White Plains, N.Y. - Kinetics Asset Management of White Plains, N.Y. is in an expansion mode. Four-and-a-half years after introducing its flagship Internet Fund, the fund group is in negotiations to acquire a small fund group with complementary competencies. Also, on May 1, Kinetics will add an A share class to three of its most popular, previously no-load funds, allowing the firm to widen its distribution to broker/dealers.
Kinetics, the adviser to nine equity mutual funds, five of which invest in companies whose business depends on the Internet, as well as a government money fund, is expecting by late summer to acquire a small no-load fund group outside New York, said Steve Samson, president and CEO of Kinetics in an interview at the company's headquarters here.
The fund group would bring Kinetics several equity and fixed-income funds with investing styles which are not Kinetics' strengths, Samson said. The group would also bring Kinetics several million dollars in assets, Samson said. He declined to name the company Kinetics hopes to acquire.
"The group has a very long track record, a focused [investment] strategy and an extremely loyal customer base," Samson said. "It will give us much more product diversification, especially in the broker/dealer channel."
Until now, Kinetics has catered predominantly to retail investors. In January, Kinetics filed a new combined prospectus for its equity mutual funds which disclosed the group's intent to, at some point, offer A, B, and C shares on each of its funds.
But the fund group does not plan to introduce all the new share classes right away, Samson said. Instead, it will begin offering the A class on just three funds - The Internet Fund, The New Paradigm Fund and The Medical Fund.
The group will only market to those brokerage firms in New York, New Jersey and Connecticut which have already expressed an interest in selling the Kinetics Funds, said Samson.
There are no plans to market beyond the tri-state area and Kinetics does not plan to build a wholesaling infrastructure to support the broker/dealer channel, Samson said.
Instead, in the next few weeks, the firm will create a new outbound telemarketing unit, will hire eight account managers, and will have those managers contact broker/dealers who have expressed interest in selling Kinetics' funds, he said. Kinetics already has signed selling group agreements with 100 brokerage firms, Samson said.
Kinetics is also hoping to gain some recognition through its inclusion in American Skandia's wrap program. Earlier this year, American Skandia of Shelton, Conn. added clones of four of Kinetics' most popular funds to its Strategist Solutions mutual fund wrap program. Those clones carry the Kinetics name. That inclusion has already raised Kinetics' profile among independent broker/dealers, Samson said.
Kinetics hopes to attract another $100 million in assets through the firm's new broker/dealer efforts within the next year, Samson said.
Kinetics also plans to strengthen its relationships with financial planners to whom investors are increasingly turning, he said. Right now, about 10 percent to 15 percent of Kinetics' assets come through financial planners, Samson said.
Kinetics will attempt to strengthen its ties by co-hosting meetings with other fund groups and companies to give financial planners opportunities to speak with its portfolio managers, Samson said.
While Kinetics hopes to build its sales through intermediaries, it does not plan to abandon its no-load share class, said Samson. Kinetics sells its funds through the retail and institutional fund supermarkets of Charles Schwab of San Francisco, Fidelity Investments of Boston and TD Waterhouse of New York.