Magazine article American Banker

Bank-Run Funds, Though off, Outpace Overall Industry; Banks' Equity Funds Lost Only 1.6%, versus a 2.11% Loss for All Equity Funds

Magazine article American Banker

Bank-Run Funds, Though off, Outpace Overall Industry; Banks' Equity Funds Lost Only 1.6%, versus a 2.11% Loss for All Equity Funds

Article excerpt

In the second quarter, bankmanaged mutual funds posted better returns than the industry as whole in rocky market conditions.

While most funds lost money for investors in the period, funds run by banks had slightly smaller losses. For example, bankmanaged equity funds lost 1.6%, versus a 2.11% loss for all equity funds.

The performance, which follows three years in which bank funds trailed the industry, lends credence to the view that banks are relatively conservative mutual fund managers.

"That seems to be true, because they aren't performing as poorly as the universe of funds," said Richard Tierney, an operations manager for CDA/Wiesenberger, of Rockville, Md., which compiled the data.

Seen as Conservative

The theory is that while conservative funds gain less in bull markets, they lose less when bears are loose, as has been the case this year.

Banks are believed to be conservative fund managers because they are new to the business and have concentrated on basic offerings before trying riskier funds.

Additionally, conservative investing is believed to mesh well with banks' traditional business of protecting customers' deposits.

While the data conforms with the view that banks are relatively conservative investors, the difference was slight across all types of funds.

Bank-Fund Breakdown

Bank-managed taxable bond funds, for example, lost 1.16%, just over a tenth of a percent less than was lost by all funds of this category.

Bank managed mixed and tax exempted bond funds bested their peers by only a few hundredths of a percent.

In the first quarter, bankmanaged bond funds posted slightly smaller declines than all bond funds, and bank-managed equity and mixed funds registered declines that were slightly larger.

Three-year gains for bankmanaged equity and taxable bond funds were nearly 1% below the industry as a whole. …

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