A small mutual fund with a strong track record - orphaned from its distributor because of troubles in the insurance industry - appears to have found a new home.

The MAP-Equity fund, a 38-year-old fund with a four-star rating from Morningstar, will become part of the MainStay funds in June, according to regulatory filings. The investment adviser to MAP-Equity, Markston Investment Management of White Plains, N.Y., will continue to manage the fund but will rely on MainStay for distribution, according to documents which the companies have filed with the SEC.

Markston's former distributor, an affiliate of MBL Life Assurance Corporation, is going out of business in June. A New Jersey Superior Court put MBL Life into receivership in 1991 because of uncertainties about the company's liquidity due to real estate investments.

Officials from MainStay, the mutual fund family of New York Life Insurance Company, declined to comment. Michael J. Mullarkey, managing director at Markston, also declined to comment.

In a filing with the SEC March 1, however, Markston said it had signed a letter of intent to affiliate with a mutual fund company. Markston did not identify the company in its filing.

In a prospectus dated Feb. 12, MainStay said it planned to add what will become the MainStay MAP Equity fund to its product line. Markston will serve as sub-adviser, according to the prospectus.

MainStay will receive .75 percent of average daily net assets under management for sponsoring the fund, according to the prospectus. It was unclear from the filing how much compensation Markston will receive. Shareholders will be required to approve the arrangement before it can take effect, Markston said.

MAP-Equity, with about $60 million in assets under management as of Dec. 31., has a track record which should appeal to MainStay's distributors. Morningstar has given the fund a four-star overall rating and a five-star rating over the last five years. Morningstar classifies MAP-Equity as a mid-capitalization blend fund.

Mullarkey, the fund's primary portfolio manager, has been managing assets in the fund since 1981. Roger Lob has been a co-manager since 1987. The pair divide fund assets with each manager running a portion of the fund. Markston, which describes the system as a "dual manager investment structure," says the approach allows each manager to focus his research on a limited number of companies.

The relationship with MainStay should help MAP-Equity build assets. MainStay has its own proprietary sales force through New York Life agents. In recent years, it also has signed agreements to sell its funds through wirehouses and other intermediaries. It already uses sub-advisers, such as Gabelli Asset Management and John A. Levin, to sub-advise on some of its funds.

MainStay has 22 retail funds, 11 institutional funds and approximately $118 billion in assets under management as of Dec. 31.

The affiliation with an insurance company also should be a familiar one for Markston. MBL Life holds a 51 percent stake in Markston. As part of court proceedings involving MBL Life, the company sold off its life insurance and annuity business to SunAmerica.

MBL Life's holdings in Markston were not part of the SunAmerica transaction, according to Mary Ann Green, a spokesperson for MBL Life. MBL Life officials with knowledge of the matter were not available to describe what would happen to MBL Life's stake in Markston. Green said the assets from MBL Life will be distributed to the company's creditors and policyholders.

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