Citi’s new fund marketer hits a home run

Citibank, beset by poor performance in its mutual funds and a rapid outflow of assets last year, hired Stephen Cone in February to fix the problems. And by all accounts, he has engineered a big turnaround.

Mr. Cone, a veteran Fidelity Investments marketing executive, was made head of global marketing for retail and retirement services. That put him in charge of all assets managed by various Citigroup units.

“The performance of the Citibank funds was not in line with what I and my clients were expecting, and not in line with other mutual funds,” says Ralph Anderson, an accountant with Richard Eisner & Co. in New York.

“Some of my clients have moved out of the funds because of their performance and because they didn’t think they got the attention they deserved.”

Under Mr. Cone’s direction, Citibank is now closing most of its own funds and folding millions of dollars into funds at Smith Barney, another division of Citigroup.

Citibank is offering the Smith Barney brand for the first time through almost 500 brokers working at more than 370 branches. This is in addition to 11,000 Salomon Smith Barney brokers and 25,000 Primerica brokers selling the funds. Primerica is also a unit of Citigroup.

Citigroup says that the brokers offer those proprietary funds side by side with funds from other companies. But Citibank brokers, who spent days attending meetings to learn about the Smith Barney funds, say that the pressure to sell the proprietary products is fierce.

“They have a push on with these Smith Barney funds,” says one Citibank broker. “I’ve been here for several years, and I’ve never seen anything so intense.”

A spokesperson for Citigroup says that there are no incentives for brokers to sell the company’s own funds over others. The company says its goal is to have 50% of all sales come from proprietary funds. Since the push began, Citibank brokers have increased sales of proprietary funds to as high as 60% of new sales; such products now average 47%. That compares with 11% before the change.

The campaign has resulted in a dramatic turnaround. Although the number of long-term mutual funds managed by Citigroup units has been reduced to 83, from 92, more money than ever is pouring in.

A spokesman says that net inflows into nine key Smith Barney funds, including three new ones, came to $1.4 billion by the end of July versus $341 million for the first seven months of 1999.

And that pace had better continue. Mr. Cone says that it is the goal of Citigroup’s asset management business to double the $400 billion it has in assets, including $230 billion coming from its mutual funds, in the next four years. It aims to become one of the country’s top five asset managers, up from its current 10th place.

Mr. Cone first had to create brand awareness for the Smith Barney funds. “We need to get the story out in an understandable way,” he says. “These are great funds, but they are virtually unknown.”

To accomplish this, the former head of retail and corporate marketing at Fidelity Investments – who was responsible for the advertising campaign featuring Peter Lynch – has launched a print campaign featuring portfolio managers running Smith Barney’s high-flying funds.

While a few small funds will be liquidated, Citibank’s three biggest products are slated to join Smith Barney’s funds. The $5.2 billion Concert Growth Fund, for example, will be renamed Smith Barney Large Cap Core Fund.

According to Lipper, it had a three-year return of 24.79%, lower than the average return of 29.29%. This ranked it 244th among 316 funds in its category.

Mr. Anderson, the accountant, thinks that his clients who remained in the funds should sit tight for now. “Let’s wait and see what happens over the next six months,” he says.