A conservative approach and a wide product selection enabled BB&T Corp.'s fund unit to maintain its assets under management through a trying 2008 for the industry.
BB&T Funds ended the year with $5 billion under management, roughly what it had 12 months earlier.
"We have a healthy parent, and that means a lot right now," said Jeffrey Schappe, BB&T Asset Management Inc.'s chief investment officer. "We don't have to worry about a lot of things that our competitors are worrying about right now. We have a stable parent and stable fund platform."
BB&T Funds' 24 funds cover a variety of equity and fixed-income styles. They include value and growth stock funds that target the large-, mid- and small-cap sectors; bond funds that focus on the government, corporate and municipal markets; and two money market funds.
Schappe said the diverse mix helped BB&T hold on to assets "even when money left small-cap funds."
"If you can reduce your losses on the downside and maintain steady profits on the upside, you don't have to reach the highest highs on the upturn," he said. "Let's be honest, you only get to the highest highs by adding more risk. Our goal is to preserve capital and earn competitive returns on the upside."
Schappe said he expects the Raleigh company's assets under management to rise over the next three to five years. "It will be a challenge because of the markets' inability to add assets, but once this stabilizes and improves, we will be well positioned for growth," he said.
Analysts said that a conservative strategy paid off last year for BB&T but that it will be difficult to add assets with such a style. Schappe said BB&T does not plan to change its fund strategy. "We have always strategically had a bias for quality that helped late last year," he said. "I mean, it didn't help us at the beginning of the bull market, when we didn't go near subprime. Last year, we wanted to focus on quality."
BB&T Funds were more "defensively positioned" last year and focused on investing in health care, commodities and energy sectors and "underweighting financials," Schappe said. "I think when customers wanted out of the market, we were able to offer them other products, and that allowed us to keep those assets in-house," he said. "These products might not offer the same growth potential, but offer shelter from difficult economic conditions."
Two BB&T Funds finished last year in the top 1% of their respective Morningstar categories. The BB&T Special Opportunities Equity Fund ranked in the top 1% of Morningstar's midcap growth fund category for the three- and five-year periods, and the BB&T Equity Income Fund ranked in the top 1% for three-year performance in Morningstar's large value fund category.
The funds are managed by George Shipp, the chief investment officer of Scott & Stringfellow Inc.'s Choice asset management team. This group of investment managers runs approximately $2 billion of client assets, including $600 million in the funds it subadvises for BB&T Funds, and four separately managed portfolios. (Scott & Stringfellow is a unit of BB&T Corp.)
Schappe said BB&T Funds does not plan to add any new products in the immediate future.
"We aren't trying to be all things to all people," he said. "We want to provide products where we can add value, and we'll offer third-party products where they are suitable. We are not trying to fill every style box."
He said investors are learning to live within their means, invest in securities they understand, maintain a sturdy cash reserve, and not to "use their home as a piggy bank."
"This is an unprecedented time period," he said. "Beyond the personal and professional pain, it is also very educational. We are a witness to history and we are learning a lot of lessons for our lifetime."