In a bid to increase sales of its proprietary mutual funds, BankAmerica Corp. has broadly restructured its investment management and sales units.
The San Francisco-based company's brokerage and private banking units will now share in the profits and losses of BofA's proprietary mutual funds, according to an internal memo from Alexander M. Anderson, executive vice president in charge of the investment management services group.
The memo, dated June 4, also announced that Kirk Hartman, head of fixed- income management, will take on the additional title of chief investment officer in charge of all investment management activities on the West Coast. Mr. Hartman reports to Mr. Anderson.
Deborah McGinty-Poteet, who oversees BofA's mutual funds and had reported directly to Mr. Anderson, will now jointly report to Mr. Hartman and Robert D. Flowers Jr., president of BofA's brokerage unit.
Ms. McGinty-Poteet was also given responsibility for developing new retail investment products and fund distribution channels, functions once handled by Mr. Flowers.
Sources familiar with the situation said the new reporting structure could cause friction between Ms. McGinty-Poteet and Mr. Flowers, who in past interviews has spoken out against banks pushing proprietary investment products.
BankAmerica officials did not return phone calls seeking comment. But observers said the changes have been in the works since last year because of lackluster retail sales of BofA's proprietary funds.
BofA "had done a terrific job on the institutional side, but retail sales have been low," said a consultant familiar with the company's investments program. "The brokers didn't have to sell (BofA's) funds, so they didn't - because there was more money to be made elsewhere."
BofA manages $12 billion of mutual fund assets in its Pacific Horizon Funds and Time Horizon Funds, 88% of which is in money market mutual funds.
According to Strategic Insight, a New York-based research firm, BofA's stock mutual funds had inflows of $28 million in all of 1995, compared with $1.3 billion that flowed into the company's money market mutual funds.
Long-term fund sales have picked up this year. The banking company's stock funds had inflows of $100 million through the end of April, according to the research firm.
By linking the fund unit's profits to those of BofA's brokerage and domestic and international banks, the distribution units will have more incentive to "place greater focus on the proprietary product line," Mr. Anderson wrote in the memo.
The shift will also "make the financial results of" the brokerage unit "more comparable with other retail broker-dealers', and give the private bank credit for the full extent of its efforts to distribute investment products to high net worth clients," he wrote.
One BofA executive said there is an entrenched bureaucracy at the bank that has limited proprietary fund sales.
The executive said that in the past Mr. Anderson tried to cut through red tape by having more executives - 23 at its peak - report to him. But the recent moves are evidence that he "has been under pressure for quite some time to reduce the number of people that directly report to him" the source said.
