Magazine article American Banker

'Sweep' Programs Fuel Proprietary Funds with Deposits

Magazine article American Banker

'Sweep' Programs Fuel Proprietary Funds with Deposits

Article excerpt

Banks are using their proprietary mutual funds for more these than just stemming the outflow of deposits.

To meet clients' cash management needs, Continental Bank recently created an end-of-day investment system that moves assets from deposit accounts directly into one of its four, no-load money market funds.

Such "sweep" programs have been around for several years, but most involved mutual funds unrelated to the bank.

In the '94 version, banks are providing sweep services in part to generate assets for their fledging properietary funds.

Consultant Notes Trend

"It is becoming more common that banks have these cash management vehicles," noted Eli Neusner, a consultant with Cerulli Associates Inc. in Boston.

While some banks can sweep money into products other than mutual funds and others offer end-of-day, next-day sweeps, "those usually do not pay competitive returns, and have high transaction costs and enrollment fees," said Timothy Jackson, product manager for Continental's 231 Funds.

Only a few other financial institutions, such as Boston-based BayBanks Inc. and Barnett Banks Inc. of Jacksonville, Fla. offer a similar same-day, end-of-day service, and Continental claims it is the first Chicago-area bank to provide this featue.

Meeting a Demand

The new service, known as FundSweep, automatically invests assets in one of Continental's proprietary funds.

Customers determine how much they want to keep in demand deposit accounts, and the overflow is automatically moved into the mutual funds. …

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