BOFA STAKES OUT NEW TERRITORY FOR A BANK: EMPLOYEES GET EQUITY IN MONEY MANAGER

BankAmerica Corp. has done an unbankerly thing in creating a wholly owned money management subsidiary called Chicago Equity Partners.

The Charlotte, N.C., financial institution, the product of a merger with NationsBank Corp., is offering equity stakes to the firm’s 38 employees, to whom it has given complete autonomy, says president and chief investment officer James D. Miller.

Chicago Equity Partners has $8.4 billion under management, with almost $1 billion of the total in the Pacific Horizon Blue Chip mutual fund.

As banks try to keep and attract money managers, they are finding that creating equity-like structures in units makes them more attractive.

“It’s becoming a broad trend that’s extending to banks,” says Kathryn Steele, director for Investment Counseling Inc. in West Conshohocken, Pa.

“A lot of banks are having to come back to the issue because it’s being increasingly requested” by executives in such units, she adds.

Chicago Equity stands alongside Bank of America’s other autonomous money management units: TradeStreet Investment Associates Inc., with $90 billion under management; and fixed-income managers Sovran Capital Management, with $5 billion, and Boatmen’s Capital Management, with $1.5 billion.

Bank of America executives say that each of those units has its own form of incentive compensation; they declined to provide details.

The decision to keep the executive group at Chicago Equity intact follows NationsBank’s less-than-successful experience when it purchased Barnett Banks Inc. and Boatmen’s Bancshares Inc. Executives at the acquired banks’ investment units quit to form their own firms, and clients followed.

But Martin E. “Sandy” Galt, president of the institutional investment management division of NationsBank, says the decision to keep Chicago Equity separate was based on its strength, not on what happened with Barnett and Boatmen’s.

“We didn’t want to tinker with” Chicago Equity’s operations because they’ve been successful as they are, Mr. Galt says.

The group is coming off a strong year in terms of asset gathering, and years of good returns relative to Standard & Poor’s 500 stock index.

The unit gained $1.2 billion in new accounts in 1998 and didn’t lose any, says Patrick C. Lynch, managing director and head of sales and client services.

Crain News Service