Gemini Fund Services Foresees Clients' Twin Needs: New Solutions, Distribution
Gemini Fund Services, the Hauppauge, N.Y.-based administrator and back-office service provider to small and niche mutual funds, hedge funds and variable insurance trusts (separate accounts utilized for variable annuity contracts and variable life insurance policies), has big plans for 2008.
In addition to pursuing new investment management clients that operate on a day-to-day basis as part of several cost-effective series trusts that Gemini offers, including the Northern Lights Funds Trust, the firm's executives will be reaching out more actively to new and existing clients.
Gemini's plans include expanding services and launching a brand new advisory council forum under which all clients will be able to share ideas, best practices and combine initiatives to realize cost savings.
The ultimate goal for Gemini is to help clients build their investment management businesses and consequently foster a deeper sense of loyalty to the administrator. Right now, the firm provides administration to about $7 billion in assets across 120 investment funds and 45 clients. The firm also has a subsidiary, Fund Compliance Services, which provides compliance services and a chief compliance officer on a full- or part-time basis.
Gemini itself is relatively new to the administration business, but its founders are not. Gemini is the successor to American Data Services, founded in 1983 by Michael Miola. Miola equitized the mutual fund industry by creating an accounting system that allowed small, boutique investment managers to preside over mutual funds right alongside the biggest providers. He sold the predecessor firm to Orbitex Fund Services of Stamford, Conn., in 1999 but three years later bought it back and, subsequently, in 2003 renamed it Gemini.
Money Management Executive Editor-At-Large Lori Pizzani recently interviewed Andrew Rogers, president of Gemini Fund Services. An edited version of their discussion follows.
MME: Are new Gemini clients mostly start-ups or those seeking new service providers?
Rogers: Most of our new clients are start-ups, but we do see some new business from existing funds looking for a better way of doing things.
Start-up clients are typically those that have been managing money in separate accounts for years or decades and are seeking a way to grow their business while continuing to service their clients. Some want to take their investment strategy to a new level and make it available to a broad, national audience.
MME: As Gemini signs on new clients, what services are clients telling you are most important?
Rogers: New clients are seeking more solutions, and they want comprehensive, turn-key solutions, such as compliance and fund governance, as well as the more typical accounting, administration and shareholder services.
Generally speaking, clients are always seeking additional help with distribution, and service providers are seeking innovative ways to help their clients achieve that. In this business, everyone wants more distribution.
MME: How are you responding to that distribution request?
Rogers: In response to this increased demand by our clients, we have an additional service offering that we are launching in the first quarter. We are currently in the planning and development phases of launching a joint advisory council. This will be a forum for our investment advisor clients to share ideas with each other, network and collaborate on their marketing and distribution efforts, all under the Northern Lights Funds Trust umbrella. It seems like the next logical step.
We've already hired a business development manager whose sole purpose will be to create and implement the advisory council and its services. Following the launch of the council, he will also be responsible for assisting all clients in their sales and marketing objectives.
We hope to expand this area of our business in the future by adding internal staff to the business development team and externally by bringing more advisors into the advisory council.
MME: What services will this new advisory council offer?
Rogers: Advisors will be able to attend industry conferences under the Northern Lights Funds Trust aegis, giving them increased access to investors and other financial service providers, as well as networking opportunities and marketing of their funds.
There will also be an advisory council blog where members of the council can share ideas and strategies with each other, really using the power of collaboration to their advantage.
We also will offer combined marketing and mailing efforts. While advisors will continue to have their own distinct marketing and sales efforts, under the advisory council umbrella, they will have increased distribution capabilities as we will help them in every way possible to create marketing materials, generate distribution and lead lists, strategize on sales efforts, etc. Members will use shared resources to come up with the best marketing and mailing strategies for their particular market niche. By doing this, the advisory council will enable advisory clients to experience significant cost savings in their marketing and distribution efforts, which can then be passed on to the end shareholder.
MME: Will Gemini be involved in the actual selling of these investment products?
Rogers: While we will be the driving force for the development of materials and marketing campaigns, the advisors will continue to drive the actual sales efforts of their products. We are going to use our marketing people for clients' marketing materials. We have discussed using wholesalers, but the person who sells it the best is the person who owns it.
MME: Is there concern that some advisors may consider your other advisor clients to be their competitors and, therefore, resist this initiative?
Rogers: It could happen. But there could be some natural alliances that form-a meeting of the minds among these advisors who will be the leaders of this council. There could be some who decide to sell three or four funds beside their own.
MME: Have you told your clients about the new council? How have they reacted?
Rogers: Yes. Driven by demand from our clients, the Northern Lights Trust Advisory Council has been very widely received, and we believe that the majority of our advisor clients will choose to join the council when launched.
This service will not be a profit center, by any means, for Gemini Fund Services. Rather, the thought behind this initiative is that as our clients grow, we will grow with them. Hence, we will do everything that we can to provide them with expertise and resources.
MME: What trends are you seeing as we begin 2008?
Rogers: We are seeing a new breed of clients and entrants into the marketplace, as the industry is definitely beginning to develop a new breed of product offerings.
Alternative strategies are becoming increasingly popular, as advisors realize that the old 60/40 (equity/fixed-income) models of the past just aren't working any more. Investors are seeking solutions that provide positive returns in all market conditions. Absolute return funds have increased lately. In addition, exchange-traded funds-of-funds have really seen a dramatic increase as ETF offerings have grown at a staggering rate. That means more products for advisors to carry out their investment strategy. However, for investors, this can mean confusion and chaos-too many ETFs and not enough direction.
Funds-of-ETFs attempt to remove that confusion for investors and provide them with a single-cusip solution that meets their investment goals. We feel these products will continue to enter the marketplace.
In addition, an increasing number of our clients are recognizing the benefits that joining a variable insurance trust (VIT) can offer. Advisors are increasingly seeking ways into the variable annuity space and ways to help insurance companies in building their products. This can be a big distribution booster to the smaller funds. But insurance companies are also seeking innovative and low-cost solutions to add to their existing product offerings.
MME: Where does Gemini see itself 12 months from now?
Rogers: We're a boutique shop. That's a term that used to bother me, but it is true, and it allows us to be engaged with our clients. We want to be a big company, but we also want to maintain our one-on-one with clients. We will, at some point, limit how many clients we take on. In 2008, we will be improving our process and operations and adding automation. If we do a great job for clients, I think 2008 will be a fantastic year. Our future is tied into our clients' future.
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