SunTrust Banks Inc. is gearing up to launch an actively managed international equity mutual fund, in a bid to increase its share of the retirement plan market.
The $42 billion-asset banking company has set up a common trust fund through its SunBank Capital Management subsidiary, and has hired a new portfolio manager to manage the assets.
The SunTrust International Equity Fund will be offered through the employee benefit plans the company currently markets, and to some personal trust customers, bank officials said.
SunTrust's move into global investment management reflects a rush by banks to catch up to the rest of the mutual fund industry.
International bank proprietary funds have now become "part of the core list of funds to offer," according to Avi Nachmany, a partner with Strategic Insight, New York.
Of the 444 international mutual funds offered in the United States, banks manage 89 fund portfolios themselves, while another 49 portfolios are sub-advised by outside investment firms, according to Lipper Analytical Services Inc. in Denver.
SunTrust's new fund will primarily invest in international companies that are industry leaders or niche players, as well as companies whose stocks are undervalued, said Daniel R. Jaworski, the fund's portfolio manager.
"We plan on differentiating ourselves by having a very disciplined and defined investment style," Mr. Jaworski said.
The new fund was seeded with $6 million of transferred trust assets. Company officials hope to reach critical mass - $25 million to $50 million - within the next six months, at which point the banking company will ask federal regulators and fund shareholders for permission to convert the assets into a mutual fund.
The fund will be offered first through the 2,500 employee benefit plans SunTrust currently administers. The plans have about $7 billion of assets under management, and represent about $47 million of the banking company's total revenue, which last year exceeded $522 million, officials said.
Jeffrey Vogelbacher, a first vice president for SunTrust, said he plans to offer the funds to retail customers within a year of reaching critical mass. SunTrust already offers 18 proprietary STI Classic Funds which are sold through the bank's broker-dealer affiliate. One of the company's funds is an international index stock fund that is not actively managed.
SunTrust will have to differentiate itself from competitors if it expects the funds to grow, Mr. Nachmany said.
"It will be hard for them to build a reputation as an international money manager," Mr. Nachmany said.
To gain an edge over rivals, SunTrust hired Mr. Jaworski, a former portfolio manager for the international investment firm Lazard Freres Asset Management, New York.
Mr. Jaworski said it will be hard to predict whether the fund will take off quickly, but SunTrust plans to market the fund aggressively to its institutional customers as a way for companies to diversify their investment portfolios.
"The strategy is simple," Mr. Jaworski said. "We just point out that two-thirds of the growth in the capital markets occurs outside the U.S."