IT’S LOOMING EVER BIGGER IN ADVISERS’ WORLD: MFS LOOKS AS IF MANAGER IS NO. 4 IN FUNDS SOLD BY MIDDLEMEN, AS FOR FIRST TIME IN 75 YEARS IT NEARS $100 BILLION IN ASSETS

MFS Investment Management isn’t nearly as big as Fidelity Investments or Vanguard Group, but it’s getting there.

For the first time in its 75-year history, the Boston mutual fund juggernaut is close to amassing $100 billion.

Currently managing $94 billion and ranking as the nation’s 14th-largest fund manager, MFS is closing in on its goal to become one of the top three fund groups sold through go-betweens, from brokerages to planners to banks.

Impressive equity performance is the main reason. MFS took in a whopping $9.8 billion during the first 11 months of 1998 – twice its inflows during the same period in 1997, according to Boston’s Financial Research Corp. That isn’t bad for a company that was best known as a bond shop only five years ago.

When the numbers are finally tallied, MFS is likely to rank as the nation’s fourth-best selling fund firm in 1998 – topped only by Putnam Investments, Vanguard and Fidelity.

“MFS has been intently focused on improving its relationships (with intermediaries),” says Avi Nachmany of Strategic Insight, an investment consulting firm in New York. “That, coupled with their great investment results, means they are meeting their clients at the point of maximum impact.”

But with new assets come new hurdles. Many a fund firm has suffered the slings and arrows of suddenly outrageous fortune. Look

at what happened to Fidelity: After a decade of eye-popping growth and performance, it nearly ran aground in 1995 and 1996 when some of its funds got too big to maneuver.

At risk is MFS’s entrepreneurial culture, which makes it feel more like a hot Internet company than a Brahmin money manager. Many insiders believe MFS’s culture is the key to its investment success.

“We very much try and make our people succeed,” says John W. Ballen, president and chief investment officer. “We try to make MFS a very enjoyable place to work, which is quite contrary to a lot of other places.”

Indeed, MFS isn’t your run-of-the-mill money manager. At a time when many fund groups are cherry-picking portfolio managers from one another, MFS refuses to join in.

Instead, it seeks out new MBAs as research analysts, spends years cultivating them and then promotes them, a structure awfully similar to Fidelity’s. The system apparently works: of the 60 analysts and managers on the firm’s equity desk, only about one a year quits, officials say.

Yet MFS already is finding it necessary to adjust to keep pace with the money flooding in.

Until recently, for example, would-be analysts met with as many as 50 investment professionals – from chief executive Jeffrey L. Shames to junior portfolio managers – before being offered a job, the idea being to give as many MFS employees as possible a stake in the new hire’s success. But with the rate of hiring accelerated to keep up with new assets, that’s no longer practical.

“You have to make deviations,” Mr. Ballen says.”What you try and do is make changes that don’t change the culture.”

two top s&p 500

It’s easy to see why MFS is taking great pains not to disrupt its investment performance. For 1998 through Nov. 30, two of its 53 funds outpaced the 21.57% return of the Standard & Poor’s 500 stock index – a feat matched by few peers.

The $3.6 billion Massachusetts Investors Growth Stock Fund returned 30.24% for the 12 months through Nov. 30, vs. the 12.37% average for its peers, according to CDA/Wiesenberger, the Rockville, Md.-based fund tracker. MFS Strategic Growth, with $485 million, returned 33.53%, significantly more than the 12.37% average for other growth funds.

The $9.1 billion Massachusetts Investors Trust, the firm’s flagship, gained 19.24%, compared to 12.41% for the average growth-and-income fund over the same period.

Other MFS funds that outpaced their peers during the same period: the $5.4 billion MFS Research Fund, the $5.8 billion Total Return fund and the $616 million Utilities fund.

“MFS used to be much less disciplined in terms of its investment approach,” says Louis Harvey, president of Dalbar Financial Services, an investment research firm in Boston. “They started changing that a few years ago and they are enjoying the payoff of that change.”

After years of playing second fiddle, MFS is finally starting to get noticed. Ten of its 53 funds posted more than $250 million in net sales during the first 11 months of 1998. And its share of the $1.3 trillion universe of funds sold through intermediaries is 4.6%, up from 3.9% a year ago, according to Financial Research.

Striking while the iron is hot, MFS expects to spend $7 million this year to promote the 75th anniversary of the Massachusetts Investors Trust fund. That’s about 40% more than it spent on branding last year.

In 1996, MFS launched a television advertising campaign but pulled the plug after the first couple of bills, shifting to much cheaper print.

“We would obviously like more awareness of MFS,” says Mr. Ballen. “But I think investors go more for the performance than a name they may be familiar with.”