“We are tired of subsidizing our mutual fund family. We hate writing large checks to our distributor,” says the CEO of a highly profitable asset management firm that focuses on institutional accounts. “We want to attract assets in our undiscovered mutual funds.”
Growing mutual funds that haven’t reached profitability can be difficult, especially if the funds are young or assets are small.
Some firms are willing to invest more in sales and marketing because their core business is highly profitable.
Others, though, believe their funds have to have assets and revenue before they can invest more in their growth because of the existing subsidy. Very likely, these firms have new or limited sales and marketing efforts. They use the fund for smaller client accounts and believe, for third party distribution, if they build it, investors will come.
Unfortunately, few advisors and investors who you don’t already have personal relationships with will commit to being among your largest or earliest fund investors.
So what’s a firm to do?
Grow a Market, Not a Fund
Stop thinking of your funds as a profit and loss center. Instead, consider your funds as a catalyst to expand and diversify your firm’s typical client base. You want to engage financial advisors, RIAs and/or family offices to start doing business with you. As you start having conversations, don’t worry if they have a preference towards separately managed accounts.
Promote Your People and Strategies
Understand that you will likely attract interest into your separate accounts or separately managed accounts first. They have the same manager and process, more assets and a longer history. Focus on your firm’s history, disciplined and repeatable process, and how you make money for shareholders. Once you’ve built a relationship with a firm or advisor, and they’ve become clients, they will be much more receptive to learning about and investing in your mutual funds.
Leverage Your Relationships
Go back to your new clients with a purpose. After you thank them for their business, let them know you also have mutual funds that can be used for smaller accounts. Ask for introductions to the firm’s mutual fund research team. This can help you be well positioned for model portfolios and select lists. Meeting additional reps down the hall is a good outcome too.
Then, remember to follow up. These leads came in through an advisor introduction after all.
For more information on how to grow your asset management firm, please contact Dan Sondhelm, CEO and Founder of Sondhelm Partners, at 703-597-3863.