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Rating:With Merger Largely Done, Wilmington Focuses on High-Net Worth Clients Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, October 16, 2012

With Merger Largely Done, Wilmington Focuses on High-Net Worth Clients

Reported by Tommy Fernandez

With most of the thornier issues related to its merger with the MTB Group of Funds [profile] largely completed, Wilmington Trust [profile] is now ready to focus itself like a laser beam towards the needs of its ultra high-net worth clients.

"We have been focused on getting things right and making sure our lineup is where it needs to be," says Eric Paul, managing director for product development at Wilmington Trust.

THE MERGER

Indeed, it's been roughly 18-months since Wilmington was acquired by M&T Bank, and nearly six months since its fund operations were merged with those of M&T.

This merger has involved a number of tough tasks, including the the consolidation of all their investment product management under one umbrella. Paul says that this includes not only their mutual fund complex, but also their separately managed accounts, their private and collective funds, as well as common trust funds, among other products. Wilmington even merged its whole managed account platform, where it manages the assets for its broker dealer and other parts of the business.

The process has also involved reorganization of a number of funds, according to Paul. So far, they took 24 funds from the legacy MTB Funds organization and merged them with 12 funds from the legacy Wilmington Fund organization.  The new resulting fund family has $12 billion in assets and 25 funds.  In the process they also merged their two registered investment advisors into a single legal entity. 

Paul says that Wilmington has now started one more round of fund mergers.

"We are planning to launch new things going forward, but so far, it has been more about rationalization than creation," he said. "For example, in some of these state specific municipal portfolios, we are really asking ourselves, 'Are you really getting enough bang for your buck in your tax treatments?' That is something we are looking at in our state funds versus our national funds."

NEW PRODUCTS

Wilmington launched in January the Rock Maple Alternatives Funds, which has now reached about $33 million in assets.

On the subject of new products, Paul had this to say:
Internally, we have been asking ourselves about where we want to be as this new combined organization. I would say that in the next six months, if we do more forward with anything, it may be with an in-house team devoted to the demand for whole dividend income and the need for quality income. There are some ways we can bring this strategy to the market very quickly.
LISTENING TO HIGH NET WORTH CLIENTS

Obviously, Paul said, alternative investments represent a big space, "but we look at it a little bit differently."

"We're listening a lot to our ultra high net worth clients. They want a degree of liquidity. We are looking at this in in terms of a managed account platform, as a liquidity buffer," he said. "You are not just looking at allocations to the traditional, less liquid type of investment, but getting back into market with an allocation that has liquidity through the 40 side. After 2008, many people were spooked by what happened with the less liquid instruments."

There is some work going on devoted to trying to understand what will be the needs of each of these client types, Paul says. "We are still looking at the role of mutual funds in our ultra high net worth, and the different tiers that we have ."

Both Wilmington and M&T, he says, brought important client segments to the new combined organization.  "Wilmington brought a rich history of servicing high net worth and ultra high net business, while M&T brought strong expertise in servicing retail clients as well as high net worth clients within the bank footprint.  Each of these tiers: retail, high net worth, or ultra high net worth, have needs with different levels of complexity that require different approaches.  Some of these approaches are best constructed using 40-act funds while others may need separate accounts of common trust funds," he says.

THE IMPORTANCE OF THE TRUST MENTALITY

Paul says that the two organizations were "much more similar that you would ever have imagined in teams of the way both companies grew up."

"When you both come from the banking and trust background, there is a fiduciary angle that is pretty unique. I think a lot of the ideas borne out of our existing books is really needs based, he says. "In a traditional trust bank, you don't have the traditional brokers, just trust administrators and investment advisors. You really hear some good things."

For example, Paul said, on the Wilmington side, these mutual funds were borne out of this ultra high net worth group and were built for these specific client types. This approach is different from other firms, he says, "who try to build products for some other third-party distribution group."

Maintaining a trust-focus when developing products leads to many benefits on the tax side, Paul says.
I think what happens, by creating your own solution sets and not using mutual funds, you have more control on the tax side. In respect to our Money Market funds, you can line up the 2a7 regs compare them to our our internal guidelines and see that we manage our money funds in a very conservative manor—again with that nod to the fiduciary upbringing. Obviously we are always in the 2a7 guidelines. 

We have our own risk profile in the fiduciary responsibilities we take. Fiduciary is the real capital F. That is a big thing for us. We have a conservative bank culture, where risk is always front and center.   This is especially true of  of M&T--a very conservative, well run institution.
FOCUSING INTERNALLY

Wilmington's mutual funds are offered through several internal channels.

"We haven't really focused externally yet in a meaningful way to date; we're just trying to get things right internally," he says.

Paul says that his firm has "wholesalers who are offering these products externally, but first and foremost we are informed by our largest client base, which happens to be internal--our high net worth, trust and our brokerage divisions. Given the percentage of the fund family assets held in these divisions, these clients are extremely important as far as the funds’ board of directors are concerned," he said.

Moreover, the merged company has "10 different sub-advisors. We don't have any affiliation to any of them."

"What we are trying to go after, actually, are hedge fund player who know how to short, most of them are smaller and definitely a little bit more boutique names. Names like Whitebox and some others that are a little bit better known," he says. 

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