U.S. banks looking for exposure in international asset management are generally taking a cautious approach, holding off on acquisitions in favor of forming partnerships with overseas players.

The banking companies hail these arrangements as good ways to satisfy increasingly demanding customers without taking on undue business risks.

KeyCorp, for example, recently made a subadvisory agreement with the asset management unit of Credit Agricole Mutuel, Paris, and Mellon Bank Corp. has set up a string of alliances with foreign managers.

Outright acquisitions, however, have been few and far between.

Even banking companies that have bought fund companies in the United States have been tentative when venturing overseas, where they generally have taken only minority stakes.

Why have banks shied away from buying? Joy Montgomery, president of Money Marketing Initiatives, a Basking Ridge, N.J., consulting firm, cited a number of factors.

For one, U.S. banks may see alliances as more appropriate for learning the business. At the same time, the arrangements may give just enough exposure to international product to retain customers, Ms. Montgomery said.

"Many of these banks are never going to have enough international demand to make it worthwhile to own one," she said.

Indeed, only about 7% of the assets in long-term mutual funds managed by banks are international, according to Avi Nachmany of Strategic Insight, New York.

Analysts also suggested that the recent spate of acquisitions of asset management firms had driven up prices to a level that makes overseas moves difficult for U.S. banks.

In general, asset management firms have been selling at four or five times book value, said Burton J. Greenwald, a mutual fund analyst based in Philadelphia. "It's a tough swallow for the banks," he said.

"Banks typically don't do that well on the bidding," said Ms. Montgomery, who added that in many cases they are not prepared to pay current market prices.

Indeed, a number of banks were said to have circled San Francisco-based GT Global Inc. when that internationally focused firm was on the block, but none was successful. The company, with roughly $60 billion under management, was ultimately bought by Amvescap PLC for a reported price of more than $1 billion. The deal closed last month.

As U.S. banks mull the overseas market, some foreign players are finding ways to break into this country.

Switzerland's Credit Suisse Asset Management last week announced that it would pursue a joint venture in product distribution with Warburg Pincus Asset Management in New York.

Robert Kosrovani, head of the Swiss company's global retail distribution, said price was a factor in the move. After what he described as a "very thorough" search, Credit Suisse decided to pursue an alliance rather than buy an asset manager because it felt such businesses were priced at a premium.

"We don't mind paying up if it's worth it," he said.

Meanwhile, Mellon despite its purchase of the Dreyfus Corp. in 1994 and the addition of Denver-based Founders Asset Management last year, has said it has no plan to extend that level of risk overseas.

Since January, it has taken minority equity stakes in three asset managers-in Chile, Brazil, and Hong Kong-and reached a subadvisory agreement with the asset management unit of Bank of Tokyo-Mitsubishi.

In making alliances, U.S. banking companies are hoping to minimize a variety of risks-not just the initial financial outlay.

"The risk is time and commitment, and we put plenty of time into this," said William G. Spears, chairman and chief executive officer of Key Asset Management, a unit of KeyCorp.

Last month KeyCorp reached a subadvisory agreement with Indocam SA, the asset management division of Credit Agricole.

Mr. Spears said the arrangement was more a function of where the Cleveland banking company is in its own strategy than a reaction to a trend.

Three years ago, KeyCorp acquired Mr. Spears' New York asset management firm, Spears, Benzak, Salomon & Farrell Inc. Now, the banking company is ready to add an international flavor, he said.

"I could care less what other banks are doing-I'm concerned about our clients," said Mr. Spears.

Meanwhile, another option for banks is to take baby steps into a developing market.

The investment management arm of State Street Corp., Boston, which has joint ventures in Hong Kong and Prague, said Wednesday that it had made its first overseas acquisition.

Its purchase: Boston Capital Management, a U.S. company that controls a Moscow investment firm with $5 million of unit investment funds under management.

Terms of the deal were not disclosed, but an investment banker said the price would be negligible, considering that-off a $5 million base-the Russian firm, Pallada Asset Management, might be making $100,000 in annual fee revenue.

"It does make sense in terms of trying to get some local knowledge for a small amount of money," this source said. "I can't imagine these people are making any money" after expenses.

John Snow, a principal of State Street Global Advisors responsible for new ventures, said the deal positions his company to grow with the Russian unit investment fund market, which now totals $40 million.

"We need to be there now to participate in the longer term," Mr. Snow said.

Mr. Snow said not to expect new products from Pallada anytime soon- Russians are restricted from investing outside their country, and U.S. demand for Russian investments, outside of arbitrage plays, is relatively slack.

Liberty Financial Cos. agreed to buy contrarian investment firm Crabbe Huson Group Inc. for up to $147.5 million. Back page

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