Signature Financial Group is making a bold move to expand its market by licensing to other companies its closely guarded approach to managing mutual funds.

After six months of negotiations, the Boston-based mutual fund administrator has struck a deal that lets Federated Investors market Signature's hub-and-spoke mutual fund structure to Federated's 2,000 bank clients. Federated, based in Pittsburgh, is a leading provider of mutual fund and trust services to banks.

Under hub-and-spoke arrangements, fund families share a central investment pool but are allowed to develop their own marketing and pricing structure. The approach is intended to cut administrative costs and make it easier to launch new funds.

This approach has been touted as having special appeal to banks that want to market mutual funds under their own names and control the pricing but don't want the hassle of managing the funds themselves.

The deal will mean increased exposure and revenue for Signature, which will continue to market hub-and-spoke funds and will receive a fee for every hub Federated sets up. For Federated, the deal is another way to differentiate itself from competing mutual fund vendors and servicers.

"Both companies stand to gain tremendously from this agreement," said James E. Hoolahan, a senior vice president in charge of business development for Signature.

"Federated has access to a number of banks that would never think of coming to us, but they would feel comfortable staying with Federated and using our hub-and-spoke structure," he said.

High costs and unfamiliarity with the structure have discouraged many banks from adopting hub and spoke. With Federated's marketing muscle, Signature is hoping to gain wider acceptance among banks as well as the broader marketplace.

Apparently not everyone at Signature supported the deal with Federated. The company's marketing director, Christopher W. Tomacek, and its chief legal counsel, James Craver, left the company in early September, reportedly over a squabble with Signature's chief executive, Philip W. Coolidge.

Sources said they were at odds with Signature's decision to sign the licensing agreement, and how to price it. Neither Mr. Tomacek nor Mr. Craven could be reached for comment.

In a telephone interview, Mr. Coolidge confirmed the departures and said there had been a difference of opinion, but he refused to elaborate.

He added that the company recently stopped requiring an upfront licensing fee and instead will be paid on an ongoing basis as hub funds are set up.

Mr. Coolidge made a splash when he introduced the innovative hub-and- spoke structure in 1993. Since then the company has seen its assets under administration grow fourfold to $48 billion.

But the company has also seen its competitive edge eroded by the advent of multiple classes of mutual fund shares, and the appearance of companies marketing copy-cat master-feeder structures.

State Street Bank and Trust Co., which offers its own master-feeder structure, has challenged Signature's exclusivity to the hub-and-spoke arrangement in court. The suit is still pending, but some industry observers say the Signature's patent is indefensible.

"Signature could have had everyone eating out of their hand if they had been more flexible about licensing and pricing hub-and-spoke," said an executive at a competing firm, who did not want to be identified. "Instead, you had everyone go out and develop their own" master-feeder structures, he added.

Mr. Coolidge said Signature will soon close another licensing deal, but for now Federated is on top.

Ronald Petnuch, vice president and director of proprietary funds for Federated, said the arrangement gives the company a dual advantage because it can build up its own mutual fund assets while adding value to its servicing relationships with banks and other fund companies.

Federated manages $55 billion of mutual fund assets in its Federated Funds family and provides mutual fund services to $82 billion more of assets.

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