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Friday, February 08, 2013

Hennessy Goes His Own Way Towards Growth

Reported by Tommy Fernandez

If you want a glimpse into the mind of fund executive Neil Hennessy, consider this fact about his company,Hennessy Advisors [profile]: they donít have voice mail.

During a recent visit with MFWire, Hennessy outlined his opinions, and corporate policy, regarding the communication device:
I want the phone answered by two rings. I donít care if it is the comptroller, the chief executive, me, the chief financial officer or a receptionist. I want somebody to pick up the phone so that person who is calling gets a real life human being and individual attention. If you need to leave a message, itís going to be left with a real person. We try to individualize ourselves by little things like that.

And so goes the mind of Hennessyís chairman and chief investment officer, a man who, still fresh from the recently closed acquisition of FBR &Co.ís mutual fund business, is hungry for asset growth, feeling peckish for more deals, and is ravenous for making headway in the sales and distribution wars which defines the mutual fund industry today.

Thanks, in part, to the purchase of FBRís $1.9-billion business, Hennessy has been able to drive his companyís AUM up to around $3.5 billion. Heís determined to grow that figure to $5 billion as soon as possibleóbut Hennessy and his team intend to do it their way.

"Our number one priority is sticking to our business plan of growing organically and making acquisitions, but always with the investor in mind," he said.

He also makes no bones about his companyís appetite for more deals:
We are looking for more acquisitions and we will continue to look for more acquisitionsóbut we want to make sure they are accretive to our shareholders. There are lots of avenues for acquisitions. You can look at five-star funds or one-star funds. We are just looking for the fund assets and then we will figure out where they should go. It doesnít matter how good or bad is the track record. Increasing assets will give you investment management fees and increased revenues if you do the acquisition right.

Hennessy is fully aware that the FBR purchase raised eyebrows in the industry, but he shrugs off the wisecracks.

"People describe the deal as a minnow swallowing the whale, but the reality of the situation is that they had ten mutual funds and we have nine. If the minnow really was swallowing the whale, it would have meant us acquiring a company with fifty or more funds," he said.

In addition to assets, the FBR purchase also affords Hennessy with vital resource the company never had before: sales staff. FBRís head of sales and four wholesalers are the first to ever be employed by Hennessy. In the past, he said, his company raised awareness primarily by word of mouth of its investment performance and press coverage.

"Our view was always, if our story was simple enough and we were simple enough to understand and reporters wrote about how well our returns were, people would come to us," he said.

But now with the FBR sales staff, Hennessy is ready to walk the walk and talk the talk with gatekeepers.
We will see how this goes in the future whether we expand the sales force. There is no question distribution is expanding. Everybody has gatekeepers now. The RIAs have gatekeeers, which used to be the wirehouses. IF you have a fairly good-sized gatekeeper, they will have analysts and consultants and others to help them weed out the funds. You have to find how they are doing these things. It is not about going out with a box lunch and telling your story anymore.

More insights from Hennessy will be made available soon on MFWire

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