Our recent webinar in collaboration with UMB Fund Services – Pandemic, Strategic Plans, and Growth – brought together top boutique asset managers to share specific, actionable insights on how they are going all-in for growth in 2022. Panelists included:

• Greg Bassuk, CEO, AXS Investments
• Timothy Reick, CEO, Liberty Street Advisors, Inc.
• Cole Smead, President and Portfolio Manager, Smead Capital Management

What ensued was a thoughtful discussion on key growth strategies, including partnering with other asset managers, building distribution and sales teams, and using digital tools and content strategies to build their brands and reputations. The overarching theme was to address critical questions and concerns many asset managers have about rising out of the shadows of obscurity and positioning themselves for growth.

In the first in a series of three articles, we feature the part of the discussion focusing on strategic partnerships and how boutique firms can leverage their money management expertise (or distribution capabilities) to grow revenues.

Most Asset Managers Admit They’re Not Very Good Marketers

To start the segment, we asked the audience if they were equally good at money management and marketing. Eighty percent disagreed and said they are better at managing money.

That percentage lines up with industry data, suggesting that most firms lack the essential resources or expertise to mount an effective marketing effort, placing them at a significant disadvantage to larger firms with massive marketing budgets.

Many boutique firms have solid investment track records using strategies that are in demand, but they don’t have the marketing or distribution capabilities. As Cole Smead of Smead Investments so adeptly put it, “There are people who have great information and people who are great connectors. But you don’t find a lot of people who can do both.”

Asset Managers Look for a Win-Win Scenario

The good news for any asset manager with a great story to tell but lacks the resources to grow is there are partners in waiting looking for asset managers with great stories and a differentiated asset class to market. Tim Reick at Liberty Street Advisors, Inc. specializes in finding asset managers to partner with, letting them manage the money while his firm helps them grow with his firm’s vast sales and marketing capabilities. This is what Reick had to say about strategic partnerships:

“The majority of our assets are managed by third-party managers who tend to do one thing really well. We focus on specific differentiated asset classes and are constantly looking for that. We’ve got our affiliated broker-dealer that is great at marketing. Liberty Street provides the infrastructure and oversight. So, the ideal partner for us is a firm that is just great at picking stocks, bonds, or securities.”

Reick continued, “We look for partners that can bring us best-in-breed asset management because we have the experience and personnel to leverage their expertise to create marketing materials and provide the sales distribution to get that strategy known in the marketplace.”

Many Ways to Partner Strategically

AXS Investments also relies on strategic partnerships to expand into new product areas such as ETFs. While they continue to focus on growing their business organically through their sales and distribution apparatus, they also look to partner with other asset managers to diversify their offering.

As AXS’ Greg Bassuk notes, “On the strategic side, we continue to partner with investment managers with long and strong track records in their respective areas of expertise. But those partnerships have taken on many different forms.”

“We find that various portfolio managers or fund companies have very different objectives of their own so, sometimes it takes the form of an acquisition, or merger, or fund adoption, or some other structures which have also been very successful for our investment partners and us,” said Bassuk.

As the panel has shown, there are many ways smaller companies can be successful in growing their business by partnering with other firms. However, while there is a lot of activity among the larger firms, representing the top 20%, more than half of all firms appear to be sticking to their primary discipline of managing money, hoping that investors will notice them.

Regardless of the Strategy, Differentiation is Key

I asked the panel what they would say to those managers contemplating whether to continue what they are doing or consider looking for a strategic partner to break through the growth barrier.

“Do something original. You want to be a unique firm, have a unique story. You must differentiate yourself. People always come to us and say the industry is doing it this way. I ask if that means everyone should do it that way or is it because it’s the way everyone else does it,” Smead said. “It sounds like a funny question, but you’d be blown away how many practices in our industry are terrible, and yet everyone follows them. I always ask our people to think about how we can make ourselves unique and how do we ask different questions about ourselves. That’s what drives our behavior.”

An increasing number of firms are looking for strategic partnerships. For many, a merger or adoption as a subadvisor by another firm is a growth strategy. Conversely, more firms are looking to acquire or adopt asset managers as part of their growth strategy. All firms have their own reasons or objectives, but everyone is looking for a win-win scenario.

In the second part of this series from The Pandemic, Strategic Plans, and Growth discussion panel, we explore their insights into the sales and distribution challenges of asset managers.

Dan Sondhelm is CEO of Sondhelm Partners, a firm that helps asset managers, mutual funds, ETFs, wealth managers and fintech companies grow through marketing, public relations and sales programs. Click to read Dan’s latest Insight articles and to schedule a complimentary consultation.