The Sierra Funds, once a darling of the bank-proprietary fund business, will disappear early next year.

Great Western Financial Corp.'s Sierra fund family is set to merge with Washington Mutual Inc.'s Composite Funds in early 1998.

The resulting complex, which will have $5 billion of assets under management, is likely to have an entirely new name, said William Papesh, president of the Composite Group.

Although the Sierra Funds enjoyed noteworthy success in external sales channels-including broker-dealers like Merrill Lynch & Co., Dean Witter, Smith Barney Inc., and Prudential Securities-Seattle-based Washington Mutual is not planning to look for more outside distribution.

"We hope to use a rifle rather than a shotgun, retaining relationships with people who demonstrated commitment to our product," Mr. Papesh said.

An eight-year-old family with $3.3 billion of assets under management in 22 mutual funds and 13 variable annuities portfolios, Sierra lost some of its luster this year, before Washington Mutual announced its deal for Great Western.

"For a while they were on the cusp of the whole bank fund market," said Eli Neusner, a senior consultant with San Francisco-based Spectrem. "Then, for some reason, we never heard from them again. They lost the momentum."

The Sierra family's management company began the year on the auction block. The bidding went slower than expected and was finally iced when Washington Mutual announced it would buy Great Western.

"From our vantage point, we're obviously very pleased that no prior sale was consummated," Mr. Papesh said.

The Sierra complex outsourced its asset management, fund administration, and customer service functions. The high cost of these services is believed to have stalled the bidding for Sierra.

Mr. Papesh said three sub-advisers will continue to work on seven specialized Sierra funds: Warburg Pincus for international, Janus on the growth and an emerging growth fund, and Van Kampen on municipal bonds and the prime income fund.

But Mr. Papesh hopes to bring expenses down by servicing other aspects of the Sierra funds through the Composite infrastructure.

"They externalized all these functions. We have been there, done that, and feel very confident in our people," Mr. Papesh said.

Started in 1939, the Composite family has eight mutual funds and three variable annuity portfolios.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.