An Illinois wholesaler of unit investment trusts said it plans to offer a private-label product through Mercantile Bancorp of St. Louis.
Mercantile is the second banking company to private-label a unit trust from Nike Securities LP of Lisle, Ill., said Frank L. Fichera, a partner and managing director at the wholesaler. The first was Des Moines-based Brenton Banks Inc., which has sold the Iowa Equity Growth Trust since last fall, he said.
Mercantile is to begin promoting the Missouri Equity Growth Trust next week.
"Even though there's no FDIC guarantee on it, we think the fact that the bank's name is on it gives it a lot of credibility," Mr. Fichera said.
And it is much less expensive to private-label a unit trust than to sell a proprietary mutual fund, he said.
Unit trusts and mutual funds are both portfolios of securities. But unlike mutual funds, unit trusts generally include only a few securities- usually around 15-and have a fixed maturity date. They are not actively managed.
Money flowing into unit trusts increased 60.4% last year, to $61.75 billion, according to the Investment Company Institute. Inflows had jumped 60.8%, to $38.5 billion in 1997, and 112.6%, to $23.9 billion in 1996, the mutual fund trade group reported.
Though it has sold unit trusts through banks for several years, Nike Securities has been trying to increase distribution through that channel for the past year, Mr. Fichera said.
"More banks are putting emphasis on brokerages, and their distribution channels are becoming stronger," he said. "Initially we want to be selling our products in the bank, and after that we'll talk to them about private- labeling."
Since January 1998, when Nike Securities created a bank division, its bank clients have doubled, to about 30. They include First Union Corp. and PNC Bank Corp., Mr. Fichera said.
About eight of the firm's 45 wholesalers work in banks. More will be hired, Mr. Fichera said, but how many and when depends on sales this year. He said he expects bank sales to total about $500 million, compared with about $250 million in 1998.
Nike Securities is in negotiations to sell its products through another large banking company, Mr. Fichera said, but it is too early to identify the bank. The firm is also talking to other banking companies about private-labeling, he added.