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Citigroup Buckles Down to Consolidating Funds


Citigroup of New York is planning to consolidate most of its mutual funds under the Smith Barney brand, according to Ed Giltenan, a spokesperson for SSB Citi Asset Management Group. Citibank and Concert funds will be re-named, merged with existing Smith Barney funds or liquidated by Citicorp, the umbrella company of all three fund families, said Giltenan.

Citicorp currently has four fund brands in the US: Smith Barney, Salomon Brothers, Citifunds (sold by Citibank) and Concert Funds (sold by Primerica). That will change.

"It was a multi-brand, multi-distribution strategy," said Giltenan. "But now the goal is to consolidate and simplify."

Stephen Cone was brought into SSB Citi Asset Management Group as head of global retail marketing in February specifically to work on branding strategy and is leading the re-branding campaign, according to Giltenan.

There appear to be three reasons for the changes. The first is an attempt by SSB Citi Asset Management Group to take advantage of the Smith Barney name.

"The idea is to marshal our strength behind what we consider to be the strongest brand," said Giltenan. "We want to make Smith Barney our primary load fund brand. Instead of having three fund brands being sold through three different distribution channels, Smith Barney will become the fund brand that we sell through Citigroup's internal distribution channels," namely Smith Barney, Citibank, and Primerica, he said. Salomon Brothers, which like Smith Barney is a brand and distribution channel, will continue to sell load funds through third party distributors, said Giltenan.

The second reason for the consolidation of funds is linked to the consolidation of companies. In 1998, Travelers Group of New York merged with Citicorp of New York combining Salomon Smith Barney and Citibank to form Citigroup.

"It is common for banks to realign and merge funds when they merge or one is acquired," said Kenneth Kehrer, a financial consultant in Princeton, N.J. "It often doesn't make sense to offer very similar funds, and they usually try to combine the assets."

This is the case with Citigroup.

"Where a Citifunds or Concert fund compliments the Smith Barney funds, they'll simply be re-branded and the management will stay the same," said Giltenan. If one of the funds duplicates a Smith Barney fund, they'll be merged."

The third reason for the change could be the poor performance of the Citibank and Concert funds. However, SSB Citi Asset Management Group denies that this is a cause.

Three Citifunds - CitiSelect 200 Fund, CitiSelect 300 Fund and Citifunds Balanced Fund, are all being merged into the Smith Barney Balanced Fund. The year-to-date total return for these funds is 6.11 percent, 2.41 percent and 3.13 percent, respectively, according to Morningstar. They rank, on average, 458 out of 563 funds in 3-year total returns in the domestic hybrid category of Morningstar of Chicago. The Smith Barney Balanced Fund, by comparison, ranked 84 out of the 563 funds in 3-year total returns within the category, according to Morningstar. The average year-to-date return of all of the Concert and Citifunds being merged is 2.66 percent while the average for all of the Smith Barney funds they are being merged with is 9.67 percent.

In total, Citigroup is merging ten Concert and Citifunds into eight Smith Barney funds, re-naming six funds as Smith Barney funds, and liquidating three funds with very low asset bases, said Giltenan.

Yet another reason for the mergers is probably the fact that these Smith Barney funds have assets of over $791 million on average, nearly ten times that of the other funds, according to Morningstar.

Citicorp is only now merging its funds because it is an enormous task, said Giltenan.

"It is a major job to consolidate three different fund families," he said. "It's easier said than done."