Mark Beeson is chief financial officer of Banc One Investment Management Group and CEO of the One Group Mutual Funds of Columbus, Ohio. In this role, Beeson is responsible for sales and support of the proprietary fund group and annuities. This includes marketing, wholesaling, training, operations and administration.
With 48 funds and assets of $92.8 billion, One Group is the sixth-largest bank-owned fund group. The company's funds are sold through more than 3,000 registered reps at 1,800 retail banking center branches across the country, as well as through most major national and regional brokerage platforms.
Beeson recently spoke with Mutual Fund Market News' Lori Pizzani about the fund group's initiatives and areas of growth. An edited account of the conversation follows.
MFMN: What do you want the One Group Mutual Funds to best be known for?
Beeson: I want it to be known as a great service organization. That means across-the-board support, from our Web site to people answering the phone, to fund managers providing support to our marketing staff.
MFMN: Why is great servicing so important to hang your group's reputation on?
Beeson: I've seen products come and go. It's a given that you have to have products and you have to have great performance. But those with great servicing ultimately distinguish themselves.
MFMN: Has that reputation changed since the One Group Mutual Funds was formed in 1992?
Beeson: It has changed immensely. In 1992, when the funds were formed, we had a collection of mutual funds but not a mutual fund business. We learned that we not only have products but also strategic development efforts and a servicing component. From 1992 through 1995, we were creating the infrastructure to build our mutual fund company. We are now looking to build on that.
MFMN: Your fund complex was one of the earliest bank-sponsored mutual fund groups to operate as a stand-alone unit. Has that position helped or hindered the fund group's progress and growth?
Beeson: Being a separate mutual fund entity rather than a division of a bank has been of tremendous benefit to us in a lot of ways. We've been able to recruit a lot of talent from non-bank areas across the fund industry. It has also allowed us to create products more quickly and to get them to market faster with different distribution options.
MFMN: Do you view other bank-sponsored fund groups as your competition?
Beeson: No. We don't view most of the other banks as our competition. One of the things that is getting murky is what is a bank. On that score, we would go head-to-head with Citigroup, Wachovia, PNC and Dreyfus. But are they banks or asset management companies?
Our real competitors in the marketplace are the other wholesale-sold fund groups: Putnam, OppenheimerFunds and MFS. In the institutional bond marketplace, we compete with PIMCO, BlackRock and Western Asset Management.
They have stronger recognition because they have been there a longer time. They also have developed more relationships. So, we have been playing catch up.
On the flip side, some of those veterans in the industry have burned their bridges with bad products. Some had to do damage control. So being a newer player has some advantages. We have learned from a lot of their mistakes.
MFMN: What have been your biggest challenges to growing the fund group?
Beeson: For us, the 90s presented lots of challenges that were structural issues surrounding what a bank could and couldn't do. But now a lot of those barriers have been dropped with the passage of the Financial Services Modernization Act.
Distribution has also been challenging. Beginning this April, we are now the distributor for our funds. We had used BISYS before. So we are in the process of transferring over selling group agreements with all of the broker/dealers we work with from BISYS to internally.
MFMN: On the product side, you are having success with your institutional money funds, and on the distribution side with third-party distribution. In light of the weak stock market and increasing reliance among investors on financial advisers, has success simply found you, or have you worked hard to achieve it?
Beeson: It would be nice to say that it found us, but we've worked hard to achieve that success. We have had a very clearly defined strategy for targeting institutions and third-party distributors.
On the institutional side, we have always had a great relationship with our banking partner, our parent Bank One. They have developed solid relationships with clients and have introduced us to them as the money manager to consider. Bank One's past merger with Chicago NBD vastly helped increase the client list.
Third-party distribution is also a new direction for us. It is nice to have captive distribution. That has allowed us to offer new products, new pricing and new structures to meet their demands. But we realized that with a captive-only sales force, we could only grow as fast as the bank could grow. Outside, there's a bigger ocean of fish.
We've expanded our distribution through Merrill Lynch and A.G. Edwards and are developing business with other regional firms. We've made a strategic commitment to develop more partnerships with brokerage firms.
MFMN: Does your expanded third-party distribution include independent financial planners?
Beeson: No. They are very spread out, and we want to focus on where we can provide the best servicing.
MFMN: Last year, you won the mandate from the state of Indiana to administer their 529 college savings plan, CollegeChoice. What made you decide to enter this market?
Beeson: We look at this as another vehicle to take care of our client base. The 529 is another product to keep our clients staying with us.
There are two areas of life where people will readily spend money - on their kids and their health. Holistically, this is a product we had to have. The question was, did we want to rent or build our own 529 plan?
The CollegeChoice plan is almost like having a separate fund complex, with its own branding and separate servicing. We have a separate back office group of some 15 people dedicated to this.
The predictions for growth in this area are staggering, although I think some estimates are exaggerated. But there is potential.
MFMN: Since officially launching the CollegeChoice Plan this past January, what have you learned since then?
Beeson: We have learned that even though there has been a lot of press coverage on 529 plans, there is still not a great understanding of how they work and who should be investing in them. There are education saving plans, such as the Coverdell plans, that might be better for some individuals.
In addition, most of the state 529 plans have a national mandate, which means that no matter where you live, you can invest in a state plan. We've all been hearing about the huge tax savings some individuals can realize when they invest in their own state's plan. But is that tax savings really beneficial? In high tax states such as New York or Illinois it can be. But in other states, those savings can go away all too quickly if an investor is in the wrong plan.
We have tried to emphasize the 529 education process with investors as well as financial advisers who often misunderstand them. In this role, One Group has become the teacher.
MFMN: Did you bid on other state-sponsored 529 plans, including your home state of Ohio?
Beeson: We were asked to bid on a few other states' plans including Ohio, but we chose not to. We felt it would be difficult to support multiple plans. We decided we wanted to put all of our efforts into this one plan.
The 529 plan concept is evolving quickly. What was once very simplistic is now very complex, with different pricing structures, different wrappers. We wanted to try to keep it simple.
We are talking to lots of different people and contemplating adding different funds and exclusive or multiple distribution partners. But right now our focus is to get this program up and running.
MFMN: What are your "big picture" goals for 2002?
Beeson: Just to grow, and we have already surpassed our target.
We are continuing what we started last year as far as product development and infrastructure development. While lots of others were cutting wholesalers and shrinking territories, we've built our team of outside wholesalers up to 40 people, along with another 40 internal wholesalers. We're continuing our efforts to see and touch clients.
MFMN: What other initiatives are planned?
Beeson: We've had offshore mutual funds for several years, and we will launch additional fixed-income and equity funds this year.
We are also looking at taking Bank One Investment Adviser's separate account skills to financial intermediaries and offering separately managed accounts or funds for the high-net-worth market. Wirehouses are definitely pushing more into the separate account area than into mutual funds.
We will also be developing separate brand advertising for our 529 plan that will run in the Fall during back-to-school time. We have plans for print ads and targeted radio ads.
It is also on my wish list to manufacturer our own annuity product. We now sub-advise a combined $1.3 billion in nine other variable annuity products that are clones of our funds.
MFMN: The One Funds currently includes 19 equity funds, 12 fixed-income funds, eight municipal bond funds and nine money market funds. Is that a comfortable mix?
Beeson: We believe that the product lineup is very good since we believe in asset allocation.
We really don't believe in the fund du jour. We prefer to be pure bread-and-butter funds. We also have four fund-of-funds. You need that broad diversification. People now realize that investing is complex, and a bond is no longer a four-letter word.
MFMN: Can an investment adviser with almost $93 billion effectively compete in today's changing marketplace?
Beeson: I believe that is large enough to compete in today's environment. But if you look ahead two to three years, we will probably need to be double that size, especially with all of the mergers and acquisitions, and the top 25 fund companies taking in the majority of assets.
We think we can compete through organic growth. But we are also looking for good candidates for a joint venture or an outright acquisition.
MFMN: What will the One Group look like five years from now?
Beeson: I do see us a lot bigger and in international markets. And I see more alliances and distribution partners. But I don't see a heck of a lot of changes in the product line. We have had a hedge fund of funds since last August for internal high-net-worth clients. I see that as an asset class for the future.