Fighting the Tide: How Boutique Asset Managers Can Beat the Growth Barrier

Celera Systems recently conducted a webinar entitled “Optimizing for Growth.” The event was moderated by Dan Sondhelm from Sondhelm Partners. Panelists included Justin Bates of Swan Global Investments and Joe Childrey of Probabilities Fund Management. Below is a summary of the insight shared to dozens of mutual fund executives.

It has been a challenging last couple of years for asset managers. According to IPE, the growing tide of passive investing has resulted in negative fund flows and downward pressure on fees for asset managers, particularly boutiques, making it difficult to achieve the growth they need to get to the next level. The dominant firms, with their money, access, manpower and resources, will continue to capture market share, while smaller firms lie in their wake asking “What happened?”

The trend is not about to change anytime soon, so asset managers have a choice: Commit to a real growth strategy or plan an exit strategy.  According to Deloitte Consulting LLP, M&A activity among asset managers reached its highest level ever in the last two years, involving nearly 300 firms. Unfortunately, much of the activity with boutique firms was generated from acts of desperation, not from deliberate strategies for growth.

Firms that continue to float around, doing little to change the status quo, will not be in control of their own destiny. They will continue to lag behind the firms with proactive plans that take advantage of the opportunities to grow or be discovered. Growth is not easy. It takes time and resources. They can’t expect to compete with the big firms that spend more money on a single conference than they have in your entire budget; but, if you have a good story to tell and are committed to growth, having the right strategies will increase the likelihood that you can propel your firm to the next level.

In this article, we focus on three key strategies that should be at the core of strategic thinking for any firm that is committed to growth in 2018 – marketing, public relations and sales distribution.

Two Asset Managers with Good Stories and a Commitment to Growth

For a real world perspective on the kind of strategic thinking that goes into developing these strategies, we tapped the minds of two industry professionals who were contributors to our recent Optimizing for Growth Webinar hosted by Celera Systems and Sondhelm Partners. Justin Bates is the Director of Operations for Swan Global Investments, a $4.7 billion Colorado-based asset manager and Joe Childrey, founder and Chief Investment Officer of $100 million Probabilities Fund Management based in San Diego.

Both firms have great stories to tell and both are smaller than they want to be. Swan Global wants to grow to $20 billion and Probabilities Fund would like to be where Swan Global is right now. They are both facing a challenging environment with the same structural headwinds. Both employ proprietary, actively managed, downside protection strategies that have produced strong track records; and both have struggled to varying degrees to get their story out.

 Swan Global Gets Smart about Marketing

With a complete digital marketing apparatus consisting of a high quality website and the use of podcasts, webinars, whitepapers and a radio show to develop thought leadership, Swan Global appears to be making all the right moves to get their story told. But, their primary focus more recently has been on identifying more accurately who their potential buyers are and narrowing their target market so they can concentrate their resources with the advisors and platforms that offer the greatest potential for success.

According to Justin, “For smaller firms, seminars and pay-to-play conferences are too expensive and not very effective. We have to get smart about marketing – finding out who is tune with our product and how and why they buy.”

Increasing ROI with Good Data

Swan Global has found that an investment in good data and digital marketing automation enables it to better direct resources for the best return on time and effort. They increase their return when they are able to track the behaviors of the people who receive their emails and visit their website. They can know down to the page what visitors are looking at and how long they stay. This information enables them to hone both their target market and their message for more effective results.

They increase their return even more by keeping their website content fresh, timely and engaging, with prompts to spur more activity and lead generation, such as opt-ins for webinar registrations or podcast downloads. With each action taken by their visitors, Swan Global learns more about them and builds a stronger relationship.

In its quest to more than quadruple its assets from $1 billion to nearly $5 billion, the team at Swan Global realized it couldn’t be everywhere being everything to everybody. The biggest advancement Swan Global made in its marketing strategy was to leverage data and digital automation to narrow its focus and concentrate its resources on high ROI markets and activities.

Probabilities Fund has a Story Worth Telling (But How Does it Get Told?)

At $100 million in assets under management (AUM), Probabilities Fund is a smaller operation, but it has a great story to tell. While founder Joe Childrey and his team are committed to growth, their biggest challenge right now is to increase the firm’s visibility and get its story out. You can’t grow a firm until it gets discovered.

The firm’s larger challenge is overcoming the aura of mystique around its complex downside protection strategy. It’s difficult to get the attention of advisors when you are promoting a tactical fund at a time when passive investing seems to be winning the day. Yet, Joe and his team have delivered phenomenal returns. The problem is their 10-year track record has been truncated by Morningstar because the firm converted from a limited partnership four years ago.

For boutique firms like Probabilities, a well-conceived public relations strategy is the most cost effective way to gain visibility and credibility in the market. While direct marketing efforts are always important for generating inflows, small firms needs to build a “buzz” around them to add credibility to their marketing efforts.

Where to start? You lead with what’s buzzworthy. Probabilities happens to be the winner of the 2017 Hedgeweek Award for Best Liquid Alternatives ’40 Act’ Fund. That’s a big deal and something that should be shouted from the mountain tops. With a PR strategy, Probabilities could leverage that story across multiple media channels and attempt to establish Joe as a thought leader in the industry.  It should be good for several interviews with key investment publications. It is this kind of PR that bolsters the credibility of any marketing effort, but it takes a strategy and the capacity to execute it.

Until now, Joe says his firm has not worked with the news media. To make this strategy work, he and his team need to seek out the media and build relationships with industry journalists. Or, they can hire a PR consultant. The big firms have their own PR departments at the ready to blast their stories across the globe. Smaller firms that understand the value of PR work with PR consultants who have the skills and extensive networks of media and industry contacts to clearly articulate their story.  It would be the quickest and most effective way for Probabilities to gain some much deserved limelight and get their story heard by the right people. It’s an investment, but one that can magnify the returns on their marketing efforts.

Sales Distribution – Where the Tire Hits the Road

It takes good marketing and PR to prime the pump, but it takes a deliberate sales effort to drive revenue. Whether your firm has an army of wholesalers or your execs wear the sales hats, without a concerted, top-down sales distribution strategy in place, revenue goals are not going to be met. Justin’s and Joe’s firms are at very different places in their growth trajectories with the resources to match their particular stages, but both view sales with the same sense of urgency.

Inspect What You Expect

With $4 billion in AUM, Justin’s firm can afford to hire its own wholesalers. The key to growing sales production at Swan Global is measuring the numbers. The sales team has clear goals to target – not just for sales production, but also for all of the sales activities that lead to sales. They break a sale down by the numbers to know how many prospects, calls and appointments it takes to generate a new sale. They post the numbers on a sales board for all to see. With the competitive sales people Swan Global tends to hire, there is always a fight to the top of the board.

That competitive spirit is fostered by a top-down, sales culture that has been imbedded by the firm’s founders and senior management, who are not afraid to share their conviction for their product with everyone they meet.

Making Sales a Daily Habit

Joe’s firm is not yet big enough to where it can afford an army of wholesalers. However, sales efforts are built into to the daily activities of  its senior team. Joe is especially active when he travels, making a point to book breakfasts and lunches with local advisors in his destination cities. Joe has found that advisors are especially receptive to meetings in their offices. It’s definitely more of a grass roots sales strategy, but it is in constant motion.

Use a CRM System to Drive Sales

The one thing Justin and Joe have in common is their use of a Customer Relationship Management System, such as SalesForce, to track their prospects through the sales cycle. Regardless of their size, firms that use an effective CRM system know exactly where they are in  relation to where they need to be and what they need to do to get there. You can’t be a sales organization today without a CRM system.

Never too Early for Strategic Thinking

With the strongest fund flows occurring in the first two quarters of the year, firms now need to be thinking tactically about how to capture their share. However, for firms committed to growth or seeking to be discovered, now is also the time for the strategic thinking needed to focus their time and effort on smart marketing, getting their story out and optimizing their sales efforts.

You can listen to the full webinar through this link. Dan Sondhelm is a veteran marketer for asset managers and mutual funds. He can be reached at 703-597-3863.