CHARLOTTE, N.C. -- First Union Corp.'s Evergreen Funds have grown by $75 billion in five years -- although mostly by acquisition and through conversion of common trusts to mutual funds.
Led by Bill Ennis, chief executive officer, Evergreen now is the nation's 19th largest mutual fund company. According to Boston-based Financial Research Corp., Evergreen has $77 billion in total assets, of which $22 billion is from tax-exempt institutions.
Conversions gave the Charlotte-based company a big boost: In July, First Union converted about $3 billion in common trust funds to the Evergreen fund family. The trust funds belonged to two banks acquired by First Union, CoreStates Financial Corp., Philadelphia, and Signet Banking Corp., Richmond, Va.
Evergreen is now integrating the 11 funds of the $15 billion Mentor Fund family. Mentor Investment Group, Richmond, belonged to Everen Capital Corp., Chicago, which was acquired this summer by First Union.
In all, First Union has gobbled up five investment management subsidiaries since 1993, gaining both investment management expertise and small mutual fund families. Overall, about $43 billion in mutual fund assets has been transferred to the Evergreen funds as a result of those acquisitions.
But performance success doesn't always follow the ticklish business of knitting a cohesive business from acquired franchises. Evergreen's domestic equity mutual funds ranked in the 56th percentile on average when compared with category peers in the three years ended Aug. 31, according to an analysis by Morningstar Inc. for Pensions & Investments. The study doesn't include the Mentor funds. The analysis compared the performance of Evergreen funds with peer funds in other families in the same broad asset classes during the same period.
Evergreen's international stock funds were in the 39th percentile; its taxable bonds ranked in the 47th percentile.
"We feel we're doing well and are comfortable with our performance," said Mr. Ennis.
And things will get better, he said, with recent staff hirings.
Jean Ledford was lured away from American Century Funds in August to serve as president and chief executive officer of Evergreen Asset Management, New York. Ms. Ledford managed the $7 billion American Century Select Fund; she brought with her to Evergreen three team members: portfolio manager Richard Welsh, senior analyst Rick Petran and analyst John Anthony.
Evergreen Asset is the original headquarters of Evergreen Funds; it runs $15 billion in equity investments for the fund family, as well as $5 billion in money market funds.
Ms. Ledford replaces Evergreen family founders President Steve Lieber and Chief Executive Officer Nola Falcone, who retired in August when their five-year contracts ran out. First Union bought New York-based Lieber & Co. and its fledgling Evergreen family in late 1993.
First Union executives also carved out a new position for Dennis Ferro from Scudder Investments (U.K.) Ltd., where he was CEO. He leads First Union's Capital Management Group, which oversees institutional and mutual fund business.
In the early 1990s, First Union began expanding into broader fee-based businesses such as investment management and brokerage, while at the same time acquiring smaller regional banks. It acquired Keystone Investments Inc., Boston, in 1996, and last year gobbled up CoreStates.
Price of expansion
The price for this expansion has been high. The company fired about 6,000 employees in March, when the acquisition of CoreStates turned out to be more costly than expected. Expenses across the company were drastically reduced, through staff reduction, to preserve profitability.
Evergreen Investment Management, Boston, runs $10 billion in equities and bonds for the fund family. First Union acquired it in 1996.
Tattersall Advisory Group Inc., Richmond, runs the $1 billion Evergreen Select Core Bond Fund, as well as more than $5 billion in fixed-income separate account assets for U.S. institutions. Tattersall was acquired by First Union in 1998.
Meridian Investment Co., Valley Forge, Pa., runs $650 million for the Evergreen Select Special Equity fund and the Select Stock Selector. Meridian was bought in 1996 by CoreStates. First Capital Group, Charlotte, N.C., runs $22 billion in U.S. institutional tax-exempt bonds and fixed income assets, primarily for the Evergreen Select funds. The Capital Management Group, Charlotte, handles $10 billion in assorted mutual funds.