Magazine article American Banker

SEI to Give Up Its Dwindling Role as Funds Distributor for Banc One

Magazine article American Banker

SEI to Give Up Its Dwindling Role as Funds Distributor for Banc One

Article excerpt

SEI Corp. is bowing out as distributor for Banc One Corp.'s $5.1 billion-asset family of mutual funds, citing differences over strategy.

The mutual fund administration company, based in Wayne, Pa., announced it will not bid on a contract with the One Group of Funds that comes up for renewal on Nov. 30.

SEI objected to Banc One's plans to do more of its mutual fund servicing work in-house, Richard B. Lieb, president of SEI Investment Services Group, said in a news release.

Shrinking Profit Potential

"Unfortunately, Banc One's strategy and ours are no longer compatible," he said.

The shift would have transformed SEI from, a partner of Banc One to a mere vendor, and would have made it "impossible for SEI to earn "reasonable" profits, Mr. Lieb explained.

Paul Walsh, chairman of BancOne Diversified Corp., said a new distributor will be chosen by the end of September.

The decision to bring some mutual-fund services in-house is part of a push by the Columbus, Ohio-based bank to "unbundle" services currently provide by vendors, Mr. Walsh said.

By law, banks that act as investment adviser to a family of mutual funds are prohibited from "distributing" the funds.

The Distributor Function

To market proprietary funds, banks form partnership with nonbank distribution companies, which organize, register, and seed the funds and offer shares for sales.

These distribution companies typically provide their bank clients with a range of services - some of which the banks could legally do themselves.

These services include mailing prospectuses, maintaining custody of securities, and hiring subcontractors to take pieces of specialized, functions, such as legal services and third-party distribution.

By uncouping the distribution of its funds from the other administrative functions, Banc One hopes to gain more control over its mutual fund operation both in quality and cost, Mr. …

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