… And Liberty For All

New Orleans bank partners with Edgar Lomax Co. to create mutual fund

The consolidation of the nation’s largest financial institutions has hit traditional community banks with some rather severe body blows. In the years ahead, financial analysts expect a few battered concerns to taste canvas, as larger companies extend their reach through mass marketing efforts, electronic services, convenient branch and ATM locations, and a vast array of financial products.

But where one person sees obstacles, another sees an opportunity to expand. Alden J. McDonald Jr., president of New Orleans-based Liberty Bank and Trust Co., is counterpunching with a new offering: the Liberty Freedom Fund. “If black banks are going to stay competitive, then we’ll have to offer the same products as the large institutions,” says the silver-maned McDonald, whose bank is No. 8 on the BE BANKS list with $147.7 million in assets and $134 million in deposits. “Our customers realize they can make better returns in the equities market than with passbook savings accounts and CDs.”

What makes Liberty’s mutual fund unique? It represents a rare example of an African American bank teaming up with a black money-management firm to create such a vehicle. Liberty will serve as the manager while the Edgar Lomax Co. in Springfield, Virginia, will assume the role of subadvisor, meaning it will select the stocks that compose the blue chip fund’s portfolio. New Orleans-based Jackson, Shanklin & Sonia will handle the marketing chores as the fund distributor.

“To my knowledge this is the first time three black-owned firms that were not main players in the mutual fund arena have undertaken such a task,” says Randall Eley, the president and chief investment officer of Edgar Lomax. In most cases, small and black-owned institutions have offered mutual fund products by striking deals with such majority institutions as American Express or Fidelity, pocketing a rather small chunk of the administrative fees. Since there will be no middlemen involved, Liberty will handle all the fees involved.

Liberty estimates fee income of $300,000 for 1998. That figure indicates the bank will break even on its investment in developing the fund within its first six months of operation. The fund provides for two classes of stock: Class I for institutional investors, which requires an initial investment of $250,000; and Class A for retail customers, which requires an initial investment of $1,000.

McDonald says Liberty had to bolster the bank’s line of products and services. “We needed to expand the offerings to our 35,000 depositors and, at the same time, try to reel in more institutional customers,” he says. “But we wanted to make sure that black companies would have complete control of the financial products and benefit exclusively from the income flow.”

In order to achieve the stellar returns that would make the fund competitive with more established offerings, McDonald and his development team reviewed a number of black-owned money management firms. They selected Eley, who ran the Profit Value Fund, cited by BE as one of the top-performing African American equity funds.

Yet, some analysts believe only a few black institutions will be able to follow Liberty’s

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