Building a successful asset management firm is difficult. That's not an earth-shattering statement given that most firms fail to meet their expectations for asset growth. And yet each year, hundreds of firms plunge into investment management believing they have something to offer that will drive investor acceptance and success for their business.
Nearly four years ago BPV Capital Management jumped into the mutual fund arena, confident we belonged. In hindsight, it was bold of us to think we had something to offer and that the investment world would care.
Truthfully, we were blind to the challenges imposed by existing participants in the industry. Like most industries, outsiders were unwelcome. But more than that, we found ourselves entering an entrenched system that rewarded tenure and eschewed innovation.
We, like other firms, have run that gauntlet. The ever-changing minimums imposed by platforms for inclusion on their system, the ever-present chicken-and-egg ("We need to see advisor demand to consider you, but don't talk to our advisors until we have an agreement"), and, of course, the need to see a three or even five-year track record. I am sure I am leaving some other notable industry obstacles out, but you get the idea.
In the end, in spite of all the forces pushing against a new asset manager, none of them compare to the most basic challenge. What strategic path are you going to follow to become relevant? Call it the invest now or invest later decision.
TRADITIONAL PARADIGMS
When we first started out, it never occurred to us that there was a choice. Our extensive financial services experience did not extend to the mutual fund industry.
In some instances that has been costly, but in other instances we avoided some traditional paradigms that hurt new firms. Most notably, it never occurred to us to delay building the infrastructure to run a meaningful business until after we had substantial assets.
The vast majority of asset management firms build their business focusing their resources on asset management, and very little on other aspects of the business necessary to be relevant. Namely operations, compliance, marketing, and sales.
That's an understandable approach. After all, most asset management firms are founded by people who have spent their entire career managing assets. The other aspects of the business can often look like a black box for some and an annoyance for others. However, we took a different path.
AT CROSSROADS
From the beginning we decided to build a sustainable business for the long haul and to emphasize the importance of scalable infrastructure covering all aspects of the business. Call it the build-it-and-they-will-come model.
This has been challenging, and we know more than a few industry participants have scoffed at a firm with less than $300 million in AUM for having over 30 employees.
But standing at the crossroads that we have worked so hard to reach, we believe we can leverage our substantial infrastructure into a long-term industry presence.
As we prepared to celebrate the three-year anniversary of our first two funds, I began to assess how we could leverage ourselves and grow AUM.
Certainly we need to grow organically - and we will. We just doubled our sales team to six, and plan to double it again by the end of the year. We are attracting experienced talent from top 50 firms who want to share in our entrepreneurial vision.
And why not? We have the kind of support and home office capabilities that a hungry sales rep wants.
Despite having less than four years' tenure as a fund company, our funds can be found on 26 platforms. The senior members of our investment team average over 30 years' experience, at firms such as Goldman Sachs, Riverview, Soros Fund Management, and Merrill Lynch.
Our eight-person marketing team produces over 30 pieces a month on average, with the goal of providing value-added content, market insights, and educational material to a base of 2,000 engaged advisors. In short, we have made heavy investments into our infrastructure and capabilities.
But when it comes down to it, there is something else that is far more relevant to our current stage.
I alluded to the countless asset management firms that have a great investment thesis and trading capabilities but little infrastructure to grow meaningfully. It turns out many of them are looking for a partner who has a long upside and the ability to grow their strategy's AUM. And so we are buying, partnering with, and adopting firms.
In many ways, we're taking the road less traveled. Often, the road less traveled leads to a surprisingly pleasant place. It recently led to our completed acquisition of Cain Brothers Asset Management, brought on as a wholly-owned subsidiary of BPV, which raises the combined assets of all BPV companies to nearly $2 billion.
And so we continue walking, if not running, down the path we have mapped out, excited about where it leads.
Mike West is CEO of BPV Capital Management.
