Nations Funds Plans Restructuring
June 21, 1999
Nations Funds, the mutual fund arm of the Bank of America of Charlotte, N.C., is planning structural changes which could increase the distribution and cut the costs of its mutual funds.
The $68 billion fund group is planning to streamline its fund operations by reducing the number of funds it offers. At the same time, Nations Funds is moving to change the legal structure of at least some funds to permit them to adopt the so-called master-feeder system, an arrangement the fund group believes may make it easier to increase assets and add new funds.
Nations Funds described the proposed changes in a preliminary proxy statement for its International Equity and International Value funds filed with the SEC June 9. Ann Anderson, a spokesperson for Nations Funds, declined to elaborate on the group's plans for new distribution efforts or to eliminate funds. The proxy statement provided little detail with respect to Nations Funds' plans to streamline fund operations.
Several mutual fund companies this year have taken steps to merge similar funds within their complexes or liquidate small funds in an effort to reduce fund company expenses. (MFMN 4/26/99) Some fund executives believe that the master-feeder structure can make it easier and cheaper to increase fund assets and potentially reduce costs for shareholders.
In the master-feeder system, funds with different sales charges and expenses but with a common investment objective serve as conduits to a single fund. A majority of funds are organized as a single investment pool with different share classes carrying different charges and expenses.
Nations Funds said that the master-feeder structure would make it easier to start new funds for offshore investors. Anderson declined to comment on whether the group plans to offer new offshore funds. Nations Funds now has five offshore funds. - Mike Garrity
Nations Funds' market share in the bank channel was 7.44 percent through March 31, according to Financial Research Corp. of Boston, a fund tracking firm. The group had $168 million in sales in long-term funds through March 31, FRC said. Nations Funds had net redemptions in long-term funds of $354 million in 1998, according to FRC.