CHARLOTTE, N.C. - First Union Corp. is launching a new institutional money management division, First Capital Group.
First Capital Group will begin with $16.2 billion in assets, which previously was handled by the trust and investment area of First Union National Bank. Of the $16.2 billion, $6.5 billion is in equity and $9.75 billion is in fixed income.
"A big part of our market will be the middle market, pension plans with $50 million or $100 million that need the one-stop shop," said Don McMullen, executive vice president of First Union's trust/investment division and head of First Capital Group.
Money managers will be responsible solely for institutional assets, something Mr. McMullen said is important to plan sponsors.
And since the group is a separate division within the bank, it can offer investment professionals the kind of compensation schedules that are attractive and competitive in the industry, he said.
This is the second investment management move First Union has made in the last year. First Union acquired Keystone Investments Inc. of Boston last winter, which provided First Union with an additional $10 billion in assets, a family of mutual funds and "instant credibility and size," Mr. McMullen said.
First Union's mutual fund assets were about $3 billion in 1994, when it began to grow that part of the business. First Union acquired the Evergreen mutual fund family in June 1994, then Keystone in December 1996. The melded Evergreen Keystone mutual fund family now has about $32.2 billion in assets.
Institutional assets - only a small part of the business - managed by Keystone prior to the acquisition were moved into First Union.
Also, in the last few years, First Union has spent millions of dollars strengthening its record-keeping system, Mr. McMullen said.
If a client needs a specific talent not found at First Capital, strategic alliances with outside managers can be arranged, officials said.
"You need to have a lot of things in place, a lot of inertia. And make sure you have a clear mandate that makes sense for institutional investors," Mr. McMullen said.
Now the firm is ready to dedicate a group to institutional investment needs. Equity offerings include select value, select growth, midcap, social principles, blend and small-cap growth.
The dominant equity product, select value, will be benchmarked against the Russell 1000 value index. It will use a bottom-up approach, quantitative models and fundamental research.
Fixed-income products include controlled risk (regular and intermediate), enhanced bond and specialty solutions such as enhanced cash, limited duration and rate participation. The style of the dominant fixed-income product, controlled risk, focuses on management of duration, sector composition and securities selection, within narrow parameters.
The group will have about 20 equity portfolio managers, 14 fixed-income managers, 15 research analysts and nearly a dozen traders.
Group leaders are David C. Francis, chief investment officer; Glen T. Insley, director of fixed income; and Peter R. Nagle, director of sales and client services.
Mr. Nagle said First Capital will compete most often with non-bank investment management firms and will rely on strong performance to win clients. Current clients are public, corporate and union pension funds, as well as endowments and foundations.
First Union Corp. provides financial products and services to about 12 million customers nationwide. It is the sixth largest bank holding company in the United States, with assets of $143 billion as of June 30.
