F-Squared Uses Spaceships to Talk to Investors
January 25, 2013
Newtown, Mass.-based F-Squared Investment Management has grown almost 10-fold within the last two years. The alternative investment subadvisor's firm-wide assets now stand at some $10 billion from $1.5 billion in 2011 and its F-Squared Alternative Investments subsidiary last year attracted some $400 million in assets in mutual funds and separately managed accounts.
To further fuel its growth among advisors, the firm last month embarked on its first-ever advertising campaign in trade pubs such as Financial Planning, a sister publication to Money Management Executive, to spread the word about its risk management prowess. MME recently spoke to F-Squared's CEO Howard Present about the firm's first foray into advertising and what messages he's looking to get across to investors in today's current market environment.
So tell us a bit about the firm.
We have a very large amount of separately managed account assets that go through a variety of audiences such as advisors, independent brokers. We also have institutional assets-defined contribution and defined benefit-and we also have a large block of business in collective trusts.
Last year, we attracted more than $4 billion in net new flows and we've increased the employee base from 27 to 44. Penetrated into the liquid alternatives market, DC market and continue to make progress in the SMA market. We're in active discussions with subadvisory opportunities abroad in Canada and Europe. We are likely to be launching a fixed income collective trust solution this year as well.
The ads are not the typical investment-oriented ads you expect to see in the Wall St. Journal or anywhere else. What was your mindset behind the ads?
So this concept of protection for investors is an important theme. The importance of it is because investors are tired of losing money and they're starting to avoid the markets altogether. But we're trying to alert them that there are solutions that allow investors to be in the market and yet we can still help deliver results that the clients can live with. In other words, reduce exposure to down markets.
The nature of the advertising doesn't look like normal financial ads. In fact, we selected an advertising agency (Mechanica) that does not have any historical experience in the investment management industry.
Did you just give them a few words like "airbag" and "cow" and let them go to town with those keywords?
We started with more basic ideas of how we think the market has changed and how needs of investors have evolved. We're not in the 1990s anymore. Products that are optimal for a bull market are probably insufficient for today's market. We then talked about our value proposition, which is effectively participation in up markets and protection in down markets. And they then went to town. We covered all sorts of creative options - some were dead ends and some actually proved to be exactly what we were looking for.
The other thing that we're trying to do with these ads is we're trying to talk to client needs and investor solutions. The industry tends to talk about performance, process and activity. Features are nice; solutions and benefits are better. What we're trying to do is get down to the core concept and one of them is the airbag.
Would you buy a car today that didn't have airbags? You hope you never have an airbag go off-I never have-but if it does, you're happy you have it. There are certain forms of protection you can't use if you're trying to engage the market but it's nice to know if things take a wrong turn, that's when you want those protections to kick in, and have them in terms that individual investors can understand. Let's demystify it and that's really the second part. So one is let's talk solutions and the other part of let's get out of the jargon. Let's get out of the complexity. I have no idea how my airbag works, but I know why it's there.
Why do you think now is the right time to embark on your first advertising campaign?
Two years ago we had $1.5 billion in assets and this month we just crossed $10 billion in assets. It wasn't the right answer for us a few years ago given our size and our footprint as far as the audience we were talking to. But today it is a very different story so it's appropriate for us to be doing it.
We actually engaged in some meaningful market research in the latter part of last year to validate our messaging in the target audience. We made a very formal commitment for 2013 and we'll be monitoring it, and if it goes well we easily could see it expanding as we head into later 2013 and certainly into 2014.