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Rating:For Neil Hennessy, It's Grow, Buy, or Be Bought Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, September 25, 2014

For Neil Hennessy, It's Grow, Buy, or Be Bought

Reported by Tommy Fernandez

For Neil Hennessy, president and CEO of Hennessy Advisors, life in the mutual fund jungle is simple: it's grow, buy or be bought.

"I am trying to make acquisitions before somebody decides to make us an acquisition. That is just part of the real world. It's not that we are up for sale. It's not that we are not up for sale. We will try to grow and continue to make acquisitions before somebody says, 'Well Hennessy, why don't we buy you.'" Hennessy recently told MFWire.

It's not that Hennessy has any intentions of being bought out of his job any time soon. His 19-employee firm is having a good year, with AUM now over $5.6 billion, thanks in part to $2.5 billion of organic growth over the past 18 months. Earnings per share for the first three quarters of their 2014 fiscal year, which ends on September 30th, already totals 90-cents, compared to 83-cents for all of 2013.

The firm continues to generate advisor buzz, adding 6,000 to its platform over the past two years, partly by ramping up the technology of its RIA website.

"They can log in and get everything they want from a due diligence standpoint, code of ethics, everything. We try to do things differently with the websites. We have tried to use technology to reach out to RIAs, we alert them, tell them what is going on," he said.

The firm has also enjoyed a boost in public recognition, partly as a result of solid performance this year: eight out of its 16 funds rated four Morningstar stars or higher, with 13 of them scoring three or more stars.

"We stick true to our numbers. People know who we are now. We have been able to tell our story. You'll see the name Hennessy somewhere every two-and-a-half days on radio, print or TV. We continue to stay out there," he said.

Even though he has big growth ambitions, Hennessy is committed to keeping his firm as lean as possible. That includes leveraging every employee for such functions as shareholder services.

"We don't have voicemail. We answer the phone within the first two rings. We want everybody to understand what we do and how we do it. Our COO, our comptroller, our compliance officer. I want everybody to talk to shareholders so they don't get pigeon-holed and forget how to work with the shareholders. Say you get a market environment, like March of '09, where everybody is panicked, everybody can be in trenches at the same time to help out. Shareholder services is a very large part of our culture," he said.

Meanwhile, Hennessy and his colleagues continue to work the conferences and industry venues in search of more acquisitions.

He described the M&A situation in the fund space in this way:

Yeah, I think there are opportunities out there. The market can create opportunities for you. Investment managers are no different from individuals in terms of their emotions. If the market gets unsteady or goes down, some people will think 'Maybe I should cash out.' That is where we cam make an acquisition. We take over the company and let them sub-advise. They can take less risk that way. It all depends on what they want to do.

Most of the banks have diversified of their mutual fund businesses. It is really going to be the mom and pop shops, $1 billion, $5 billion, maybe up to $10 billion.

There seem to be a lot more competitors now, it seems like every other day there is somebody trying to get into this business and build it through acquisition.

Despite the competitive pressure, Hennessy is determined to go it his way.

"Everybody is trying to take the fun out of this industry, we have to have fun at what we do every day. I'm not sure what the next step is, I never really had a goal in my life. The harder you work, the luckier you get," he said. 

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