How to grow in an industry of giants

Hennessy's Nilsen says
acquisitions and marketing
are crucial 

They say one of life’s greatest lessons is to learn from your own mistakes, but that doesn’t mean we can’t also learn from the missteps our friends and peers have taken. If you’re a smaller firm trying to grow your funds and gain the attention of investors, you should study what those before you have done to achieve the growth you desire.

To give others a peek into the growth process, SunStar Strategic partnered with the Small Funds Network to present a webinar “How to Grow in an Industry of Giants.”

Presenting was Teresa Nilsen of Hennessy Funds, David Mertens of Jensen Funds, David Moore of Compass EMP Funds and Kent Croft of Croft Funds. The presenters discussed their growing pains and shared tips on what to do and not to do, also comparing their current status to their starting point.

SunStar’s Dan Sondhelm presented an overview of the opportunity for smaller funds. Recent data by Morningstar shows that four of the top 10 big fund firms have shown net redemptions, creating opportunities for the smaller guys to get some of the action. Also, financial advisors have been getting burned by the larger firms, making advisors more willing to give smaller firms a chance.

The panelists agree there isn’t a one size fits all approach to growth but multiple, integrated strategies help the most.

Teresa Nilsen of Hennessy Funds explained that much of their strategy relies on acquisitions, not just organic growth. Over the years, Hennessy has made 13 strategic acquisitions and it’s a strategy to which they are still committed.

Kent Croft pointed out that PR and marketing have been crucial elements of their growth and noted that it does not take an onerous amount of time away from the desk, making it very manageable.  

David Moore noted that one of the most important things is to have a unique, repeatable story. This is crucial to work with external sales team, which is part of Compass’ strategy. Nilsen added that the story is most credible when you have performance data to back it up. Croft echoed Moore’s point and also explained how his firm uses databases to track as much detailed information about their advisors as possible, allowing them to reach out to advisors as needed.

David Mertens said part of the core strategy at Jensen has been to broaden distribution by channel via their internal sales team.

As for public relations, Croft discussed the importance of using article reprints to your advantage, particularly if a reporter writes a nice feature on your fund. He recommended posting them on your company website. This helps to ensure your investors feel good about what you’re doing, he said. Mertens says the media coverage has helped them fortify their message, as they want their investors to have a clear understanding of the fund. He said the media has provided a means to get in touch with not only new clients, but existing ones as well. Nilsen stressed the importance of being a resource for reporters, making it easy for them to want to reach out to your firm for stories.

The panel warned of the heavy fees associated with the major platforms, but overall agreed that the prices to pay along the path of growth are very much worth it in the end. Expect growing pains, but with commitment comes great reward.

To hear the full full Webinar and Small Fund Network archives, click here. You will need to be a SFN member. And by being a SunStar client, you will save half of your membership fee.

by Katie Bird