Robert Graham is ceo and co-founder of AIM Management Group of Houston and vice chairman of AMVESCAP PLC of London, the parent company to both AIM and INVESCO Funds of Denver.
Gary Crum, who serves as AIM's investment team leader, is director, executive vice president, and co-founder of AIM Management and serves as a member of the firm's Executive Committee. He is also director and president of AIM Capital Management, the group's investment advisory subsidiary and also serves on the board of AMVESCAP PLC.
Along with former AIM chairman Charles Bauer, who retired this past December, Graham and Crum founded AIM in 1976. AIM now ranks as the eighth largest mutual fund company with $154 billion in assets and nine million shareholders. AIM will be celebrating its 25th anniversary in August.
Graham and Crum recently spoke with Mutual Fund Market News. An edited account of their conversations follows.
MFMN: What are the most significant changes you have seen over the past 25 years?
Graham: When we started, the whole fund industry had $50 billion in assets. Now AIM alone has several times that. Mutual funds have become the mainstream product for the entire population. We really are the standard and we have a great responsibility.
Another change I've seen is the blurring of lines between load and no-load funds. They used to be polarized; two separate camps. Now everyone is going after the same market. And it shows that financial advisers are here to stay.
There's also been a blurring of the lines between retail versus institutional. In the past, areas like the managed wrap business were only open to institutional advisers. Now fund companies are moving up to that arena. INVESCO has had an institutional business for years.
MFMN: Is there any sibling rivalry where AIM now has to compete with INVESCO?
Graham: We don't mind going head to head against INVESCO. There was a conscious decision to maintain the two brands in the U.S. We both have very strong firms and we are going with the two-brand strategy. This gives us two brands to get on the shelves.
Crum: There are now two kinds of investors, and we are trying to satisfy several different masters. Retail mutual fund investors who come in through financial consultants are not as sophisticated in terms of alphas, betas, etc. But the U.S. pension fund market demands that. We also have to address people in 401(k) plans and the pension consultants.
As for investments, I don't think the investment side has changed that much in 25 years. We haven't altered a lot of what we do.
Within AIM, we have worked, over the last four to five years, to weatherize our firm. We moved away from being primarily a growth shop and now have a value fund and offer a GARP (growth at a reasonable price) style product. We now have the capability to run any product we would like.
We are looking at expanding the basic value side of our business. We may combine our basic value style with a fixed-income component to develop a total return fund.
And we have $2 billion now in the three hedge fund-like AIM Opportunities Funds. We also have a large institutional money market fund which has done well. It has been our anchor to the wind. That is very nice to have when you have volatility in your asset base, with the market off this year.
Regarding our funds, there's a lot of damage to work through. Some 18 months ago, at the end of 1999, 94% of our funds were beating the S&P. Now, 21 of our 47 funds are back in the 40th percentile or better.
MFMN: Are there other types of funds that are on your wish list for development?
Crum: No. I am very happy with what we have right now and our portfolio managers who always work as a team.
MFMN: Would AIM ever consider sector funds, like INVESCO has had success with?
Crum: I'm not a huge proponent of sector funds. I don't think you will see us go into very specific sectors because you have hot money flowing into sector funds. We already have a healthcare fund and a utility fund that came to us with the G.T. Global acquisition.
But look at the Internet-only funds that melted down in a matter of 19 months. That's not our focus. There was pressure to bring out an Internet fund. Everyone wanted a hot go-go fund. There was a mania going on for dot.com companies with unrealistic business plans and inflated market caps. We had a new technology fund that could invest in Internet companies if we chose.
MFMN: AIM is intentionally moving beyond "just" being a mutual fund advisory firm. By AIM's own admission, between 25% and 40% of new business will likely come from other than mutual fund products. What areas are of interest now?
Graham: We've looked at alternate investment products for investors as they move up the scale. The wrap product area, which we entered one year ago, is a big growth area for us right now.
The ball we want to keep our eye on is providing good investment performance and the management of assets. But we can do that in a mutual fund format, a separate account format...We have to be conscious of changing preferences.
Hedge funds and College Savings, 529 Plans, are also of interest to us now.
MFMN: AIM said publicly last year that it wasn't interested in pursuing the 529 Plan market.
Graham: We think we made a mistake. We are currently in several 529 programs. And we will shortly be announcing that we will be working with a state to become a primary sponsor of a 529 College Savings Plan. We will be doing both the investment management and the marketing. But it takes a lot of work.
MFMN: In your efforts to offer a multitude of products and services, will your wholesalers be restructured so that different wholesalers represent different products?
Graham: No. We like one sales force for brokers. We want to say, "Here's the package." So many of our brokers sell a number of different products and they want one salesperson. We've got to be able to talk to them about any product.
But we are looking at reorganizing wholesalers possibly by channels-wirehouses, banks, NASD regional firms. We are evaluating what the differences are from channel to channel.