Magazine article American Banker

Bank Takeover of a Fund Firm Seen Likely

Magazine article American Banker

Bank Takeover of a Fund Firm Seen Likely

Article excerpt

WASHINGTON -- A wave of mutual fund takeovers is coming, and a major U.S. bank is likely to take home one of the first prizes, a prominent fund industry figure said last week.

"I think we will see an acquisition of a mutual fund management company by a large domestic bank holding company," said William J. Nutt, former president and chief operating officer of Boston Co.

Mr. Nutt said he expects to see such a deal within the next three years, even though it would require some maneuvering to cope with the Glass-Steagall Act's prohibitions on bank mutual fund activities.

A bank that acquired a fund company would have to turn over the job of marketing its funds to an unaffiliated distribution company, Mr. Nutt said during a panel discussion at the Investment Company Institute's annual convention here.

However, that would not be much of an obstacle because banks that manage homegrown mutual funds already maintain such relationships with distributors. More than 100 banks have their own families of mutual funds.

Banks typically get into the business of managing mutual funds by starting their own funds. But it can take a long time to build these so-called proprietary funds, which generally are created through conversions of trust assets.

In the past year, as the mutual fund business has heated up, banks have been searching for quicker ways to build critical mass.

One approach favored by banks is the formation of strategic alliances. The joint brokerage formed by NationsBank and Dean Witter Financial Services is the best example.

Some banks have been talking about acquiring mutual fund assets outright, but so far the strategy has been tried only on a modest scale. …

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