Who would expect that a company that documents mutual fund regulatory compliance could also come up with engaging public relations spins?
American Data Services, a mutual fund service company in Hauppauge, N.Y., is trying to do just that with the addition of its ADS Media Relations Division. Launched seven months ago and located in Tampa, Fla., the four-person division develops advertising and publicity strategies for mutual funds. So far, it has attracted 12 small funds including the First Idaho Municipal Bond Fund, as clients. In time, ADS hopes to expand that to a roster of 25, limiting its services to existing administrative clients.
Mark Miola, president of ADS, said the enormous growth of mutual fund start-ups in the past few years is what inspired him to help clients distinguish and promote their funds. On top of that, offering the marketing assistance to clients distinguishes ADS from other mutual fund service companies, Miola said.
"There are many firms like ADS offering back-shop services," said Don Clark, the new head of the ADS Media Relations Division. "It's a commodity business; bureaus can be told apart only by quality and price. Marketing is a tool that makes ADS distinctive."
In addition, building clients' assets translates into higher ADS fees, Miola said. ADS currently has 50 clients with $3 billion in assets under management. But, many of these funds have only between $3 million and $10 million under management, Miola said.
Clark, now vice president of public relations and marketing at ADS, was previously a public relations executive with Hill & Knowlton of New York and then oversaw retail marketing at Invesco Funds Group of Denver, Colo., from 1985 to 1991. When he left Invesco, he opened his own mutual fund marketing boutique.
Clark then went into semi-retirement in 1994 but was shaken out of that quiet life late last year when he met Miola at a cocktail party.
Miola told Clark about his marketing idea, but Clark was not interested in talking about business, Clark said.
"We put several quarters in the jukebox and danced before we discussed this," Clark said.
A few weeks later, however, Miola convinced the former marketing executive to help him build a new marketing arm for ADS.
"Most funds are started by advisers who know how to manage money and believe that if they build it, investors will come," Miola said. "And we know that is not true."
Portfolio managers often break out on their own and succeed at raising $2 million to $10 million from business associates and former clients but often do not surpass the $10 million mark because they do not know how to promote themselves, Miola said.
"You can have the number one fund in its asset class and even have it surpass its peers by 50 percent," Clark said. "But performance will get you no recognition if you don't know how to promote it."
Distinguishing one fund from another is not an easy task, Miola said. This is why he wants to limit his client roster to no more than 25 funds and is only promoting relatively small sector funds. Right now, that includes technology, health care and banking services funds.
Clark said he will take the same approach to developing a marketing and public relations strategy for funds at ADS as he did at Invesco.
"The first thing we do is look for aspects of a mutual fund that are noteworthy," Clark said. "Not all can be number-one in performance or run by Warren Buffet. But usually in a fund's philosophy, there is something of interest. Perhaps the fund is run by a former molecular physicist who uses quantitative analysis. Or someone who sees something inherently wonderful about investing in regional banks. There is almost always something of interest."
Clark then works with a fund's management to effectively communicate a fund's strengths and develop a brand image.
Once he has a commitment from a fund's portfolio manager or a marketing director to support his angle, Clark then tries out his idea on one, or several, of the 400 mutual fund reporters in his database. So far, he has gotten coverage for ADS clients in the Wall Street Journal, Forbes, CNBC, Money, Barron's and Investor's Business Daily, Clark said. Nonetheless, many ADS clients are still skeptical, not just of turning to a mutual fund service bureau for marketing, but of marketing at all, Miola said.
"The small funds that have been in the field a while are skeptical because they feel they know the score," Miola said. "But I tell them, just because you take out an ad in the Wall Street Journal and the phones weren't ringing doesn't mean that advertising and public relations don't work. I tell them that's just playing.
"But we have already seen asset growth at several of our clients," Miola said. "The Amerindo Technology Fund recently surged from $30 million to $150 million. We worked carefully with them on their ad campaign."