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Wrap Program Asset Growth Bests Funds'


Driven by investors' desire for asset-based fees and advice from investment professionals, assets in mutual fund wrap programs increased 21.3 percent in 2000 over 1999, according to Cerulli Associates of Boston.

Assets held in traditional, long-term mutual funds declined 2.3 percent in the same period. In the fourth quarter of 2000, assets in all managed accounts declined less than those in traditional funds according to Cerulli, which released the data last week. Mutual fund wrap programs held a total of $126 billion in assets at the end of 2000, up from $103.9 billion at the end of 1999.

While poor market performance affected assets held both in mutual fund wrap programs and traditional funds, mutual fund wraps were able to minimize the effects and increase assets because of the advice offered in wrap programs, said Ryan Tagal, an analyst with Cerulli.

Still, flows into mutual fund wrap accounts dropped in the fourth quarter, shrinking $5 billion to $126 billion, according to Cerulli.

While a downturn in markets will shrink mutual fund wraps' asset levels, wrap programs are generally making up for the losses with increased sales, Tagal said.

That could be indicative of a growing need for advice as a result of volatile markets, said Dennis Dolego, director of research for Optima Group of Fairfield, Conn.

"I think there is probably a trend towards seeking out allocation-like advice and you might see a trend in that direction accelerated by shakiness in the markets," he said. "People would then naturally turn towards some handholding and more advice and seek out also a more thoughtful and broader allocation of assets."

SEI Investments of Oaks, Pa. attained the greatest share of assets held in mutual fund wrap programs in 2000, with 18.7 percent of assets, up from 17.4 percent in 1999. American Express of Minneapolis posted the greatest percentage increase in 2000, moving from 10.9 percent of all assets in 1999 to 13.6 percent in 2000. Fidelity Investments finished third in 2000 with 11.4 percent, up from fourth place in 1999 with 10.4 percent. Fidelity managed to climb up a spot in 2000 because it added benefits to its PAS wrap program and lowered its investment minimum from $200,000 to $50,000, according to Cerulli.

The remainder of the top ten mutual fund wrap providers and their asset shares in 2000 were: Merrill Lynch of New York, 10.7 percent, down from 11.6 percent in 1999; Salomon Smith Barney of New York, 9.9 percent, down from 13 percent; Linsco/Private Ledger of Boston, 8.2 percent, down from 9 percent; Prudential Securities of Newark, N.J., 4.9 percent, down from 5.3 percent; Paine Webber of New York, 3.5 percent, up from 3.4 percent; Wheat First Union of Richmond, Va., 2.6 percent, down from 2.9 percent; and Assetmark of Pleasant Hills, Calif., 1.3 percent, unchanged since 1999.

All other mutual fund wrap providers held 15.2 percent of all assets in mutual fund wraps, up from 14.7 percent in 1999, according to Cerulli.

Janus of Denver and Putnam of Boston are the two most popular fund groups offered in mutual fund wrap programs, according to Cerulli. The firm asked wrap providers to list the top three outside fund providers in their programs. Both Janus and Putnam were the only two groups to account for over $2 billion in mutual fund wrap program assets, according to Cerulli.

Janus' ability to retain mutual fund wrap assets is indicative of wrap program's focus on asset allocation, not performance, said Tagal.

"When you have an asset allocation, which is what you have in a wrap program, you only change your allocations based on how your model portfolio is supposed to be working out and that's the advice you are getting," he said.

Franklin Templeton of San Mateo, Calif., Dreyfus of New York, Vanguard of Malvern, Pa., Pimco of Newport Beach, Calif. and Neuberger Berman of New York all had between $1 billion and $2 billion in assets, Cerulli said.