The mutual fund sub-advisory business has become more than just the icing on the cake for pure-play asset managers; it is evolving into their bread and butter and their ability to garner - and keep - relationships is the key to remaining viable.

The concept of sub-advising a fund is essentially one fund firm creating a fund and then outsourcing the investment management role. There are brokerages, banks, insurance companies and fund firms that have fully sub-advised fund lineups. "There really isn't a part of the industry that it hasn't touched yet, so the expansion has been dramatic," said John Benvenuto, director of research at Boston's Financial Research Corp. and author of a white paper report on sub-advisory distribution. "More fund firms are embracing these sub-advisors because of the growing acceptance of open architecture," he said.

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