Whatifi Asset Management of San Francisco, the manger to the five fledgling Whatifi online mutual funds, is receiving an unspecified cash infusion as part of a second-round financing agreement with CIBC Capital Partners, a New York venture capital firm and a unit of CIBC World Markets of Toronto.
Under the terms of the agreement, CIBC Capital Partners will be investing in return for an ownership stake in the Whatifi fund group's management company. The agreement was disclosed in a Feb. 2 prospectus amendment the fund group filed with the Securities and Exchange Commission.
CIBC World Market's parent company is the Canadian Imperial Bank of Commerce, the second largest bank in Canada and the eighth largest bank in North America.
Because of the change in ownership of the funds' adviser, Whatifi will be asking its shareholders to approve a new advisory contract between the funds and the adviser at a shareholder meeting scheduled for sometime next month, according to the filing.
Neither the exact amount of the investment made by CIBC Capital Partners nor the size of its ownership stake are disclosed in the filing. Executives at Whatifi and a spokesperson at CIBC Partners declined to comment on the investment or possible future relationship between the firms.
But, the venture capital firm usually invests between $3 million and $20 million in a given firm, according to information available at the website of CIBC Capital Partners. CIBC is the second venture capital firm to provide financing to Whatifi which has online, predominantly index mutual funds targeted at Generation X who generally lack both time and the assets to invest in more traditional mutual funds.
Shawmut Capital Partners, an independent venture capital firm in Boston that is focused on the online financial services sector, provided an undisclosed amount in early financing to Whatifi.
The investment by CIBC Capital Partners is a traditional venture capital investment, said Harris Fricker, president and CEO of Whatifi Asset Management. But Whatifi may be hoping to market its seven-month-old mutual fund family
to the almost eight million customers CIBC has in North America. CIBC has
the largest personal computer banking
customer base in Canada, according to the filing. CIBC also maintains a discount brokerage unit called CIBC Investor's Edge through which the Whatifi Funds could be offered.
Those customers would be a promising new market for the low-cost index mutual funds Whatifi plans to offer via the web. All of the Whatifi Funds are sub-advised by Barclay's Global Fund Advisors of
San Francisco.
The Whatifi Funds, which include two domestic equity index funds, an international index fund, a bond index fund and a money fund, are not tracked by fund data providers because they have not attracted sufficient assets.
And that is what the fund group expected, said Fricker. The fund group has not done any marketing since the funds' launch, he said.
"Our goal is not to become a stand-alone, separate investment entity," he said. "Our whole business proposition is to then offer [these funds] to those who already have customers."
One of the biggest problems facing online financial service providers, like mutual funds, is how to grab an audience, said Ann Becker, president of Thompson Becker International, a public relations and marketing firm in Foxboro, Mass.
"CIBC is right on," she said. They may be thinking about offering the Whatifi Funds as a "sweep" vehicle into which banking customers can temporarily shift idle assets or offering them as part of a brokerage platform, she said.
