New sales of proprietary bank equity mutual funds more than tripled in 1993 to $7.4 billion, according to a survey of proprietary bank mutual funds.
The survey of 53 banks, accounting for half of the banks with proprietary funds and 76% of bank proprietary fund assets, was conducted by Strategic Insight and Money Marketing Initiatives Inc.
The study was done on behalf of the Bank Securities Association, which is based in Corte Madera, Calif.
New sales were the main source of new money in proprietary bank bond funds and equity funds in the year ended Dec. 31, accounting for 82% of the growth in assets.
By contrast, conversions from pooled trust assets accounted for less than 15%.
Boosting profits
What's more, these funds are making a significant contribution to bank profits.
In 1993, more than 85% of banks reported a positive pre-tax contribution to the bottom line from proprietary funds.
Thirty-two percent of banks reported $1 million to $3 million in pre-tax profits from their funds; while 21% reported less than $1 million.
Eighteen percent reported between $3 million and $10 million, while 14% reported more than $10 million.
"Proprietary bank funds have made a tremendous impact in the industry and are one of the fastest growing segments in the fund market today," said Peter Succoso, president of the Bank Securities Association and senior vice president of Wilmington Trust Co., Wilmington, Del.
Distribution varies
Distribution channels for bank funds are surprisingly diverse. The study found that 29% are distributed to retail investors, largely through bank broker/dealers; 27% are distributed to personal trust clients; 18% to employee benefit programs; 18% to institutional trust clients; 6% to external customers and 3% are distributed through other means.
The study also found that multiple classes of shares may become the predominant fund structure.
While only 47% of banks currently offer multiclass proprietary funds, 73% of those that don't have them already indicated plans are in place to offer these by the end of the year.
More than 80% of the responding banks also said changes in fund pricing are in the works or are under consideration.
Banks not only manage the mutual funds, but also they provide various additional services: 30% act as transfer agents; 30% provide fund administration; 36% provide fund accounting; and a hefty 49% act as custodians.
Members of the Bank Securities Association include representatives of commercial banks, investment companies and other securities industry firms.
