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Mutual Fund Targets Black Groups

July 1, 1998

NEW YORK _ A New Orleans bank launched a mutual fund Wednesday that aggressively targets potential investors through black social, political and economic organizations.

Backers of the Liberty Freedom Fund said that it has $10 million in commitments and hopes to 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, a survey released in April by Ariel Mutual Funds and Charles Schwab & Co. said that African-American households with incomes exceeding $50,000 are more conservative in their investing than similar white households. That translated into African-Americans being far less prepared for retirement and being less wealthy.

Liberty Freedom’s strategy, even before the fund’s launch, was to go after African-Americans assertively, pushing its way into black fraternities, sororities, churches and national organizations as 100 Black Men, the National Association of Market Developers and the National Conference of Black Mayors.

``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’s president, Alden McDonald Jr.

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 African-Americans.

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

Aside from the targeted groups in the black community, the fund seeks a share of money from cities, agencies, 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.

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.

And that, analysts say, is the only issue.

Andrew Guillette, a financial services consultant and director of research at Cerrulli Associates in Boston, was previously unfamiliar with Liberty Freedom but described it as an unremarkable mutual fund put together by a small bank to gain new customers and keep present ones happy.

``In the short term, I’m sure they’ll generate a lot of interest and support,″ Guillette said. ``But over the long term, it’s success will be primarily dependent upon its fund performance relative to other growth fund peers.″