I enjoyed your recent column on P&I Online. Please let me know if you have any other suggestions or recommendations to break in to the institutional market. I manage a registered investment adviser firm that is primarily an asset management firm. We have original research and analysis with good relative portfolio returns by all important measures.
Suggestions for generating business with small pension funds
Let's assume you performed some of the preliminary “tasks” I mentioned in last week's Ask the Expert column about entering the institutional investment market.
For the sake of argument, let's also suppose that you have now determined small public defined benefit plans represent the institutional target market you wish to approach, and you have the internal resources necessary to proactively pursue separate account mandates in this space. The small to midsize public defined benefit plan universe likely prefers an account size more in keeping with your minimum or target account size. Going after the large public pension fund market might not be appropriate because these plan sponsors need to put out sizable assets with each manager to have any real impact on their total rate of return.
First thing you should do is submit your data and information to some of the databases of asset managers that are readily available online and that many consultants use, assuming they don't have proprietary databases like Callan, Russell and Mercer. There are some consultants who won't even “take a meeting” if your information is not in their database or an industrywide one.
Then I would scan the databases of plan sponsors — which I also mentioned last week — to find out the name of the appropriate contact person at the pension fund and the type of asset classes in which they are invested and their current managers, so you have a sense whether they should be on your initial call list.
While cold calling has never been extraordinarily successful, you have to start somewhere and given that you most likely don't have any “old relationships” with these asset owners, you have to begin the process. If you do connect by phone, don't start in on why your product is the best in the marketplace and “when can we have a meeting?” Ask as many questions as possible while you have this person on the phone. For instance, confirm how large the fund is and then ask:
- what the funded ratio is;
- have they been contributing regularly into the fund;
- what the actuarial assumed rate of return is and to what extent has the fund exceeded or met this target over the last 1, 3 and 5 years;
- what the strategic asset allocation is and is the fund close to the targets; and,
- if the fund is not close to the targets, what asset classes are currently below the long term strategic mix.
The point of all of this is that you want to ask as many pertinent questions as possible so that if you do get a meeting or at least a request for more information, you will have some substantive information from which to properly position your product to help the plan executives meet their investment goals and objectives. Your “pitch” should be as relevant as possible to the idiosyncratic nature of the pension fund from which you are soliciting business.