F-Squared Investments is aiming to start a revolution in the retirement market with its strategies that tame the bear while still riding the bull.

Paul Gamble, the Wellesley, Mass.-based firm's new managing director, who heads up F-Squared Retirement Solutions, sat down with MME recently.

The discussion included the firm's goal to create a new category in the retirement space that manages downside risk while allowing participants to reap the benefits of market upswings. Gamble also plans to build out F-Squared's distribution team to forge relationships with advisors and consultants while partnering with retirement focused asset managers in target-date and target-risk funds.

What are the responsibilities of your new position?

At F-Squared I am head of our retirement solutions group. That means my responsibilities are to get F-Squared's strategies and solutions into the 401(k) market and the adjoining markets such as 403(b) plans, nonprofits and 457 plans. Also to determine our distribution and product strategy with the ultimate goal of helping plan participants with our unique value proposition of downside risk management. Right now I'm building out our distribution team in order to do that.

That means you are currently hiring?

I am. Right now I'm close to hiring five senior sales and distribution people to work with the top retirement focused advisors and consultants in the marketplace that work with the plan sponsors. Also, on the institutional side we are looking for additional sub-advisory relationships to get our strategies and solutions in with other leading retirement firms and leverage the distribution they have.

What are your goals going forward for F-Squared's retirement program?

The primary goals we have at F-Squared are to deliver solutions to the market that meet the real needs of plan participants. What we define that as, is that participants need someone looking out for them to protect them from market losses, but still allow them to participate when markets are going up. We plan on doing that in two main ways.

The first is having a distribution team working with the leading retirement advisors and consultants in the country to get our services within those plans so participants have access to them. Two, is creating new sub-advisory relationships with leading retirement focused financial services firms. Companies that are looking to provide something different and better to retirement plan participants. Specifically, how much can they lose, how bumpy will the ride be with investments until retirement and how much wealth will they have to prepare for retirement? The goal is to bring downside risk-management--what we do very well at F-Squared-to the retirement market.

How deep is F-Squared's penetration into the retirement market currently?

Our largest partnership overall is with Virtus Investment Partners, primarily as a sub-advisor to Virtus mutual funds that are delivered through advisors to individual investors. We've seen explosive growth over the last several years through that. What that has done for us on the distribution side for retirement is to give us really great mind share with advisors in the marketplace. Virtus also gives us distribution within the smaller end of the market.

As we looked to take F-Squared strategies to the retirement market, we partnered with Reliance Trust. We've created a series of collective investment trusts, which are being distributed to the market through retirement advisors and consultants. In order to be made available to plan participants you need to be on the various record-keeping platforms and we are on about 40 of them.

What firms do you see as possible partners?

Without being specific on names, there are financial services firms out there that have large footprints in the retirement market. There are two ways in which we can develop partnerships with them. One is to get our collective trusts on their platform and make them available to sponsors and participants.

Second, is with the investment firms focused on the retirement market. Many of those firms are centered on providing target-date funds and target-risk funds. One of the things we're going to be concentrating on is embedding our downside risk management to create next generation target-date funds. What I mean by that is most target-date funds today reduce volatility over the long term for the end investor by diversification, which works pretty well over the long term.

When markets become volatile and begin to go down, however, participants really take a hit. What F-Squared does well is guard against investor losses--what we call maximum draw down, how much they can lose in a short period of time. So we're looking for partnerships with investment firms and plan sponsors that can either have our downside risk-management embedded as part of a target-date fund or provide our risk management as an overlay to the target-date funds.

Are there any new retirement specific products in the pipeline?

There are. We've had our fixed-income strategy in the marketplace as a sleeve of a larger investment strategy for some time. From the demand we are seeing in the current interest rate environment, we will be taking the fixed-income portion and creating a stand alone collective trust that will likely launch later this year. That's what we are considering in the short term.

How does your previous experience relate to your new position at F-Squared?

I came to F-Squared from Financial Engines. Now, Financial Engines and F-Squared offer different solutions--they really don't compete with each other. There are a few things that they have in common, however. One is that there is a big demand for their services because participants want and need it and plan sponsors and their advisors really understand it.

That's really what we're doing here at F-squared. We're taking the demand we're seeing in the marketplace and generating distribution strategies that will create a category. This drives business to F-Squared, but more importantly it gives participants what they need as they head into retirement.


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