Business Abroad: Europe's Mushrooming Mutuals

For many a European housewife last week, the most prized present of all was a stack of engravings that owed nothing to art but everything to the Continent's newest and fastest-growing investment trend—mutual funds. Tantalized by bullish stock prices and the Common Market's bright prospects, small European investors are buying into mutual funds as never before. Where only a handful of Continental funds existed prewar, Western Europe now boasts some 200 open-end and mixed investment trusts with well over 2,000,000 shareholders and total assets of about $4 billion.

Prison for Peddlers. European mutual funds do business quite differently from U.S. funds. Peddling stock door to door, as is done in the U.S., is punishable by prison in many European countries. Instead of being operated by professional fund managers, the European funds are generally run by banks. One reason: with no government agencies as prying as the SEC to bother them, European companies keep their affairs so secret that only bankers can get enough information to know which companies are sound investments. Bank distribution—which means lower overhead—also has the advantage of keeping the loading charges on European funds down to 3% to 4%, v. 7% to 8% on most U.S. funds.

The impetus for the current European boom in mutual funds began with the return to convertibility of most European currencies. Excited by the prospect of being able to invest abroad and take home their profits in hard francs, Swiss bankers hurried to set up a clutch of new mutual funds. The Swiss master of mutuals is a Zurich banker named Ernest Renk, who runs a combine called Intrag for the giant Union des Banques Suisses and three smaller banks. Intrag manages ten separate mutual funds with combined assets of $500 million, specializing in investments in different parts of the world.

Renk's funds have set the style for the rest of Europe. His goal, he explains, is growth, not dividends. "We should not bother the shareholders too often with cashing coupons," says Renk grandly. True to Renk's word, his funds return only about 2% annual earnings. But they do grow. The per-share value of Intrag's North American fund has increased a whopping 25% in the past eleven months.

Soaring Shares. The Common Market has put the topping on the European fund boom. Two years ago, a syndicate of banks from six European countries headed by Brussels' Banque Lambert set up a mutual fund, EURUNION, in Luxembourg, where mutual funds are exempt from taxes. Spreading its investment among 93 Common Market companies, EURUNION has increased its assets from $12 million to $33 million in two years. EURUNION's archrival, VALEUROP, which is run by another syndicate of banks including the Amsterdamsche Bank, Banque de la Société Générale de Belgique and the Deutsche Bank, also boasts a spectacular record: $100 invested in VALEUROP 18 months ago is now worth $195.