The Franklin Templeton
] team is talking up their liquid alternatives push, making their case to the press and perhaps to alternatives managers they'd like to team up with.
| Rick Frisbie|
Franklin Templeton Solutions
Executive Vice President, Head
This morning Rick Frisbie
, executive vice president and head of Franklin Templeton Solutions, hosted a press breakfast at the Modern restaurant the Museum of Modern Art in New York City. David Saunders
, CEO and co-founder of Franklin's recently-acquired K2 Advisors
, moderated a panel that featured PMs from three of the twelve shops that K2 includes in its multi-manager liquid alternatives strategy for its Franklin mutual fund. The PMs on the panel were: John Hynes
, PM at $2.5-billion AUM EMSO Partners Limited
(an emerging markets specialist that does bottom up fundamental research and invests mostly in fixed income); Kevin O'Malley
, PM at $2-billion AUM Chatham Asset Management
(a U.S. domestic credit high yield shop); and Ken Tropin
, founder and chairman of $10.75-billion AUM Graham Capital Management
(a macro investing shop with both discretionary traders and quantitative models).
As is traditional at many such press briefings, as reporters munched on fine fare, the PMs gave brief overviews of their shops and their investing strategies. Yet much of the discussion shifted towards more business-level concerns: why the shops wanted to get into the liquid alternatives space in the first place, and what it's been like working with K2 and Franklin.
"It allows us to focus on what we do, which is hopefully delivering performance over time," Tropin says of Graham's partnership with K2 and Franklin. "We're not a marketing organization."
O'Malley describes working with K2 and Franklin as "an absolute home run" for Chatham.
Thanks to the retail constraints, O'Malley says, they "construct portfolios slightly differently. The idea flow actually works both ways," both from institutional to retail and vice versa.
"Having very transparent dialogue with our investors makes us better investors as well," O'Malley says.
"We think of the liquid alternatives as a natural extension of our hedge fund business," Hynes says. "We wanted a partner who could fit very nicely with us and not create any kind of a drain on our system, our resources."
Hynes, Saunders, and Tropin all tried to dispel the traditional fear of institutional and alternative asset managers about the retail space, namely that the money is too "hot." Tropin describes institutions as making investments all at once, after they've gone through their process, while retail investors can be more gradual about allocations and changes. Hynes says that retail money "tends to be stickier, more stable money than the less liquid options."
"Their perception is the faster money is the retail money. You're saying it's the opposite," Saunders says. "I agree with you."
And though Franklin's K2 is already working with 12 alternatives managers, it sounds like they might be looking for more, especially given that some strategies (like those run by Chatham and EMSO) are capacity-constrained. Saunders explains the pitch:
The Franklin Templeton model is a service provider model to the 23 investment boutiques of which K2 is one. We don't have to be concerned with compliance and technology and risk management. They provide all the services to us and ten times more than we could have generated on our own. What we've tried to do is replicate that model for our managers that participate in the fund ... Let's create an open-architecture environment.
All three PMs praised K2 and Franklin for the "seamless integration" (in Hynes' words) and for doing a lot of the legwork for them in reaching retail investors.
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