TO BANKS, A FUND BY ANY NAME NOT THEIR OWN ISN’T AS SWEET: RUSH TO RETITLE FOLLOWS FED’S EASING OF REGULATION TO LET INSTITUTIONS USE THEIR NAMES ON OFFERINGS

Eight years ago, portfolio managers for Firstar Corp. were thumbing through a thesaurus as they wracked their brains in the Milwaukee bank’s conference room. The issue: what to call the firm’s new line of stock and bond mutual funds.

They were looking for a word like “gateway,” one that would convey a passage to a more secure financial future, recalls Mary Ellen Stanek, president of Firstar Investment Research and Management Co., the bank’s investment subsidiary.

Many ideas were offered, but most were derailed by trademark conflicts. Finally, Portico Funds were born.

“Portico ended up being the one that came through (the trademark check) the clearest,” Ms. Stanek says.

Of course, the name everyone really wanted to use was Firstar, but that was off-limits because federal regulators frowned on using bank names on mutual funds. They were concerned that investors might be misled into believing the investments were federally insured like bank accounts.

It’s taken eight years, but Portico Funds at last are Firstar Funds. The bank hopes to leverage its name recognition in Midwestern markets to attract more assets to its 18 funds, which currently hold $5.2 billion.

Firstar is only one of several banks slapping their names on proprietary funds now that the Federal Reserve has relaxed its opposition.

The Fed, which regulates bank holding companies and state-chartered member banks, loosened the restrictions a year ago, in part to become consistent with the more flexible stance adopted four years ago by the Comptroller of the Currency, overseer of national banks.

they could, but…

Technically, many banks had been able to use their names for years, since the banks often serve as investment advisers to their funds, says Melanie Fein, a partner with Arnold & Porter in Washington, but fear of running afoul of regulators kept many from taking that step.

“What (the Fed) did was just make banks more comfortable,” Ms. Fein says.

Winston-Salem, N.C.-based Wachovia Corp. le
d the parade last summer, renaming its Biltmore Funds the Wachovia Funds.

And bigger-name banks are following suit. In early January, the JPM Pierpont Funds became the J.P. Morgan Mutual Funds. Next month, Citibank will redub its Landmark Funds the CitiFunds Family of Asset Funds. And Chase Manhattan Corp. plans to convert its Vista Funds into the Chase Vista Funds.

The moves correspond with banks’ increasing efforts to build greater brand awareness. As they continue to increase investment assets, banks see their names as an advantage against competing investment-management firms.

Many banks also are emphasizing retail investments. Banks in many cases established mutual funds as an easy way for private-banking clients to invest, says George Gatch, vice president in charge of mutual funds for J.P. Morgan & Co. in New York.

even morgan goes retail

With the retail explosion, banks are vying for the dollars of non-bank customers. That can be seen, for example, in the 45% stake J.P. Morgan recently took in American Century Investments Inc., the Kansas City, Mo., mutual-fund complex.

“It is of the utmost importance that the funds advised by J.P. Morgan are clearly identified with the J.P. Morgan brand and what the brand stands for in the marketplace,” Mr. Gatch says. “Many people are aware of who J.P. Morgan is. Very few people are aware we are one of the largest investment managers in the U.S.”

Using their names is crucial for banks trying to establish themselves in the investment industry, agrees Lee Lodes, a director at Prophet, a San Francisco market-research firm.

“Banks still equal savings, checking and loans to most people,” he says. “If they are going to build (investment business) and leverage the brand, it makes perfect sense to rename (funds) after the brand.”

Ultimately, for banks, as for mutual-fund firms, increased sales will follow performance – and, as a category, the performance of bank mutual funds has sent few hearts racing.

But, at least,
customers will know their banks sell mutual funds.

For Firstar, that is a victory: “There was always one more question you had to answer,” says Ms. Stanek. ” ‘Who’s Portico?’ “