Mercantile quietly increases clients

THE LO-KEY FUND FAMILY

October 23, 1992|By David Conn | David Conn,Staff Writer

Mercantile Bankshares Corp. is quietly marketing a family of mutual funds called the M.S.D.&T. Funds, but they might as well be called the Stealth Funds.

Some of the seven funds have been around since 1989, although at first they included only a few money market funds, available only to customers of the trust department of the Mercantile-Safe Deposit & Trust Co.

But in the past year, the variety has grown to include an equity fund and several flavors of bond funds, including a Maryland tax-free fund. Mercantile opened the investments to all bank customers, not just those with trust accounts, about a year ago. The number of clients has grown to about 2,500, with nearly $1 billion invested, according to Brian Topping, vice chairman of the bank and head of its trust department.

Mr. Topping acknowledged that the funds' launch has been a bit low-key.

"That's the Mercantile style," he said, a bit apologetically.

Perhaps one reason for the lack of noise is the hefty minimum investment. To appeal to those Mercantile refers to as its less affluent customers, the banking company allowed investments in the mutual funds as "small" as $50,000, Mr. Topping said, plus an annual fee of at least $250.

In contrast, the minimum amount needed for individually managed trust accounts is about $350,000, he said, with the annual fee based on 1 percent of assets, or at least $3,500.

"We've had a history of requests from people to handle amounts less than we typically handle for individuals," Mr. Topping explained. "I think it's an opportunity for us to broaden the number of people we work with."

He said the management fees on the no-load funds also are low, partly because "we're not in the retail distribution business; we have no advertising expenses."

The funds officially are managed by a Wilmington, Del., company called M.S.D.&T. Funds Inc., which is not directly affiliated with Mercantile. Its chairman and president is Leslie B. Disharoon, the retired chairman of Baltimore's Monumental Corp. The funds' distributor is Funds Distributor Inc. of Boston.

But the real investing work is being done by Mercantile itself, which serves as fund adviser. It's the Mercantile investment officers, the ones who manage the money of the trust department clients, who are making the investment decisions for the mutual funds as well.

So far, their performance has kept pace with those of indexes that chart similar investments, according to Mercantile's comparisons.

At least for now, the funds are available primarily for retirement accounts, such as Keogh, IRA and 401(k) money being rolled over from a previous investment.

But there's little chance that Mercantile will pose a challenge to Boston's mutual fund behemoth, Fidelity Investments, or even Baltimore's own T. Rowe Price Associates.

"Our objective is largely to serve the local market," Mr. Topping said.

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