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Kelmoore Funds Offer More Pitch Than Performance


Winning distribution through broker/dealers and wirehouses often depends on offering a fund that has top-tier performance. But short of performance, access to distribution can often be gained by offering a unique niche product that has a good story to tell.

Companies that can offer a unique product that fits well with existing market conditions stand a good chance of winning shelf space with distributors, said Donald Cassidy, senior analyst with Lipper. By offering a product that fills a hole in brokers' line up or by providing a fund that addresses market conditions, fund groups can gain shelf space without posting outstanding performance, he said.

Enter Kelmoore Investments. The small Palo Alto, Calif.-based asset manager offers three funds, a variable annuity product, an offshore fund and separate accounts. Currently the firm has $700 million in assets under management, said Michael Loukas, Kelmoore's national inside sales manager.

Although its funds may not have shoot out-the-lights performance, they offer a significantly higher monthly dividend than most other funds. The dividends can used to provide a stream of income or be reinvested, said Richard Schilffarth, Jr., Kelmoore's national sales manager. The funds' income is derived from a covered option feature that puts a call option on the funds' investments. That strategy is designed to allow the funds to provide a stream of income in up, flat or down markets, he said.

Kelmoore's product line has been popular with brokers because it gives them something to sell despite market conditions, Schilffarth said. "It's a new idea they can take back to their clients and it gets them past the hesitation to pick up the phone," he said.