Magazine article American Banker

Mutual Fund Wrap Accounts Gaining Momentum

Magazine article American Banker

Mutual Fund Wrap Accounts Gaining Momentum

Article excerpt

After years of hype, mutual fund wrap accounts are finally poised to take off.

So say fund marketers, who are hoping that July's stock market correction has made wrap accounts - which promise investment diversification in a simple package - attractive to skittish fund investors.

"It's difficult to sell asset allocation in a market like we had last year," said David J. Schulman, national sales manager for Great Western Financial Corp.'s wrap account. "How do you compete with a fund that was up 40%?" he asked. "You can't."

But this summer, thanks to the stock market's hiccup, wrap sales have improved.

Sales of Great Western's Sierra Asset Manager account are now averaging $25 million a month, Mr. Schulman said, double the rate of a year ago. He made his remarks during a speech at a wrap conference here sponsored by Global Business Research.

Mutual fund wrap accounts, which typically don't carry a separate sales charge, spread a customers' assets among an assortment of mutual funds. In exchange for an annual fee that usually runs 1% to 1.5% of assets, a broker uses a set of funds from a preselected menu to match a particular investment objective. The fund assets are periodically rebalanced to stay in line with the original portfolio allocation.

While wrap funds minimize risk through diversification, they also limit the chance to hit a home run with a hot fund. Their popularity waned during last year's torrid market.

But as inflows into most mutual funds complexes stalled during last month's market correction, the biggest wrap programs in the business kept rolling along. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.