Sales at Dodge & Cox Funds
skyrocketed eleven-fold in February to $800 million, according to Financial Research Corp (FRC). The firm managed increase sales from $72 million in February 2001 without spending a dime on advertising, reports Dow Jones. Instead, the firm's funds are selling primarily to large 401(k) plan sponsors based on investment performance.
The fund firm finished the month in second place behind Fidelity in net fund sales as measured by FRC. In the past year Dodge & Cox has seen its asset base swell by 53 percent. Fully seventy percent of sales have been through institutional channels, mostly to defined contribution plans.
That channel is dominated by investment consulting firms and has openings for just a few products to squeeze through since only the top few products in each category get a hearing. Rather than advertising, firms in that space typically rely on dedicated consultant relationship managers.
The feast or famine nature of that distribution channel is shown by the fact that most of the sales are going to the firm's large-cap value. The Dodge & Cox Stock Fund pulled in some $459 million in February. The firm offers three other funds including a balanced fund, a fixed-income fund and an international fund that debuted in April.
Distribution for the fund was undoubtedly given a boost by the fact that value is the flavor of the moment. Indeed, the demand for value products is such that many funds are being closed to new investors.
While Dodge & Cox may find demand for its fund to be ephemeral, the group does have an opportunity that may be missed by fund shops closing the doors to their products that are basking in their moment in the sun.
Defined contribution plan participants tend to not move funds once they have been allocated. By some estimates, up to eighty percent of 401(k) investors never reallocate money. That tendency makes it difficult for new funds to gather assets in a plan, even if they have won a spot in the core lineup of funds.
The flipside is that assets allocated to that fund remain sticky. From a business perspective, that participant behavior suggests fund firms should make hay while the sun shines because the clouds are likely to return and when they leave a different product is likely to be in the lead.
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