Sep. 28–Imagine yourself as an uneasy chaperone, genial yet vigilant while you oversee a pressure-packed jumble of people, pressure and money.

That’s how chairwoman Virginia Stringer views herself as she leads the board of U.S. Bancorp’s First American family of mutual funds.

On the one hand, she needs to get along with the management. On the other, her charge is to protect the shareholders in the $57 billion family.

Partly because of bank mergers, First American has rapidly grown to become the nation’s fifth-largest bank mutual fund family and its 32nd largest overall.

During the last few years, the challenge for First American was to integrate the merged streams of fund families into one family. Now, Stringer says, First American’s challenge is to meet rising demands for better performance and good governance.

First American has scored some successes.

Avi Nachmany, research director at the Strategic Insight mutual fund monitoring firm, says 15 of the 28 First American funds ranked by Morningstar carry top ratings of four or five stars. That’s better than the industry, he says.

“Looking at the numbers, it appears they’ve done a pretty good job,” Nachmany says.

But just looking at the numbers is not enough these days.

Early this month, New York Attorney General Elliot Spitzer accused four of the nation’s largest mutual fund companies of giving favorable treatment to a hedge fund. First American is not among the accused, but the charges are raising unsettling questions about the entire industry.

That’s boosted concerns about governance.

Under Stringer, First American has become well known in the industry for having a board relatively free of direct ties to its investment adviser — U.S. Bancorp.

Two months ago, two of the fund family’s directors quit because of time pressures. A third retired. Before the departures, eight of the nine directors met the legal definition of independence from the funds’ adviser.

Now, with the addition of three new independent directors — Mickey Foret, chief financial officer at Northwest Airlines; Ben Field, recently retired CFO at Bemis; and Victoria Herget, formerly with Zurich Scudder Investments in Chicago — the board is totally independent.

Fund Directions, a publication that follows the mutual fund industry, hails the board’s 100 percent level of independence as a rarity among all corporate boards.

Stringer, a St. Paul resident, has led the board since 1997. She became a director in 1990, when the fund had assets of just $1 billion. In 2001, Fund Directions named her as one of three nominees for its national “trustee of the year” award.

Stringer worked as an executive at IBM for a decade until 1981. She then worked at Pillsbury as a human resources executive until 1989. She later ran her family’s trucking firm and since 1991 has been a management consultant.

Not only is Stringer among a handful of women leading a mutual fund family board, but she also is among a handful of independent directors chairing such a big fund board. In most cases, the CEO is the chairman.

“When you see who’s leading the charge for the industry, it tends to be men,” says Jim Alt, counsel for the fund and an attorney at Dorsey & Whitney.

When Stringer joined First American’s board in 1990, she spent most of her time on directors’ and board committee meetings.

“It didn’t take major amounts of time. Now, given today’s environment, not a day goes by that I’m not monitoring, thinking, reading about what’s going on in the industry,” she says.

The board’s most important function is to approve contracts between the funds and U.S. Bancorp and to OK fees that the funds’ shareholders pay to the banking firm for various services.

One board oversees all of the funds. Board members get paid about $100,000 a year, below the industry average of $137,000.

Board members recently approved a code of ethics for the First American’s top officers.

The funds face new regulations, such as those mandated by last year’s Sarbanes-Oxley legislation, and a flurry of proposed rules. The board has stepped up training for directors. The First American family accounts for a little less than half of the $123 billion managed by U.S. Bancorp’s asset management arm.

The family has 47 funds. Money market funds account for $37 billion of the $57 billion in the family. Another $11 billion is in equity funds and $9 billion in fixed-income funds.

Since 2000, U.S. Bancorp has built up a new management team to lead the funds.

At the top are Tom Schreier and Mark Jordahl. Schreier, who had been at the bank’s Piper Jaffray unit, is the CEO of the banking firm’s asset management operations including the funds. Jordahl, a longtime Reliastar investment executive with experience in integrating fund streams there, is the funds’ chief investment officer.

When they started, they faced a potpourri of funds — 86, in fact. Duplication in fund styles was common.

They eliminated nearly half of the funds, hired about 25 investment professionals and let 20 go. Five left on their own. Five were transferred to Minneapolis.

Today, the funds’ analysis and management functions, once spread far and wide, are in Minneapolis save for a small operation in Milwaukee.

This summer, with the merger integration work completed and the new management settled, First American launched a pricey national marketing campaign with George Washington as their branding icon. The funds are sponsoring big events, such as the George Washington exhibition currently at the Minneapolis Institute of Arts.

Stringer worries about maintaining the trust of investors.

“Today, whenever an event undermines investor confidence, we’re all troubled by that,” she says. “People are starting to look at the industry with suspicion instead of confidence, and that isn’t good.”

How should First American cope in such a volatile atmosphere?

She comes back to that “uneasy chaperone” analogy.

The term is actually the title of a book written for mutual fund directors. The book has been distributed to all First American fund directors and to the top manager at the fund.

Don’t be shy, the authors advise, but don’t be overzealous. And do your homework.

Dave Beal can be reached at dbeal@pioneerpress.com or 651-228-5429.

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