Shawmut National Corp. has scuttled scuttle plans to merge two of its mutual fund portfolios, citing poor performance and feeble asset growth.

Early this year, Federated Investors, Shawmut's fund distributor, filed with the Securities and Exchange Commission for permission to merge the Shawmut Growth Equity Fund into the Shawmut Quantitative Equity Fund.

"The idea was to merge the two funds because the growth equity fund was stagnant" and the quantitative fund was projected to grow rapidly, said Robert C. Rosselot, corporate counsel for Pittsburgh-based Federated's administrative services unit.

But "as the year went along we found that the quantitative fund wasn't growing at all," he said.

So officials at the $30.7 billion-asset banking company asked Federated to withdraw the petition in June, he said, after the 10-month-old quantitative fund pulled in a disappointing total return of 8.42% for that period.

Shawmut's filings with the commission said, "There are expectations of no further growth, and possibly continuing asset dissipation."

A Shawmut spokesman added that the decision to abort the portfolio merger was made final after the banking company failed to reach a long-term contract with the quantitative fund's subadviser, Marque Millennium Group Ltd., a New York firm specializing in quantitative analysis.

Shawmut manages about $1.5 billion of mutual fund assets in 21 portfolios. The quantitative fund held $4.2 million of assets as of the end of June, according to Lipper Analytical Services, Summit, N.J. The growth equity fund, which the banking company will leave intact, had $23.9 million of assets, according to Lipper.

Federated filed another petition with the commission in June, seeking to merge the quantitative fund with the banking company's Growth and Income Equity Fund, which has similar investment objectives and lower expense ratios.

Shareholders approved the merger of the two portfolios July 25, and the transaction should be completed early this month, a Shawmut spokesman said.

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.