Wilmington Trust Stamps Its Name on Mutual Funds a single family bearing the banking company's name.
Unveiled Nov. 1, the Wilmington Funds comprise the proprietary Rodney Square Funds, the WT Funds, and the CRM Funds managed by an affiliate, Cramer Rosenthal McGlynn of New York.
The new fund family contains seven equity portfolios, three fixed-income portfolios, and three money market portfolios. It will be managed by Wilmington, Cramer, Roxbury Capital Management, and Rodney Square Management Corp., the bank's investment manager.
Wilmington owns a 33% stake in Cramer and holds 100% of Roxbury's preferred shares, allowing it to receive 30% of the firm's gross revenue. Wilmington managed the WT Funds, which were not previously distributed on a retail basis, for Peter Kiewit Sons' Inc., an Omaha construction firm.
The restructuring broadens Wilmington's fund offerings, while lowering fund costs through economies of scale, said John R. "Rusty" Giles, vice president in the bank's asset management department.
And more importantly, Mr. Giles said, Wilmington can private label the funds. The funds operate under a master-feeder structure, in which assets of several funds are managed by a "master" in a centralized pool. The "feeder" mutual funds can be independent and can carry different names, sales charges, or even expense ratios.
"It's built-in distribution for us," Mr. Giles said. "For companies that want their own private-label funds, we can provide that," he said.
Wilmington Funds have approximately $4.6 billion under management, including $3.6 billion from the Rodney Square Funds. Wilmington had a total of $24 billion of assets under management as of Sept. 30.
"Wilmington senses an opportunity in mid-sized institutions that don't have the resources to play to the affluent market," said Burton J. Greenwald, a mutual fund consultant in Philadelphia.
"Everyone's trying to develop techniques to attract high-net-worth customers," he added. "Wilmington doesn't feel they can provide national coverage, so they're seeking distribution through alliances."
However, Mr. Greenwald cautioned, "there is considerable expense involved" in a master-feeder structure. The fund accounting and compliance, for instance, are much more complicated, he said.
Mr. Giles acknowledged that the legal work involved in the restructuring -- a nine-month process -- had been extensive. But since the Rodney Square Funds have had a master-feeder system since 1996, the restructuring will produce savings in legal and accounting fees "from day one," he said.
A number of other banking companies -- including Mercantile Bancorp. of St. Louis, Fifth Third Bancorp of Cincinnati, and Huntington Bancshares of Columbus, Ohio -- have also put their names on proprietary fund families in the past year or so.