U.S. Trust Corp. has struck a mutual fund marketing agreement with a specialist in affinity-group sales - a move that could help the New York banking company reach a new clientele.
As part of the deal, U.S. Trust will take over a $19 million mutual fund complex managed by the marketing firm, USAffinity Investments, and will merge the six portfolios in the USAffinity family into its own mutual fund portfolios.
In return, USAffinity has agreed to market the entire UST Master family to the members of affinity groups with which it has marketing relationships. It works with 55 such groups - including, for instance, members of the San Francisco bar association.
USAffinity is a brokerage subsidiary of Trans National Group, a privately held Boston company that specializes in marketing telephone, travel, and other services to associations and groups with a common bond.
U.S. Trust will not have an exclusive deal with USAffinity. In a month, USAffinity hopes to start selling another 200 to 300 mutual funds from other companies, as well as fixed and variable annuities.
But even though U.S. Trust will be part of a crowd, officials of the New York banking company believe the venture with USAffinity is worthwhile. It will mark the first time that U.S. Trust has targeted affinity group members for sales of any of its products.
This means U.S. Trust will gain experience with a powerful marketing approach that has made a bundle for other banking companies - most notably MBNA Corp., the affinity credit card marketer.
"This is an opportunity for us to understand a different market with a group of folks who understand that market very well," said Peter P. Capaccio, mutual funds manager for U.S. Trust.
With $3.5 billion in its mutual funds at yearend, U.S. Trust is the 24th largest mutual fund manager among banks.
When it started its mutual funds, U.S. Trust only sold them to its own bank clients - mostly individuals with at least a quarter of a million dollars for the bank to manage.
Two years ago, U.S. Trust joined the handful of banking companies that sell their own funds outside their branch networks. UST Master Funds are available through more than 90 brokerages, banks, and financial planners. Funds sold through this channel have a 4.5% front-end sales load that U.S. Trust clients are not charged.
To give the affinity marketing program an extra push, U.S. Trust is cutting members of affinity groups a special deal. They will be able to buy the UST Master Funds without paying the front-end sales commission.
For USAffinity, the deal marks a change in strategy. The company was started in 1992 to focus on selling its own mutual fund family.
But Hubbard R. Garber, a USAffinity principal, said the USAffinity funds didn't get enough assets to be viable. And research showed that affinity group members wanted a wider selection.
The five basic money market, bond, and equity portfolios in the USAffinity family will be merged into similar UST Master Funds. Investors in the sixth offering, a "socially responsible" portfolio called the Green Fund, will be allowed to move into a similar fund managed by another company.'
