MutualFundWire.com: April Fools For Fundsters
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Wednesday, April 01, 2020

April Fools For Fundsters


Editor's Note: MFWire interrupts our regular news coverage to bring you this special April Fools Day message from the folks at Fuse Research Network. If you need a few laughs and a break from the news, read on ...

And yes, to be clear, this article is fake news. But what if ...


Thomas Neil Bathon
Fuse Research Network
Founder, Partner

Mergers & Acquisitions

Northwestern Mutual Announces Merger with Southeastern Asset Management


The new organization, which will operate under the name Compass Rose Holdings LLC, seeks to combine the best of each firm's strategic direction for the benefit of clients. However, everyone is not aligned with the notion that this combination will lead them down a successful path. According to Nancy Angle of Bearing Capital Partners, "Sometimes in mergers of this type, interests are pulled in opposite directions, creating more discord than synergies."

Flock of Firms Unite


Birds of a Feather Funds was recently formed from seven separate firms to cover the full spectrum from passive (Sparrow) to aggressive (First Eagle) investment styles. The combined entity, which also includes Swan, Green Owl, Tweedy Browne, Robinhood, and Blackbird Ventures, promises to protect an investor’s nest egg with the hope that 2 out of 3 investments will survive to maturity. In a surprise move, the SEC is challenging the legitimacy of the Green Owl subsidiary given no actual proof of existence or track record could be found.

Other notable new items:

  • Highland, Seven Canyon, Poplar Forest, Ocean Capital, and Great Lakes are all in talks with All Terrain Funds.

  • Ocean Capital merges with Crossing Bridge and Pacific to form Pacific Ocean Crossing Bridge ...

  • Matthews Asia appears interested to join the joint venture.

  • The Rockefeller, J.P. Morgan, Mellon, and Morgan Stanley investment teams are coming together under the Baron Capital Group moniker. Our industry sources suggest the likelihood of this union surviving the first year is de minimis.

  • We are still awaiting word on the merger discussions between Six Circles and Symmetry — seems like a natural fit.

  • In an effort that seems to take the behavioral science fad a bit too far, Dimensional and Reality are teaming up to customize portfolios ("Infinite Possibilities") across an unlimited realm of viable outcomes.

  • Cutler Capital Management went through a strenuous advisor segmentation process and found it had the most success with advisors who were born in the 1970s, are left-handed Capricorns, and day trade bitcoin.

  • In completing the five-year cycle for such thinking, supported by old copies of kasina reports, CFOs have concluded that they can meaningfully lower the total compensation cost of the sales team by switching to net sales-based programs.


  • Marketing Tactics

    Celebrities Promoting Funds


    Eyeing SSGA's recent marketing campaign with actress Elizabeth Banks, a growing number of asset managers are teaming up with celebrities to promote their funds. One Direction's Harry Styles will be the frontman for Direxion Funds, and Johnny Depp will pitch the Seafarer Funds. Negotiations with Sean Penn to endorse the Defiance Funds have fallen apart, and an unnamed alternatives manager is signing a contract with RuPaul to tout its strategies.

    Amazon and Mutual Funds: Now a Reality


    The Super Prime Builder Funds (motto: Principatum Orbis Extulerunt – go ahead, look it up) will be open to using the funds of "any and all viable money managers." Stipulations cited for inclusion to manage a portion of the Super Prime Builder's assets include use of the Cleanest-of-Clean Shares, a $5 million entry fee, and willingness to transition large quantities of the asset manager's staff as seasonal workers, when needed.

    Fidelity Invests in ESP Tech Lab


    Having the foresight regarding the inevitable digitization of everything and spiraling administrative costs, Fidelity is investing in a new ESP technology. The new business unit, TeleVest Labs, will focus on telepathically delivering client statements, disclosures, and annual reports directly to clients' minds, eliminating the need for paperwork entirely.

    How to Improve Advisor Email Campaigns


    After spending countless budget dollars and years of refining their targeted email marketing strategy, Chief Marketing Officers are now reverting back to blasting generic emails when interacting with advisors. One CMO at a Top-10 fund company noted, "No one opens emails anyway so why waste resources seeking to personalize engagement." In a related move, FUSE is hearing that CMOs are changing KPIs so as to focus more on sheer quantity of emails sent while eliminating the ability to unsubscribe.

    New Products/Product Management & Development

    Funds Targeting Specific Market Segments


    Market uncertainty leads all investors to pause and reconsider the most dependable path to wealth preservation and, hopefully, investment growth. With this in mind, the Nostalgia Funds (available somehow, strangely, on your Facebook feed) are stepping up. Based on discrete demographic algorithms, Thurston Howell III Funds, Gordon Gekko Thematic Opportunities Funds, and Frye Festival Funds are positioned to appeal to increasing highly refined market segments.

    Citywire Announces Sub-Advisory Change to Pomology Fund


    Today Harvest Funds announced that it is replacing Pear Tree, one of the three sub-advisors on its $200 million Pomology Fund, with Appleseed Capital because the former manager didn’t bear fruit. The two other sub- advisors Plumb and Persimmon will continue to manage a portion of the fund. There will be no material changes to Pomology Fund's investment strategy.

    CorpShares Brings Latest Innovation to ETF Market


    As investors have increasingly embraced ETFs, their appetite for more refined investment themes and exposures has also increased dramatically. Looking to capitalize on this demand, CorpShares has now stepped into the market and introduced its new line of single-stock ETFs. CorpShares provide concentrated exposure to investable public companies that heavily influence many investor portfolios. Developed as a trading or investing instrument, CorpShares give sophisticated investors specific exposures to the most popular market participants — Microsoft Corp. will be version 1.0 of this new offering.

    Vanguard Repositions Managed Payout Fund


    In March 2020, Vanguard announced that it was scrapping its Managed Payout Fund's monthly payout policy and repositioning the Fund. According to an anonymous inside source, the new fund names that were considered included the Titanic Fund, Les Miserable Fund, Dead Fund Walking Fund, and April Fools Fund.

    OK Boomer Fund to Make its Debut


    Cerulli Associates predicts dramatic growth among thematic funds during the next 12 months. Its analysts (average age 22.3 years old) assert that in the absence of steady market returns, baby boomers will venture into funds that provide them a sense of comfort and meaning. In response to these recommendations, a large asset manager has filed "The OK Boomer Fund," which will invest in Exxon, Kraft/General Foods (maker of Jello and Kraft Mac & Cheese), Yahoo, Anheuser-Busch, and Simon Property Group (manages Malls) and other boomer-worthy securities.

    Royal Parts Ways with Harry and Markel


    Royal Mutual Funds has dissolved its holdings in shaving start-up Harry's and specialty insurer Markel Corp. Despite the liquidation, the firm announced at a recent summit that it is totally supportive and hopes the two firms will each find a constructive way forward.

    Forester Shears Lineup


    Forester has found itself in trouble with the sustainability crowd after significant cuts were made to the product line. Their roll-up of all of the Oak (4 — Angel Oak, Oak Assoc., OakTree, and Two Oaks) and Redwood (2 — Redwood and Sequoia) funds has not seen the growth they had hoped for and significant pruning was required.

    Advisor Engagement Programs

    In Stunning Reversal of Recent Trend, Advisors Clamor for Meetings with Wholesalers


    The number of meetings between wholesalers and advisors has been steadily declining for more than a decade. As recently as last year, on average, advisors only wanted to meet with those they deemed to be "top" wholesalers once a quarter. However, over the last few weeks, we hear that wholesalers are now being inundated with calls from advisors seeking any sort of social engagement. Steak dinners (Grubhub delivered) and rounds of golf (solo versions) are back! Reinforcing this trend line, new research from Strategic Insights sought to gauge the number of external salespeople an advisor interacts with on an ongoing basis. The responses suggest a high correlation between the advisor's openness to meetings and the number of meetings that occur. A new type of value-added program has also emerged as advisors are actively seeking out meetings with wholesalers that offer toilet paper and hand sanitizer in exchange for dropping a ticket.

    The Merits of Short-Term Performance


    In this age where investors and their advisors demand real-time access to their investing information, Financial Planning Magazine (spurred on by the tireless efforts of Andrew Shilling) has launched an investment ranking system that constantly updates the ranking for all mutual funds, closed-end funds, SMAs, ETFs, CITs, and individual stocks/bonds. Unbeknownst to Andrew, Financial Planning has recently signed on with Narrative Science so as to automate the one-dimensional pieces that characterize much of his work.

    Putnam's Latest Picture-Perfect Value-Add Program


    Putnam, the leader in social media programs, has developed a new value-add offering for advisors that employ videoconferencing with their clients. Using the partnerships with the Patriots, Celtics, PGA, and US Ski Team ... advisors will get customized backdrop screens to use in the home offices. Depending on which segment the advisors qualify for, they may be offered a picture of Brad Wanamaker (reserve on the Celtics) or anyone on the New England Revolution for Tier 3; Keegan Bradley (#62 on PGA tour) for Tier 2; Kemba Walker (Celtics) or Julian Edelman (Patriots) for Tier 1. Unfortunately, U.S. Women's Ski Team pictures are for Putnam Platinum Club members only.

    Compensation Insights


    FUSE Capitulates on Wholesaling


    Neil Bathon of FUSE Research, in the face of a just released ground-breaking joint research report from AITE, Interactive Communications, Strategic Insights, Cerulli, and SS&C, has issued formal guidance to his clients that traditional wholesaling might be changing. Given the undeniable conclusions in the report, FUSE is forced to publicly acknowledge that 2020 (and perhaps 2021 also) is a time of change for distribution. FUSE will no longer argue against the cutting-edge guidance offered in the study — investment products must be sold in a consultative manner and as part of an investment solution. These research leaders have also confirmed that internal sales desks are no longer simply call centers or schedulers. Bathon went on to say, "While there is no end to my respect for those who 'carry the bag,' I cannot refute nor deny the insight delivered by my industry peers."

    Segmentation: Find Your Niche

    Platform Augmentation


    Since the recommended lists and model portfolios produced by home office research teams are having little to no impact on what old school advisors use in client solutions, due diligence executives and their teams are being forced to find ways to become more relevant. To achieve their goals and enhance job security, most broker/dealers are planning to triple the number of strategies they cover on their platforms in the coming months. The wirehouse firms are specifically looking for strategies with less than $50 million in total assets from investment managers with limited distribution resources.

    Latest Offerings & Tools

    Morningstar Announces Latest Offering


    Morningstar has rolled out its newest offering — online betting on fund level performance results. As the star ratings have shown no predictive power, the firm is now attempting to capture the market for speculation on future performance. The platform allows betting on whether funds will beat their benchmark over periods ranging from one day to one month. Additionally, the firm has created a new rating system in which market strategists will receive between 1 and 5 Crystal Balls based on accuracy of their betting lines.

    Dalbar Introduces DALBAR i-PRT Investor Panic Relief Tool


    On March 10, DALBAR introduced its DALBAR i-PRT Investor Panic Relief Tool. Always on the bleeding edge, DALBAR provides an innovative, "institutional type" strategy to prevent portfolio losses — the use of Put options! In a hypothetical tool that looks like it runs well in Netscape browsers, clueless advisors can identify how much in Put options they need to buy to hedge a portfolio. Louis S. Harvey, DALBAR's President and CEO, added, "I hope this will save millions of investors, billions of dollars as they navigate the treacherous waters of the coronavirus crisis." (yes, actual quote) By marketing that the system will "Insure Against Losses," DALBAR hopes to maintain social distancing from the SEC in the near future. No word on how DALBAR will be compensated, but we do see an annual awards program (made up only of participants) as an outgrowth of this service. Note: the S&P 500 returned 10.15% from March 17 through March 30, 2020.

    Neil Bathon is founder and partner at Fuse Research Network, a consulting and research firm that supports asset managers.


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