From Medical Device Supplier to Mutual Fund
January 18, 2013
If you thought the path to the mutual fund world is a straight line, then you haven't met John Brandmeyer, who transformed a family business from selling medical products to marketing funds.
Brandmeyer, son of Joe Brandmeyer, who founded and chaired Leawood-Kan.-based medical device manufacturer Enturia, now heads up independent alternative investment firm Cognios Capital, also based in Leawood, a firm that launched its first mutual fund earlier this month and managed $132.9 million assets as of Nov. 30 2012. Prior to Cognios, however, he held various senior level positions at Enturia, before it sold for $490 million to Cardinal Health of Dublin, Ohio, a global major healthcare products and services provider.
Of course, generating revenue approaching $150 million selling antiseptic applicators is a far different game from building and managing alternative mutual funds for willing retail investors. But Brandmeyer, believes that with the right portfolio manager hires and enough education, the switch can be made.
So how did you get started in the mutual fund business?
In 2008, our family had a liquidity event with our original business, and with that happening we formulated a family office, which I headed up. During that process, we started to evaluate different investment firms and products, and over that period of time, because our background really wasn't in the investment industry, we decided two-and-a-half years ago to get some portfolio managers, in-house investment money managers, to do a lot of this evaluating for us. Through that process, we developed our own products that really took on the characteristics of some of the products that we really liked and moved away from some of the things we didn't like. We built an investment firm that the family office would want to be a client of, and that's really where Cognios came from.
What's your debut mutual fund all about?
We created this mutual fund to provide access of alternative market neutral products to investors that in the past have not had access to those products. As a family office, we were able to see and evaluate a number of products with great strategies that only institutional and accredited investors were allowed to invest in. Because of the way we structured our product - daily liquidity and other benefits - we felt that we should provide access to all investors. The purpose behind our first product is a mirror of a hedge fund strategy that we currently run. The idea was to provide this product to the retail investor as a liquid alternative product.
What was attractive to you about the mutual fund format?
The thing we like about mutual funds is that they are regulated and there's a high degree of transparency that's required. So in our experience with other products that we looked at as a family office, we found that some investment products didn't have that. The mutual fund structure provides people not only with transparency and regulations, but also the daily liquidity necessary for them to exit this strategy if they need to and not to keep their money in something that they're not necessarily happy with. For us, liquidity is a big element of an investment strategy that you have to understand.
What accounts for the timing of the launch of the Market Neutral Large Cap Fund?
2008 was when our investment management really started. But until we brought on the portfolio managers, we didn't really have the skill set or the understanding that we needed to provide a product like this to the market. To launch a mutual fund is not easy, a product that has the performance and liquidity that people should have, and that took time. The retail investors out there are looking for alternative products that are regulated, liquid and that provides them with a strategy that is less correlated to the market, and that minimizes volatility. With the beta adjusted market neutral investment strategy, what we're really providing is minimizing of that volatility within the marketplace.
What are your business development plans going forward?
Growth for this business is going to come from the demand of our investors. We believe that this market that is seeking these types of products, and our strategies around growth will be about creating higher awareness about Cognios Capital and what we're trying to provide.
How exactly do you plan to go about marketing yourselves?
We highly recommend that for any investor, whether they do it on their own or through advisers, that they get as educated as they can about these products. Our goal is to provide as much education through as many channels as we can to provide people with what they need to make good investments. I can't be specific about which channels right now.
This is new to us, as far as selling a mutual fund, so we're looking for opportunities to present our message where we can.
How about distribution? What are you doing to expand those channels?
To build our distribution network is a focus more than anything else. Creating those relationships are key. Our product has to be on platforms that investors access. The thought with distribution is, again, back to access and where are the majority of investors.
So the question really comes into play of where do we focus our efforts. Because of the size of our fund and the amount of time it's been launched, certain groups are going to allow us to have distribution and others aren't. So it's a matter of identifying those groups.