MutualFundWire.com: Montage Slows its Acquisition and Launch Rates
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Monday, February 6, 2012

Montage Slows its Acquisition and Launch Rates


With 14 asset managers under its wing and a fifth mutual fund on the way, Montage Investments' chiefs are shifting their gaze. Watch for the Leawood, Kansas-based acquirer to put on the brakes, at least when it comes to deals and new products, and focus instead on beefing up distribution.

"We filed for a new fund … It's a convertible bond arbitrage strategy," Gary Henson, president and chief investment officer of Montage, told MFWire.com. "Other than that, I don't think you'll see us do anything until we have distribution figured out. Distribution is hard. It's expensive and it's difficult."

A Family Creates Its Own Montage of Managers

Montage's history dates back to the financial crisis of 2008-2009. A year earlier Henson, an insurance PM veteran, joined up with a family office.

"We're owned and backed by a family office that started in the wealth management business," Henson said.

The family had plenty of cash on hand, yet decided to invest in building a new business instead of using traditional financial products and strategies. The family office team began making investments in boutique asset managers, and in 2010 the Montage Investments umbrella was born. The family even invests in Montage's boutiques' products, alongside customers.

"Generally we have a majority stake in the asset manager and generally we do not exercise that majority stake," Henson said. "We allow them the latitude to be an entrepreneur."

"Our value-add is the fact that retail investors are able to invest alongside a wealthy family who acts like an institution," Henson added. "You invest side-by-side with us."

Distribution is Key

Now Montage boasts 14 boutiques, seven of whom have products ready for distribution, Henson said, with the other seven "still in incubation." Those 14 firms work with a combined total of about $9.5 billion. Four of the boutiques have already launched their first mutual funds, which collectively hold about $285 million and focus on "hard to access" asset classes not traditionally found in retail investors' portfolios, assets like MLPs (master limited partnerships for natural gas pipelines) and hedge funds.

"You will not see us launch a 'me-too' product," Henson said, pointing to more traditional assets like large-cap U.S. growth equities.

Last year Montage named David Henrisken as head of distribution, Anthony Carrubba as national sales manager and Jenny Rhodus as director of national accounts [see MFWire.com, 6/30/2011]. Montage's main focus so far, Henson said, has been the RIA channel, which has in turn provided about 90 percent of Montage's boutique's assets.

"We are now moving towards the broker-dealer channel and the independent broker-dealer channel," Henson said. "The gatekeeping for these channels is different to maneuver, and also very expensive."

To that end, Henson said, the Montage team is "selectively expanding" the distribution unit, which now includes nine external wholesalers, five internals, and others, about 25 people in total when marketing is included.

"The holy grail is a balance of distribution channels," Henson said.

What About Fund Number Five?

As for new mutual funds, Henson confided that the fifth Montage mutual fund is on the way from Montage boutique Palmer Square Capital Management [profile], with SSI, a firm not affiliated with Montage, managing the fund. Palmer Square launched its first mutual fund, the Palmer Square Absolute Return Fund, last year [see MFWire.com, 5/19/2011]. Fellow Montage boutiques Convergence Investment Partners, Nuance Investments and Tortoise Capital Advisors have also already launched mutual funds.


Printed from: MFWire.com/story.asp?s=39058

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