It may not have household name like Fidelity or Franklin - but Lord, Abbett & Co. is making clear inroads into banks.
As banks develop proprietary funds and lists of preferred outside managers, it has become increasingly difficult for smaller fund firms and latecomers to the business to build sales through the bank channel.
But Lord Abbett, which is based in New York, has increased the number of banks it does business with by 50% since March, according to Mike McLaughlin, manager of the firm's bank program. The firm now has 45 sales agreements with banks, he said.
He hopes to strike deals with more banks in the next few months. He would not identify new or potential partners by name.
30% to 40% Growth in Bank Sales Seen
Lord Abbett sold roughly $300 million through financial institutions in the 12-month period ending July 31.
During that period, the company's total sales were $2.3 billion, Mr. McLaughlin said. He forecasts a 30% to 40% growth rate in sales through banks in the next two years.
"We certainly think we should be growing at a rate faster than the industry is growing because we are coming off a lower base," Mr. McLaughlin said.
|Good Performance Across the Board'
Though not a big-name player, Lord Abbett ranked 34th among all mutual fund companies last year with $10.5 billion of assets managed, according to Strategic Insight, a New York consultancy.
"Even though Lord Abbett offers good performance across the board, there is not a lot to differentiate them" from others, said Avi Nachmany, a Strategic Insight partner.
"It is easier for small companies that bring something special to the table to get on banks' short lists," he said. Well-established companies such as Fidelity and Putnam definitely have a "head start," he added.
Other analysts agree smaller firms are at a decided disadvantage in angling for spots on banks' short lists of preferred suppliers.
"The larger fund companies that have dedicated regional representatives to service the banks are going to get the lion's share of the busines's," said Ann Becker, president of Thompson Becker International, a consulting firm in Foxboro, Mass.
Lord Abbett, however, is already on preferred products lists at Philadelphia-based CoreStates Financial Corp. and Rochester (N.Y.) Community Savings Bank, among others. And New York-based Citicorp selected seven Lord Abbett funds for its due diligence approved list.
|A Very Good Wholesaler Force'
The absence of dedicated bank wholesalers is no obstacle, Mr. Laughlin said. "We are not planning to add a sales force dedicated to banks, because we think we have a very good wholesaler force," he said.
However, reacting to demand from the marketplace, Lord Abbett this spring created a fund family with a fee structure more appealing to banks. "We essentially added a clone family of funds with level-loads," Mr. McLaughlin said. While consumers traditionally pay an up-front sales fee when they purchase a mutual fund, level-loads enable them to spread out these commission payments over several years.
Traditionally, Lord Abbett has offered front-end loads, which make it harder to compete in the bank environment, Mr. Nachmany said. Lord Abbett's fund family includes equity, tax exempts, and taxable fixed income funds.
The company's tax-exempt products are not selling as well as it would like, possibly because of pricing, Mr. McLaughlin said. To compete more effectively, the company plans to add four tax-free clones Oct. 1.
Will Rely on Its Strengths
Mr. McLaughlin said the firm will rely on its strengths - its reputation, performance, and wholesaler quality - to establish itself in the bank environment. Banks "are a very viable long-term market," he said.
But the company, which began a concerted bank marketing effort two years ago, is sure to face formidable challenges.
"When companies start late in the game, the challenges are harder to overcome," Mr. Nachmany said.
