What mutual funds are bank customers buying these days? American Banker recently posed that question to executives at five large banks.
Not surprisingly, banks that manage their own funds often report strong demand for the homegrown products. Customers appear to take comfort in knowing that the bank is calling the shots on these investments, bankers maintain.
Most banks also sell funds managed by other companies. While plain-vanilla government funds have traditionally been the most popular offerings through banks, that may be changing.
Funds that help customers shield income from taxation, provide strong yields, or represent a cautious first step into equity investing are gaining popularity, bankers reported.
Bankers also emphasized the importance of sales support from outside fund companies.
Riggs National Bank
Washington's Riggs National Bank is a newcomer to the mutual fund business, but that hasn't hindered its efforts to market its proprietary Rimco Monument funds.
The $5 billion-assets company launched the fund family in 1991 with two money market funds. In 1992, four stock and bond funds were added to the lineup. Mutual fund assets total $600 million.
Going for the Yield
The best seller is the Prime Fund, which has growth to $280 million in assets, and currently yields 3.44%. "People gravitate to it for the yield. It's that simple," said Deanna Belli, a senior vice president.
"When customers debate whether to go with a well-known fund family or with us and they learn that Riggs National Bank's trust group manages the fund, it makes a difference to them."
Riggs is also doing a big business in Putnam Funds. Ms. Belli credits wholesalers at Boston-based Putnam Financial Services for providing a high degree of customer service and support.
She said interest in annuities is also rising, particularly among older and first-time customers.
National City Corp.
At National City Corp., a $29 billion-asset bank holding company based in Cleveland, the hottest proprietary fund is the NCC Stock Fund, which focuses on large-capitalization stocks in about 10 sectors.
Since it was launched in 1989, the $100 million-asset fund has posted a 51.66% annualized return.
Like Riggs' funds, National City's are an extension of the trust and investments department.
"We've been managing trust money for 75 years," said Joseph C. Penko, a National City vice president, "and retail customers like the fact that we're offering them a product that is conservatively managed."
Eaton Vance Fund a Hit
National City supplements its seven proprietary funds with a preferred list of funds from other providers. According to David Dunning, managing director at NCC Securities, the Eaton Vance Total Return Fund -- heavily weighted toward utilities -- as been moving well in recent months.
Mr. Dunning also said the way a fund is marketed has an impact on sales. "All our preferred funds offer deferred sales charges," she said.
"The public is learning that paying a load up front may not be in the best interest in the long haul. A deferred charge eliminates a customer objection and makes it easier to make a sale."
NBD Corp.
At Detroit-based NBD Corp., the top seller is a homegrown stock fund, the Woodward Opportunity Fund.
Focusing on midsize companies with proven records of growth, it has provided a 27.8% total return over the past year.
In all, NBD manages $5.3 billion in mutual fund assets.
"Our bank has one of the lowest loan-loss ratios in the industry," said Russell Browne, first vice president. "We're well managed, and our funds mirror that conservatism."
Outside Fund List Revamped
The bank recently revamped the list of outside funds that it offers, so Mr. Browne said it is too soon to say which funds are selling well.
Since Aug. 1, NBD has been using only two outside fund vendors: Putnam Financial Services and Franklin Resources, which manages the Franklin and Templeton funds. The bank dropped two other vendors.
"What we are doing is offering more funds within fewer families," said Mr. Browne.
First Union Corp.
Saving money on taxes appears to be a priority among customers at First Union Corp., a $68 billion-asset company based in Charlotte, N.C.
The bank's proprietary First Union Funds are heavily weighted towards the fixed-income variety. Three municipal bond funds - for Georgia, Florida, and Virginia - were launched in July.
According to Barbara Colvin, vice president of retail investment products, the bank's best-selling proprietary funds are a U.S. government fund and an insured tax-free fund.
"We see an enormous demand for tax-free products as people anticipate tax increases," she said. "We've also got a lot of yield-sensitive customers who are used to a different kind of return that what they can get with an insured [bank deposit] today."
In addition, two stock funds -- the balanced fund and the value fund, made up of strategic growth and income stocks - are attracting interest from people saving for retirement.
Chemical Banking Corp.
At Chemical Banking Corp. in New York City, fixed-income funds continue to attract large numbers of customers. The $140 billion-asset company sells a range of the best-known outside funds as well as its own Hanover Funds.
Steven Plump, director of sales for Chemical Investment Services, said he is beginning to see customers diversifying their investments among several bond funds.
"Many clients are taking advantage of current yield curves to invest in intermediate term bond funds, which offer up to 8.5% in the long end," he said.
He cited Massachusetts Financial Services' Government Limited Maturity Fund as an example. In addition, variable annuities and equity funds weighted toward utilities are drawing investors' interest.
Ms. Sullivan is a freelance writer based in New York.
