Firms pondering realignment efforts as non-traditional strategies bloom

Money managers — including BlackRock, BNY Mellon and Franklin Templeton — are assessing how to reorganize sales and distribution channels as investors increasingly move toward more complex strategies and away from traditional stocks and bonds.

Ultimately, managers need to determine if it's more efficient to train legacy sales staff on the intricacies of non-traditional asset classes or to recruit additional people already experienced in selling such strategies.

“You're seeing some firms deciding on major acquisitions, while others lift out another person or two. Then there are those in the middle, bringing in teams,” said Justin R. White, a partner with money manager consultant Casey Quirk & Associates LLC, Darien, Conn. “It depends on the current state of the firm, what their objectives are and what they're able to do culturally and financially.”

With clients moving more toward outcome-oriented approaches and away from traditional benchmark-pegged offerings, there are a number of ways managers are approaching the challenge. Money management giant BlackRock Inc. has organized a team within its institutional sales division to identify client needs. In October 2014, the firm formally organized the alternative investment strategy group, according to Mark McCombe, New York-based senior managing director and global head of BlackRock's institutional client business.

“Every client has their own approach to how they manage their assets. The increased diversification and specialization meant it was increasingly difficult to bring one person from the firm to the client,” Mr. McCombe said. “We needed to provide a greater level of specialization.”

“It's completely aligned with our distribution effort,” Mr. McCombe added.

When it comes to retraining its sales team or bringing in someone new, BlackRock does both. “We spend an inordinate amount of time on product and platform training. But if we need a hedge fund specialist, we'll go and find someone with that skill set,” Mr. McCombe said.

BNY Mellon Investment Management employs a similar strategy. Its sales team uses the guidance of a separate research and consulting team built internally in 2009.

The bank-owned manager's investment strategy solutions group is run by Stephen Kolano, a BNY Boston-based investment analyst. ISSG members look at the investment landscape and assess where markets might be heading.

The team provides investment solutions designed to achieve investment return and risk objectives, manager research to meet portfolio construction requirements, and strategic and tactical asset allocation, rebalancing, risk management and reporting

“We have a weekly call to discuss what assets clients are worried about,” said Kim Mustin, co-head of global distribution for BNY Mellon Investment Management in New York. “ISSG has a segment of the call every week about how they're positioning their regime-based asset allocation portfolio and our sales people use that to discuss clients' needs.

“Client needs are more complicated. How do you help clients manage those income needs? It used to be you had a couple of solutions. Now you have a basket of solutions,” she added. “Clients really need our help thinking about how to allocate among that basket.”

Franklin Templeton Investments, San Mateo, Calif., tackled the issue via acquisition. In September 2012, the long-only shop acquired Stamford, Conn.-based hedge funds-of-funds specialist K2 Advisors LLC to expand its capabilities.

“We didn't have the capabilities to build liquid alternatives products on the 40-Act side and more robust solutions on the institutional side,” said Thomas Regner, president of Franklin Templeton Institutional LLC, St. Petersburg, Fla. “We needed to buy a firm that had the intellectual capital we didn't have. K2 is not only an alternatives firm, it's a bank of very smart people to help us build outcome-oriented portfolios,” Mr. Regner said.

Dan Elsberry, managing director head of sales at K2 Advisors LLC, Wilton, Conn., agreed that the acquisition filled the blind spots that each firm had separately. “Franklin Templeton saw the alternatives business grow, and that's why they bought K2,” Mr. Elsberry said. “The combination of having both traditional and alternatives expertise is a huge advantage.”

J.P. Morgan Asset Management also has been adding to its sales teams and training its staff on more specialized and multiasset capabilities. Although JPMAM has had multiasset class capabilities for decades, the company aligned these teams almost a year ago to create greater focus and address growing client needs across these areas.

Jed Laskowitz, co-head of J.P. Morgan Asset Management's solutions business, New York, said the manager is “doing more outreach with certain client segments.”

JPMAM has about 100 people in its multiasset investment team, including client portfolio managers. The company also has an institutional advisory team that works with insurance companies, pension funds and sovereign wealth funds.

The manager also has a retirement advisory team of roughly 75 specialists, with some sales people embedded in it, that works with plan sponsors, consultants, retirement plan advisers and financial advisers.

“I think we have an incredibly well-resourced team,” said Mr. Laskowitz. “We continue to invest in tools and training.”

Michael A. Siciliano, Baring Asset Management Ltd. senior vice president and head of sales and business development for North America, Boston, told Pensions & Investments that he has rebuilt the firm's sales team in the past 18 months to accommodate institutional investors' growing interest multiasset class solutions.

“People are recognizing that multiasset strategies provide equity-like performance with lower volatility,” Mr. Siciliano said. As part of the rebuilding, Mr. Siciliano said he aimed to ensure that his team could better understand company objectives and then properly position strategies. n