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Thursday, March 06, 2014

Hancock's Arnott Is Open to More Fund Adoptions

Reported by Tommy Fernandez

If you run a firm that values a team-based approach to investing, is focused on the long term and encourages your executives to have skin in your funds, then you might want to give Andrew Arnott and his colleagues at John Hancock Investments a call. They're open to more fund adoptions on their platform.

"We absolutely have an appetite for more good managers. That will never change," Arnott, who is JHI's president and chief executive officer, recently told MFWire.

Arnott, who has been in his current position at Hancock since July 2012, says that he and his colleagues meet with 250 managers each year to vet new candidates.

John Hancock has currently 16 sub advisors on its platform, he said.

So, what would Arnott and his colleagues look for in a potential subadvisor?

First off, Arnott said, Hancock execs want a "good cultural fit."

"We want to partner with firms that we can work well with, that we will spend a lot of time with them," he said.

Arnott said that Hancock executives devote "significant periods of time" on site with sub-advisor candidates before they actually hire anyone, to "get to know them, understand their culture and how they operate."

Shops that are long-term focused and "are successful because of a process, not because of an individual, but due to a team" are also highly prized.

They also look for managers "who have real skin in the game."

Hancock executives do prefer firms that focus on a particular core specialty and have been around the block a bit. They to see a firm's track record during tough times and whether it has its compliance and other procedures in order. It's rare that they would adopt a startup, according to Arnott.

Arnott said that there is an appetite at Hancock for more multi-asset types of strategies, strategies that provide alternative sources of income, and income that is not duration sensitive for example. However, Hancock is open to solid shops in all categories. In fact, the firm's top two selling funds in 2013 were in large and mid-cap stocks.

Of course, Arnott said, there is a premium placed on firms that have demonstrated competitive performance within their investment categories. However, under the right circumstances (and there are a lot of circumstances that have to be met here), Hancock might be open to looking at funds that have slightly less than stellar performance and could benefit from Hancock's "investment expertise," according to Arnott.

And why would a fund want to be adopted by Hancock?

Well, Hancock's full-year 2013 sales were up 79 percent over 2012. Fourth quarter 2013 sales reached $5.6 billion, up 49 percent over Q4 2012.

The firm also plans to launch a variety of sales and distribution initiatives this year, which MFWire will publish stories regarding in the coming weeks.

Also, for you mutual fund historians, Hancock may (Arnott says that this title is under contention within the industry) have been the first firm to ever conduct a fund adoption, in 1991 with the Freedom National Aviation & Technology Fund.

Fundsters be forewarned, while Hancock does look to unveil some funds in the near future, "you will not see a tremendous amount of new fund launches." 

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