Inspired by a 15% increase in mutual fund assets, U.S. Bancorp of Minneapolis is hoping that its First American family will become the leader in sales among bank proprietary funds.
The boost comes from the Qualivest mutual fund family, the proprietary funds of the original U.S. Bancorp, the Portland, Ore.-based banking company that First Bank System Inc. acquired in August.
A merger of the two proprietary families, which would combine $19.8 billion of assets under management into 32 mutual funds, is expected to close today. Ten of 13 Qualivest funds, with $2.5 billion under management, are being folded into similarly managed First American funds.
The resulting family would have 51% of its assets in money market funds, one-third in equity funds, and the remainder in fixed-income funds and in funds of funds.
Meanwhile, the First American funds are attracting $2 million of assets a day, said John Murphy, chairman and chief investment officer of First Asset Management, the proprietary funds' adviser.
"We're very proud we've grown to this point," Mr. Murphy said, referring to First American's No. 8 ranking among bank-managed fund families, but he added that the funds are aiming for the top.
After the merger, Mr. Murphy wants the funds to increase 20% in assets per year. He said a good portion of that growth will come from sales to retail and 401(k) investors in the Pacific Northwest.
Almost half of all mutual fund assets brought in through U.S. Bancorp's old franchise are going into the new bank's proprietary funds. The combined bank has 200 retail brokers, 400 platform salespeople, and 30 institutional representatives touting First American funds.
Mr. Murphy is scheduled to visit U.S. Bancorp branches in Portland, Seattle, and Boise, Idaho, to talk about the funds. He also plans to promote them in conversations with the local print and broadcast media in those cities.
Existing strongholds for the First American funds are Chicago, Denver, Omaha, and the Twin Cities, Mr. Murphy said.
Observers said it is unusual for a bank marketing program to promote its own funds as successfully as U.S. Bancorp has.
"In most cases, the proprietary funds suffer if there is an aggressive retail operation," said Burton J. Greenwald, a Philadelphia-based mutual fund consultant.
"That operation will almost always be more comfortable selling brand- name funds, Fidelity, Putnam, etc.," he added.
Though internal sales are the primary driver of growth, more customers from the outside are coming into the funds.
External sales-through broker-dealers and the institutional networks of Fidelity Investments, Jack White & Co., and Charles Schwab & Co.-now represent 8% of production. For the year ending June 30, they made up 2% of First American sales.
The new First American complex retained many Qualivest employees among its 105 portfolio managers and analysts. The president of Qualivest Capital Management, Timothy J. Leach, now works in marketing for the bank's private financial services group in the northwestern states.