Magazine article American Banker

Bank Mortgage Funds Led the Pack in Half

Magazine article American Banker

Bank Mortgage Funds Led the Pack in Half

Article excerpt

Banks are proving especially adept at managing portfolios of mortgages.

During the first half of this year, banks supervised four of the top five mortgage funds in the nation, eking out modest gains while most rival funds were falling.

Huntington Bancshares supervised the top two funds, First of America oversaw the third-ranked mortgage fund, and KeyCorp managed the fifth best performer, according to rankings by Lipper Analytical Services.

The funds, handled by the banks' trust and investment units, bucked the general trend. Three-quarters of the 60 mortgage portfolios tracked by Lipper, of Summit, N.J., declined in value in the first half.

While long-established mutual fund companies generally manage the top- performing stock portfolios, mortgage funds give banks a chance to shine, industry experts said.

Longtime trading for their own portfolios has made banks "expert liability managers," a key capability for mortgage fund managers, Ms. Yuen said.

Huntington Bancshares came out on top with two classes of its Monitor Mortgage Securities Fund. A $45 million portfolio for trust accounts earned 1.06%, while a $1.7 million segment for retail investors returned 0.85%. Different pricing structures account for the unequal returns.

Securities culled from home loans have a firm position with an important segment of Huntington Bancshares' customers, executives said.

The mortgage fund "is primarily used in trust accounts when the customer needs high current income coupled with the credit quality of government- guaranteed securities," said Stephen M. …

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