How do you market a purely direct-sold mutual fund?

The Minneapolis Star Tribune offers one answer to that question with a profile of Minneapolis-based Disciplined Growth Investors [profile].

DGI eschews the big custodial and broker-dealer platforms that even most of the old-school direct-sold mutual fund shops now work with. Being on those platforms makes mutual funds more broadly available to thousands of financial advisors and countless individual investors, and it also means that the platform provides sub-transfer agent services (like omnibus accounting) to the fund.
Yet being available through a mutual fund supermarket also costs: typically 40 basis points on a no transaction fee (NTF) platform where the fund's investors pay no trading fees to buy or sell the fund, or 10 bps for a transaction fee platform where the fund investors pay a trading commission when they buy or sell shares. The bps come out of the fund's fees, which of course eat into the performance of the fund.

"Our bold idea is let's ignore that model, because it doesn't work from the client's perspective," Robert Buss, head of client relationships at DGI, tells the Tribune.

Buss tells the paper about the boutique institutional asset manager's local marketing campaign, which now includes nearly three dozen ads on barroom coasters, billboards, and buses. The ads feature taglines like "You don't need to be a millionaire to invest like one" and "Hug your mother, not the index." He also reveals that the 21-year-old institutional asset manager's one mutual fund is "an accident of history", created (in 2011) after a pension fund sponsoring client of DGI switched to a 401(k) plan (after the plan sponsor was acquired) and participants wanted to stick with DGI.

DGI's four-star mutual fund now has $203.7 million in assets, according to Morningstar. As of DGI's most recent form ADV, filed last march, the firm had about $4.76 billion in AUM and 17 employees. The firm self-identifies as eschewing style boxes and focusing on fundamentals. 

Edited by: Neil Anderson, Managing Editor


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