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Back to Basics Spurs Davis Growth


When Russell Weiss took over as marketing chief at the Davis Funds in 1994, he was joining a firm with a stellar performance record, consistent growth and a marketing approach from the Dark Ages.

"It would be safe to say we needed to better reinforce our message to the financial intermediaries," said Weiss. "And we needed to develop a better relationship with our existing client base."

A little more than four years and several seemingly elementary marketing measures later, Davis Funds' assets have increased ten-fold and it has moved from the 105th largest fund firm to 48th at the end of 1998, according to Dalbar's FundRATE Market Monitor.

Assets under management recently topped $21 billion for the Davis Funds, in Santa Fe, N.M., where president and portfolio manager Andrew Davis began operating a few years ago. At the end of 1994, Davis managed slightly more than $2.5 billion.

What happened?

For one, ownership of the firm changed dramatically. Just two years earlier, in 1992, Shelby Davis, (Andrew's father) bought out Martin Proyect, a 60 percent owner and Shelby's partner since the founding of Davis Funds in 1969.

Shelby Davis had learned his investment lessons from his father, Shelby Cullom Davis, who stressed that the key to successful investing was purchasing value -- and sticking with those stocks for the long term. He started with $100,000 on Wall Street in 1947 and by 1993, that had grown to $800 million.

His son developed an outstanding track record with the flagship fund- Davis New York Venture A, which is celebrating its 30th anniversary this month. The fund has consistently been in Lipper Analytical Services' top ten percent of growth funds for the past 25 years.

Besides for performance and consistency, Shelby Davis promoted his fund by stressing that his family and employees were willing to put their money behind their investment philosophy. Today, about $2 billion or about ten percent of the firms' assets under management come from Davis family members, directors or employees, said Andrew Davis.

"You tend to sweat at it a little harder when your own money is invested," said Weiss.

But beyond focusing on performance and letting it be known that the family was deeply invested in the funds, Davis did nothing to market itself. The company was too focused on executing its investment strategy and operated on the assumption that outstanding performance was the best marketing campaign any company could run. And, growth was lukewarm until the mid-1990s.

That is when the Davis family decided to revamp marketing and bring in Weiss, a former sales and product manager for Merck, the pharmaceutical company.

Weiss set about revamping all the company literature and hiring new writers and graphic designers to give more life to promotional materials. Some of the changes simply involved adding more color, said Weiss. But the major effort was making the literature more focused on the company's investment philosophy and track record. Then, a wholesale force of 14 employees (seven in the field and seven in-house) was hired to carry the message to the broker/dealers and financial advisers who were selling Davis funds. (All Davis funds are sold through intermediaries.)

"We had zero wholesalers until then," said Weiss. "We needed to build upon our ability to communicate with the people selling our funds."

In 1997, Davis added a key account department, with the goal of servicing the home offices of the major brokerage houses with which Davis had relationships. If a Paine Webber broker needed clarification on a new fund or some updated marketing material, he could get this information by making a telephone call. In the past, it could take several phone calls and considerable effort.

"This is a pretty common department that most major fund companies have," said Weiss. But Davis did not add it until nearly 30 years into its existence.

Last year, Davis added a money management division to handle the accounts of high net-worth individuals and its broker/dealer network has brought in about $100 million to this division. Meanwhile, the company added its 11th fund in May, 1998, called Growth and Income, a diversified fund which employs the Davis investment strategy, with 60 percent equities and 40 percent bonds. The fund was developed to dissuade investors from shopping elsewhere for this diversification mix.

"We're not going to start a fund because it's the fund of the week," said Andrew Davis. "We were hearing from the people who sell our funds that investors were trying to mimic our investment goals, but were going to other companies and buying percentages of other funds" to attain the 60-40 stock to bond ratio that Davis advocated.

In addition, Davis strengthened its shareholder services and back-office capabilities by hiring Ken Eich, formerly the cfo at Oppenheimer.

"It's added better management organization of our legal and accounting departments," said Weiss.

Despite all the changes, the company will continue to get by without advertising.

"We'll continue to try to better communicate with the financial intermediaries we have and there are better ways to do that than by advertising," said Weiss. "We're happy being a high-quality, boutique firm in the mutual fund business."