Marketers, consultants and investment managers nationwide - frustrated with the slower pace of traditional firms - are leaving and transforming themselves into "dotcom-ers."
H. Davis Nadig and Donald Luskin - two strategists formerly of Barclays Global Investors, San Francisco - have leapt into an Internet-based venture with a business model and daily operation far removed from the very traditional world of pension fund investment management.
Always alert to new trends, top investment management marketers and strategists such as Frank P.L. Minard, John Story and Tim Armour also have adapted to the cyber world. And consultants such as Scott Lummer, chief investment officer of 401(k) Forum Inc., now use the same analytical processes they once used for institutional investment management to help 401(k) plan participants on the Internet.
`Democratization' of markets
Mr. Luskin, formerly head of mutual funds at BGI, and Mr. Nadig, chief strategy officer at BGI and a former consultant at Cerulli Associates Inc., Boston, joined forces after they left.
Neither wanted to rejoin the "rat race of investment management," Mr. Nadig said, and after a year of study, founded MetaMarkets.com Inc., a mutual fund management firm in South San Francisco. They saw a revolution coming - the "democratization" of investment markets - and a resulting rise in the need to serve individual investors, Mr. Nadig said.
This fall, MetaMarkets launched the OpenFund mutual fund, which gives its investors real-time access via the Internet to not only the fund's holdings, but also its trades, blow-by-blow. There's even a "tradercam" in the company's trading room, with its lens trained on the money manager at work. The fund attracted $10.5 million in its first six weeks.
Marriage of opposites
Mr. Story is now the president of X.Com Asset Management, which launched three mutual funds at the beginning of December, entirely on the Internet. Until April 1998, Mr. Story was an executive vice president at Montgomery Asset Management, San Francisco, running the mutual fund unit there using more traditional sales techniques and delivery systems.
X.Com soon will introduce more Internet-based mutual funds, all subadvised by BGI, and separate account management and online brokerage. Separate account management will be added later.
The San Francisco-based company, a subsidiary of X.Com Corp., is a "marriage of opposites," Mr. Story said. He paired up his traditional investment management background and "wisdom of age" with the technological savvy of 28-year-old Elon Musk. By doing it all on the Web and using BGI's low-cost institutional passive management services, Mr. Story said, X.Com is able to price its funds below those of mutual fund low-cost leader The Vanguard Group of Cos.
"I was talking about the revolution for the last three years, but I didn't know what it would look like," Mr. Story said.
"The power of the Internet allows the money manager, particularly a mutual fund company, to get much closer to the user. . . . Through the Internet, not only is investment management cheaper, but you can communicate and educate much faster - in real time - and more efficiently."
One transforming itself to a .com company is Morningstar Inc., Chicago. Tim Armour, formerly president of Stein Roe Mutual Funds, Chicago, joined as president of the company last year and was charged with re-engineering Morningstar for life as an Internet-based company.
"Morningstar is an information company - it's perfect for the Web. We're sitting at the center of a fabulous opportunity to help individual investors with investment advice, " Mr. Armour said.
Investment management consultants - like Scott Lummer, formerly of Ibbotson Associates Inc., Chicago, - also are hurrying over to Internet businesses.
Mr. Lummer moved from advising institutional investors to a job as chief investment officer at 401(k) Forum, which provides Internet-based investment advice to defined contribution plan participants.
Frank Minard left his position as head of global marketing and client service at Morgan Stanley Dean Witter Investment Management, New York, to become president of PlanSponsorExchange.com in May.
At Morgan Stanley he had been working to enhance the firm's marketing capabilities via the Web with what he calls "real marketing."
"To me, it (the Internet) was an extremely important piece of technology," Mr. Minard said.
After speaking with PlanSponsorExchange.com's creator Colin Wahl, Mr. Minard chose to join the team in bringing to fruition an independent Web source for plan sponsors to get information on products, research, money management firms.
As an investor in and marketer of the Web startup, Mr. Minard has been plugging the site as one-stop shopping for plan sponsors who want questions answered in a protected environment.
More than 900 plan sponsors representing $4 trillion in assets are registered on the site so far. The exchange is commanding about 7,000 hits per month; Mr. Minard expects traffic will build as plan sponsors realize what information is on the site and that it's free.
Revenue is raised by the fees money managers pay to showcase their products and add content to the site.
PlanSponsorExchange is looking to expand its 16-member staff. Future work might include creating sites for specific types of clientele such as endowment officials or financial advisers.
"It was an important career change for me. To me, this is the way the world is moving," he said.