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Schwab to Adopt, Rename Mutual Fund Co.

November 4, 2003

SAN FRANCISCO (AP) _ Charles Schwab Corp. said Tuesday it will adopt and rename a small mutual fund family, hoping to add more flavor to its investment menu.

The San Francisco-based company is taking over the administrative duties for all 11 mutual funds managed by AXA Rosenberg, an 18-year-old money manager that primarily handles investments for pension funds and large institutions.

AXA will continue to manage the funds, which have assets of $1.4 billion. The Orinda, Calif.-based firm also manages $31.6 billion for institutional investors.

Despite its success, AXA isn’t well known in the mass market, a factor Schwab will address by rebranding the adopted mutual funds as Laudus _ a reference to the Latin word for ``praiseworthy.″

The brokerage hopes to adopt several other small funds and advertise Laudus as a ``best of breed″ family offering the expertise of savvy money managers who have been well-kept secrets within the investment industry, said Jeffrey Lyons, president of Charles Schwab Asset Management Products & Services.

No money is being exchanged under the AXA arrangement. The two partners instead will split the funds’ investment fees, with AXA initially keeping 70 percent and Schwab getting the remainder, said Randy Merk, president of Charles Schwab Investment Management.

Schwab’s portion of the fees initially will be just enough to break even, Merk said, but the company expects to start making money from the Laudus family as the funds accumulate more assets.

AXA’s mutual funds have had their greatest success investing in the stocks of small and international companies. Schwab’s adoption of the funds is expected to be completed early next year.

With $143 billion in customer assets, Schwab already oversees the nation’s 11th largest fund family. The company plans to retain the Schwab brand on all the funds it already manages. Schwab also will continue to sell hundreds of mutual funds offered by other families.

Schwab has been developing more investment products and services as part of an effort to boost its revenue and better insulate the company from the volatility of its main stock brokerage business.


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