, Crain News Service
BOSTON -- The company that gave birth to the first mutual fund is laying plans to manage stocks and bonds in separate accounts for wealthy investors.
MFS Investment Management of Boston plans to start early next year managing $100,000 and up for investors in individual portfolios known as wrap accounts. The nation's 13th-largest fund company with $113.4 billion under management expects to earn up to 15% of its annual revenue from wrap fees within two years.
"The business is growing tremendously," said Robert Leo, director of the broker-dealer group at MFS. "I predict that we'll be selling billions of dollars worth of money management in a couple of years."
MFS's move is significant. In addition to being a nod to the growing popularity of wrap accounts --which most mutual fund companies view as competition -- MFS's move marks an acknowledgement by a major fund group that investors may be getting bored with mutual funds.
"Investors want to move beyond mutual funds," said Mr. Leo. "There's a certain cachet to having money managed in an individual account as opposed to having it in a mutual fund."
The numbers bear him out. While mutual fund net sales of $99.3 billion are off 42% for the first half of this year, the wrap business is thriving. Total assets in wrap accounts reached $286.5 billion at the end of March, up from $111.4 billion in 1995, according to a report slated for release this week by Cerulli Associates, a financial research firm in Boston. Wrap accounts essentially provide management and brokerage for an annual fee, typically about 2% of the account's assets. They come in two forms: mutual fund wraps, which invest in mutual funds, and consultant wraps, which put money into individual stocks and bonds.
To spearhead its move, MFS recently hired away Bill Taylor who ran the wrap program at rival Alliance Capital Management LLP to head its wrap program.