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Mellon Financial to Distribute18 Mutual Funds in Italy


Mellon Financial Corp. of Pittsburgh has joined a growing list of U.S. companies that manage mutual funds looking to expand into Italy. Mellon's global distribution unit, Mellon Global Investments Ltd., signed a deal late last month with Italy's BNL Investments to distribute the 18 Mellon Global funds. It was the second deal in three days for BNL, which had just signed a deal to sell 13 of Janus International Holding LLC's funds.

Jon Little, chief executive officer of Mellon Global Investments, said Italy is an important market for Mellon but is only a small part of his company's plan to grow in Europe.

"Our plan is to further develop relations through a selective policy of alliances with partners that can adequately leverage our distinctive strengths," Little said.

BNL, a unit of Banca Nazionale del Lavoro Group, is one of Italy's top financial advisors. It has 265 agencies throughout Italy and sites in 698 bank branches, and works through 1,150 financial advisers.

The Mellon portfolios it plans to sell are listed in Dublin and include equity and fixed-income products with investments in different regions globally. They are global and regional equity funds, balanced funds, traditional bond funds and passive-management stock and bond funds.

The 13 Irish-listed Janus World Funds, which were started in 1998, offer investment styles including U.S. domestic growth and domestic value, income and currency reserve funds.

Denver-based Janus, which has $159 billion of assets under management, has opened an office in Milan as part of its Italian push.

Richard Garlen, chief executive officer of Janus International, said his company already had offices in London, Hong Kong and Tokyo. He said the Italian market is very attractive right now because Italians are being encouraged by the government to provide for their own retirement.

Analysts said that many fund companies are targeting Italy as a way to increase distribution overseas and that Italian banks are willing to distribute third-party funds to expand their product depth. SEI Investments of Oaks, Pa., is distributing its funds in Italy through Mediolanum, an Italian insurance and asset management company.

Les Dinkin, a managing principal at NBW Consulting Services in Westport, Conn., said most fund companies are looking at developing a presence in European markets because as the economies open up overseas, opportunities for growth are proliferating.

"It is going to be easier for the early entrants to compete with the traditional retirement and savings vehicles available to investors in Europe," he said. "Right now there is also less peer competition in these markets, and getting in early is the best means of getting ahead."

Dinkin said that, historically, European countries had heavily regulated retirement systems under which the government guaranteed excellent retirement benefits to its citizens. "But now things are changing overseas," he said, "and smart institutions in the United States are aware of this. [Europe is] moving to a more market economy, and this doesn't just go for goods and services but financials as well," he said. "We are going to see more companies looking to take advantage of every opportunity available overseas."

In addition, new legislation in Europe that will be implemented by August 2003 will allow European asset management firms to market a greater variety of funds throughout Europe [see MFMN 5/20/02]. Until now, Europe only granted equity and bond mutual funds a so-called EU "passport," or UCITS (Undertakings for Collective Investments in Transferable Securities) directive. Beginning in 2003, fund-of-funds and money-market funds, which have been very popular in Europe, will be able to be sold throughout Europe as well. However, a recent report by Boston-based Cerulli Associates said that European nations are likely to adopt the new UCITS directive at varying paces and that Italy was not likely to be one of the early adopters. Instead, Cerulli expects Ireland and Luxembourg to be among the first to adopt the new directive.