Starting a major effort to attract pension funds and other institutional investors to managed-futures trading, Kenmar Holdings Inc., one of the largest firms in the industry, has formed an institutional product development and marketing firm with David M. Love, founder of Monmouth Capital Management Inc.
Both Monmouth and Kenmar manage some of the relatively little pension fund money in managed-futures trading.
Monmouth, with only $32 million under management, mostly from institutions, was unable to raise enough asset base to keep its business viable, Mr. Love said in an interview.
The firm, based in San Diego, will fold as a result of Mr. Love's departure. Monmouth had five employees in all.
As a result of the combination, the $2.2 billion San Diego County Employees' Retirement Association - Monmouth's only direct pension fund client - will move its $9 million managed futures portfolio to Kenmar Investment Adviser Corp., a unit of Kenmar Holdings, said Paul Boland, the San Diego fund's retirement administrator.
The San Diego fund will retain another $18 million portfolio Kenmar Investment already was managing, giving the firm two separate portfolios to run under different strategies. The Monmouth portfolio will continue to be run in a more conservative style, while the Kenmar portfolio will continue to be managed more aggressively.
Burns Fry Ltd., Toronto - Monmouth's biggest institutional client - moved a $20 million (Canadian) portfolio Monmouth was managing to Hart-Bornhoft Group Inc., Denver. (Hart-Bornhoft, which manages $300 million in total, mostly for institutions, also runs $18 million in managed futures for the San Diego pension fund.) The Burns Fry portfolio is part of a $105 million pool in managed-futures trading the Canadian firm handles in a manager-of-managers approach, all for pension fund clients, said Fred Hirshfield, who works in the area for Burns Fry.
Mr. Love will become president and chief executive officer of the new venture, called Kenmar Institutional Investment Management L.L.C. Kenmar Holdings will own the new unit, which will be based in Rancho Santa Fe, Calif.
Mr. Love said he will receive a share of the revenue stream it generates. He declined to disclose the percentage. The firm will work on product development and market to U.S. and Canadian pension funds and other institutional clients. The assets will be managed by Kenmar's existing team.
"With Dave in the picture we think the pace of growth (for managed futures trading) among institutional investors will be fantastic," said Esther E. Goodman, Kenmar senior executive vice president and operating manager.
A competitor, Frank J. Franiak, president of Glenwood Futures Management Inc., Chicago, said Mr. Love "is experienced in terms of marketing to institutions and I think that's a great benefit" to Kenmar. Glenwood manages $130 million in managed-futures trading, nearly all from pension funds and other institutional clients.
Mr. Franiak said Kenmar is probably the third-largest manager of managed-futures trading, behind Commodities Corp. (U.S.A.) N.V., Princeton, N.J., and Dubin & Swieca Capital Management Inc., New York. Commodities Corp., whose officials declined to comment, runs $1 billion, according to the Money Market Directory. Dubin & Swieca runs $800 million, said a spokeswoman.
"Because of our small size, we needed to form an alignment or affiliation to give us (Monmouth) greater viability in the institutional marketplace," Mr. Love said. He approached several other managed futures firms with ideas of some kind of linkage without reaching any agreements, before Kenmar invited him to head the new venture, he added.
Roy Callahan, Monmouth's director of research, is considering joining Kenmar.
"We're definitely talking with him," said Ms. Goodman. "He's a real talent."
Mr. Callahan didn't return a phone call for comment.
Kenmar is decidedly the bigger of the two firms. With 45 employees, it runs $500 million, including $128 million for the $16.4 billion Virginia Retirement System, its only other pension fund client.
Yet Kenmar executives consider Monmouth's Mr. Love an expert in product development for managed futures to pension funds and other tax-qualified institutional investors and marketing to them, said Ms. Goodman.
Mr. Love was among the first and most prominent mainstream investment professionals to endorse and promote the use of managed-futures trading for institutional portfolios, Ms. Goodman said.
Before beginning managed-futures trading at Monmouth in 1989, Mr. Love worked in traditional institutional equity and fixed-income management and marketing at Atalanta/Sosnoff Capital Corp., New York, and other firms.
In a separate deal, Kenmar reached an agreement to have Servisen Fondkommision AB, a Stockholm-based broker and asset manager, as a European marketing representative, said Ms. Goodman.
Servisen is a minority shareholder in Monmouth. Mr. Love, who owned a majority of Monmouth, said Monmouth's employees owned the other minority stake.
Neither Servisen nor Monmouth employees will receive any consideration from the Kenmar deal, Mr. Love said.
If the Kenmar venture is successful, he said he will volunteer to share part of the revenue stream he receives with Monmouth employees, although he noted he has no legal obligation to do so.
Kenmar has a European office run by Peter Huri, managing director of Kenmar S.A. in Geneva, which Ms. Goodman said won't conflict with the new Servisen arrangement.