PHILADELPHIA - Many institutional money managers view mutual funds as an entry into the retail asset management business, but not Glenmede Trust Co.
Since 1988, the Philadelphia firm has introduced a dozen institutional mutual funds, all as demand arose from customers, most notably the Pew Charitable Trusts.
The effort has paid off. Although Pew comprises 50% of the firm's $7.4 billion in assets, new business - stemming largely from the mutual funds - accounts for three-quarters of its revenue, according to John W. "Jack" Church Jr., chief investment officer and senior vice president.
Although in mutual fund rankings the firm is painted with the same brush as banks, whose performance as a group has been fragmented, Glenmede's performance, particularly in international funds, has been top-notch.
The firm has no plans to tap the retail market. "We're growing fast enough now. We understand the limits of growth; we want to make sure we're adequately servicing existing clients before we chase new ones," Mr. Church said.
To target defined benefit plans, the firm eliminates the management fee on the individual funds. Clients can negotiate a separate fee for an account manager in the firm to invest in the funds.
For defined contribution plans, it offers funds modeled after mutual funds for defined benefit plans, but with the management fee embedded in the expense ratio so the expense is borne by participants.
Either way, "our fees are low because we don't have the distribution expenses of retail funds," Mr. Church said.
Now that its $330 million international stock fund has a track record longer than five years, it is in seven or eight defined contribution plan searches and some defined benefit searches. All of the searches are through consultants.
Of course, sometimes launching funds based on clients' needs can backfire. Now that the firm's $28 million international fixed-income fund, launched in November 1992, is nearing a three-year track record, it is marketing to a pension fund arena partial to global fixed income. Sheryl Durham, vice president and portfolio manager, said she is talking to consultants about offering a global bond portfolio where a separate account would be used for domestic bonds and the account manager would be able to also invest in the international bond fund.
She said it's possible the firm would offer a global bond fund "if that's where we see the demand."
Both international funds are value-oriented; turnover is low to keep costs down. Mr. Church said risk is low because securities are purchased at below-market price-earning ratios that already have discounted a lot of bad news.
"You can't take a bath in an empty tub," he said.
The stock fund now is invested in 80 to 85 stocks in 15 to 20 countries led by Japan, the United Kingdom, France and The Netherlands. According to Andrew B. Williams, vice president and portfolio manager, favorite stocks include Acom Co. Ltd., a Japanese consumer finance company, Philips N.V., the Dutch conglomerate; Argyll Group PLC, a U.K. supermarket company; and Elf Aquitaine, the French energy company.
In the bond fund, Ms. Durham is anticipating a stronger dollar by favoring "dollar bloc" countries whose currencies move in line with the greenback, like Australia, New Zealand and Canada.