimum investment of $25,000 and charges an annual management fee of 1% to 1.5%.

The asset allocation account uses Sanwa's five Eureka Funds along with 11 funds from New York-based Dreyfus Corp.

The bank is also exploring farming out the asset allocation product to some of its 200 correspondent banks, Mr. Weiss said. Many of them are community banks that could not offer a similar product unassisted, he said.

Sanwa is talking to a number of its correspondents, but Mr. Weiss said negotiations are too preliminary to identify them.

Geoffrey H. Bobroff, a mutual fund consultant in East Greenwich, R.I., questioned the need for a mass-market account such as Sanwa's.

Peoples looking to invest $25,000 would probably be better off just buying one mutual fund, rather than being given a choice, Mr. Bobroff said.

"By and large, $50,000 is still too small to try and design a portfolio. I think the breaking point is probably about $100,000," he said.

However, Mr. Weiss said the bank opened 13 of the new accounts for existing customers during the first two weeks. New retail sales are $4 million so far, he said.

Mr. Weiss said Sanwa aims to keep its customers from taking their investable assets to Charles Schwab & Co. or Merrill Lynch & Co.-though he noted that at Merrill $25,000 might not get customers through the door.

"For years banks have been robbed of deposits in mutual funds," Mr. Weiss said. "They're in the banks first; they're the bank's to lose," he added.

The asset allocation product and the 401(k) business should help the Eureka Funds reach $700 million of assets by yearend and $1 billion by 2000, Mr. Weiss said.

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