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Friday, December 02, 2016

Turner Strategically Builds Out a Full Menu

Reported by Neil Anderson, Managing Editor

Bob Turner is transforming his eponymous, 26-year-old mutual fund shop from a growth equity specialist into something much more.

Robert Baird
Turner Investments
Chief Operating and Accounting Officer
Turner, founder and co-CEO of Turner Investments [profile], confirms that he is "in the process of negotiating to bring in a couple of teams now," across a variety of different investing styles. It's the latest step in his plan for "going from 'a la carte' to 'here's a full menu.'" Watch for Turner to add other staff, too, pushing the firm to about 40 people (up from 25), including about 15 investment professionals by the end of 2016.

"We are in the process of hiring additional people in distribution," specifically in the family office, wirehouse, and foundations and endowments channels," Turner tells MFWire. Yet he adds that they're "never going to have a massive sales force."

The Turner Investments revamp kicked into high gear in August, when the firm completed a merger with investment management and fintech platform shop Veracen. That deal brought Veracen chief Michael Kennedy on board as co-CEO of Turner Investments and boosted the combined firm's AUM to about $800 million, up from $380 million in the spring but down from a pre-financial crisis peak of $28 billion. Kennedy and Turner are the "principal owners" of the combined shop, Turner confirms, though "outside investors are coming in."

"Most of the employees have equity ownership as well," Turner says. "Over time that increases as well, too. You will see a firm that is owned in a meaningful way by active employees within the firm."

Turner has made several other key additions to his team this year, including: Robert Baird as chief operating and accounting officer; Jena Dietrich as director of marketing; Erik Hagar as senior portfolio specialist; and Stefania Perrucci as his first global head of fixed income. Hagar and Perrucci confirm that she is hiring fixed income staff at Turner Investments.

"I'm definitely building the team, five to ten people in the front office," Perrucci tells MFWire.

In terms of products, Turner plans to extend the firm's reach across six broad areas: global and international equities, ESG, growth and momentum, absolute return, yield and income, and fixed income and credit. And each of those areas, in turn, will offer one to six different strategies.

"This is a unique approach, the platform approach," Turner says. "We're also bringing a risk control team on."

Turner Investments currently offers five mutual funds. Yet in the near future, they will launch 13 more.

"They are going to be all priced in the bottom quartile of their peer groups," Turner says. "If traditional active management doesn't adjust to the future ... those organizations will fall by the wayside."

"We're acknowledging with our eyes wide open that it's a saturated market," Hagar says. "We want to be distinct in a number of ways with our investment themes."

"Performance needs to be competitive, our fees need to be competitive, and we need good strong people and technology," Hagar adds.

In terms of distribution, Turner's initial focus was institutional separate accounts. Yet over time his funds have reached onto about 120 platforms. Going forward, in addition to traditional open end mutual funds and separate accounts, Turner sees ETFs and UCITs as other vehicles that he may explore.

For big distribution targets like pension plans, family offices, and RIAs, building out a broader investment platform means making life easier for those allies, Turner says. He mentions an example of a $5-billion family office that currently works with 90 managers, which entails a massive amount of ongoing due diligence. Offering a broader platform means that the Turner folks have more arrows in their quiver, depending on the specific intermediary's needs. Yet also makes that intermediary's relationship with Turner sort of equivalent to relationships with a handful of different boutiques.

Internally, the Veracen deal brings Turner Investments "the efficiency and scale to manage thousands of separate accounts when that opportunity arises," Hagar says, adding that he managed separate accounts in a previous life. (He previously led consultant relations for Vanguard.)

"The goal is to have all of them cloned, to have zero performance dispersion," Hagar says. 

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