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Bank Fund Seeks Black Organizations

July 2, 1998

NEW YORK (AP) _ Obstacles abound for a new mutual fund that is courting black social, political and economic organizations.

The Liberty Freedom Fund, launched Wednesday by a New Orleans black-owned bank, has already spent time seeking investors in black organizations. Backers said they have $10 million in commitments and forecasted they would grow into a $100 million fund within a year.

The fund’s originator, Liberty Bank and Trust Co., a regionally acclaimed bank known for lending to first-time homeowners, also claimed it’s the first black bank to launch a mutual fund.

But banks big and small have a fairly unsuccessful record in starting and maintaining mutual funds.

Even worse, blacks earning at least $50,000 are far less prepared for retirement and are less wealthy than their white counterparts because they have negative attitudes about investing, according to a survey released in April by Ariel Mutual Funds and Charles Schwab & Co.

``We will be educating new investors on how to leverage their income ... and hopefully use it as an economic tool for economic growth in our communities,″ said Liberty bank’s president and creator of the fund, Alden McDonald Jr.

But some warned that the fund must still produce good results in order to compete with the thousands of other mutual funds that are available to investors.

``In the short term, I’m sure they’ll generate a lot of interest and support,″ said Andrew Guillette, a financial services consultant and director of research at Cerrulli Associates in Boston. ``But over the long term, its success will be primarily dependent upon its fund performance relative to other growth fund peers.″

The fund will invest in the country’s largest corporations, such as Microsoft. That also would provide the fund with shareholder leverage should issues arise concerning black employees or other issues relevant to black Americans.

They also want to invest in ``companies sensitive to the needs of the total community,″ McDonald said.

Even before the fund’s launch, McDonald and other principals went after African-Americans assertively, pushing their way into black fraternities, sororities, churches and national organizations such as 100 Black Men of America, the National Association of Market Developers and the National Conference of Black Mayors.

Aside from those targeted groups, the fund seeks allocations from cities, agencies and retirement and pension funds. In New Orleans, the city retirement board is considering making a $5 million dollar commitment.

Mayor Marc Morial, in a telephone interview, called Liberty bank a Southern success story worthy of consideration by the retirement board.

The bank’s work ``demonstrates how African-Americans can be successful in this community,″ Morial said, especially after the bank withstood the oil bust, the savings and loan debacle ``and has come back very strong, acquiring other institutions.″

``If they show a good return, the sky’s the limit,″ Morial said.