U.S. FUNDS GET NOSES UNDER TENT OF BANK-BASED EUROPEAN SALES: INTERNET CHANGING WAY INVESTORS SEE WORLD-AND BUYING

Selling mutual funds in Europe is easier said than done, especially if you don’t have a bank ally.

Unlike the United States where brokerages rule, banks are the cornerstone of funds distribution in Europe. According to a survey by Datamonitor and Frankfurt, Germany-based Union Investment Group, the funds distribution market share controlled by banks’ branches varies from 74% in Germany to 92% in Spain.

For a long time the cultural gap was too wide between American managers, sure of their brands’ attractiveness, and European banks, who were afraid of losing valued clients to Americans. But some European banks are beginning to offer foreign funds to their clients.

Credit Suisse Group, the seventh-largest European bank, is about to start a new service, called Fundlab, which will offer foreign funds to its 300,000 private banking clients.

not like internet

They won’t, of course, have direct access to the menu of funds, but they will be available on an intranet server restricted to the bank’s private banking advisers. The Swiss bank’s worldwide reputation would make Fundlab the most important distribution agreement of its kind by a big European bank, but not the first.

Few banks have given their clients direct access to funds through their branch network, but SEB, a Swedish bank, distributes six Fidelity funds along with its own products.

Other banks that offer third-party mutual funds usually do so via a dedicated subsidiary or their private banking department.

Paribas, now in merger mode with another French bank, Societe Generale, has created one of the first fund supermarkets in Europe. Its subsidiary Cortal, with about 450,000 clients, is the continent’s largest discount broker and fund mart. The company has $5.5 billion of client assets, of which 70% are invested in mutual funds.

Vega Finance, a subsidiary of French public-sector money manager Caisse des Depots, is a comparable though smaller fund supermarket.

Banque du Louvre, now a subsidiary of French bank CCF, sells Goldman Sachs’ funds, among others, to its wealthy clients.

Banque Rothschild and Thema Vie, a life insurance subsidiary of Axa-UPA SA, have also developed life insurance contracts to sell third- party funds, including those from Fidelity, Templeton and Invesco. Other large fund distributors include Direkt Anlage in Germany, a subsidiary of Bayerischen Hypotheken und Wechsel Bank, and Bank24, a subsidiary of Deutsche Bank.

In Spain, Bankinter, a subsidiary of Banco de Santander with an edge in Internet banking, is now thinking about selling savings products and funds electronically.

Selling funds at bank branches makes sense considering how close Europeans typically live to their banks. In a recent survey, one third of Italians said they go to the bank once a week. So it’s no surprise that 47% of Italians would entrust their money only to their bank. And just 4.2% of those surveyed say they would choose a foreign asset manager.

It’s no wonder American managers are looking closely at distribution offers that would give them indirect access to these clients.

In Italy, financial planners control 47% of funds distribution. There are 32,000 financial planners in the country, but many are working in structured organizations like Azimut, a subsidiary of Banca Popolare di Brescia which claims 45,000 customers, or Area, an independent company with 36,000 clients.

American Express should also be a promising fund distributor for American money managers. It’s still mostly known in Europe for its card business, but has started to offer some other financial services — albeit on a small scale.

“Usually the distributors get 100% of the entry fee and part of the trail commission,” an annual sales charge, says Jean-Baptiste de Franssu, European CEO of Denver-based Invesco, a subsidiary of Amvescap PLC. Other industry insiders say the distributor usually gets between one-third and one-half of the management fee.

Management fees vary by country. Typical management fees for the French version of mutual funds, for instance, are in the 0.8% to 1% range for long-term fixed-income funds, about 1.2% for French equities, 1.5% for international equities and up to 1.8% or 2% for the most aggressive funds of funds. Trailer fees may be progressive, increasing proportionally to the assets brought in.