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Small Firm's Size Provides Marketing Edge...


Quantitative Advisors is not the largest fund company in the country. In fact, it's the 329th largest in terms of assets under management, according to Financial Research Corporation. Heather Dondis, director of marketing at Quantitative Advisors, is charged with marketing the six Quant Funds that currently hold $175 million in assets. During this down market, the strategy for the small fund complex is to retain the assets it has as well as to highlight and sell alternative areas of the business.

Not long ago, investors were pumping money into mutual funds as the markets soared. Marketing teams at fund firms of all sizes were busy, but increasing a firm's assets under management seemed to be a piece of cake. Now that the market has turned around, a greater effort is needed just to keep the assets the company has, never mind increase them, according to Dondis.

"Clearly, it's more of an asset retention time," she said. "You're just trying to keep people comfortable. A lot of our shareholders have been with our funds for a long time, so it's not like they're jumping ship because we're in a down cycle. But clearly, you're not in that position you were in a couple of years ago where you're getting this five-star recognition more regularly than you're getting now and people are just coming to you."

Large and Small Differences

One of the differences between marketing a small complex vs. a larger one is that the larger complexes are much more active in trying to attract new assets even in a downturn. Quantitative has not stopped promoting its funds, however, an active marketing campaign to sell them right now simply does not make sense, Dondis said. "For us, in terms of a small fund family, we're not out there pounding the pavement necessarily for brokers and things like that right now because I just don't think it's very smart time to do that," she said.

The majority of Quant Funds' assets are sold to high-net-worth clients through U.S. Boston Capital Corp., a broker and distributor in Boston. Most of the funds' shareholders are long-term high-net-worth clients, and U.S. Boston has only a couple of reps dedicated to the Quant Funds, according to Dondis. The funds have 12b-1 fees of either 25 or 50 basis points. Five out of the six funds have a 1% redemption fee and the sixth is purely no load, aside from the 12b-1 fee.

Marketing the Positive

When the market downturn began last year, one thing the firm started to do was highlight other areas of the business had become more attractive, such as the firm's increased Web site functionality. Adding features to the Web site helps the company increase visibility and takes some of the focus off of the effects of the down market, Dondis said. "If you can draw the attention of shareholders, investment professionals and media about some good things you're doing at your firm...it's only beneficial," she said. "The idea is to promote a message that's more positive even in times like these. You don't necessarily have to rely on fund performance 100% of the time."

The company has even begun offering shareholder account and transfer agency services to outside fund firms to leverage its expertise in that area and generate additional revenue. The company offers Web site development and hosting services as well as advanced shareholder record keeping services. While the company still knows it's an investment manager ("No matter what, you always have to promote your funds in this business," Dondis says), if Quantitative can generate a buzz' around its other services, there is no reason not to take advantage of that, she said. Those services appeal to other small fund complexes. Quantitative is in the process of signing up several firms now and will soon make announcements about them.

As far as marketing action taken in response to the tragedy of Sept. 11, the firm has made information available to shareholders, but does not want to overwhelm them, said Dondis. The firm sent out a short "touch-base" letter to shareholders by e-mail, letting them know that Quantitative's systems are up and operational and that they should call the company's sales reps or shareholder services with any questions they may have. "People are getting inundated with a lot of stuff. We just wanted to send out a simple letter saying, Hi. We're here. Bear with us and bear with this market.'"

Quantitative is relying heavily on its reps to communicate with shareholders and ease their concerns. "This is the time for the reps to really step up and protect the assets and the relationships with clients," Dondis said. "It's still an asset retention mode, although it's a little different."