Breckinridge Capital Advisors does not offer mutual funds, taxable advice, or money market funds. In fact, all the small Boston company offers is what it calls a "second-tier" product.
But founder and president Peter Coffin says the small municipal bond specialist has been successful selling the product, a separately managed bond portfolio, to wealthy investors through banks and investment advisers.
"Separate accounts are not as lucrative as mutual funds," Mr. Coffin said, "but we believe managed accounts are the right vehicle for wealthy investors. This is a little bit of religion here. We really do want to offer a better product at a better price."
In recent years as equity markets were slumping, banks and investment advisers begun buying into that religion. The company expanded its assets under management by 33% last year, to $2.4 billion.
Already this year, Breckinridge has added a distribution agreement with a second large banking customer. The firm has $125 million of assets under management through the banking channel, and Mr. Coffin said he expects to grow as more private banking and high-net-worth money managers try to widen the array of products and services they offer their customers.
"Big investment companies aren't interested in offering this type of product because they cannot deliver the product the way that we can," he said. "It is a hard thing to deliver."
Mr. Coffin, who started his firm after leaving Massachusetts Financial Services in 1993, said a separately managed municipal bond portfolio is more efficient than a municipal bond fund. "Size can be a disadvantage in the municipal bond market," he said. "There is a small supply and a high demand for large blocks of municipal bonds. But when we make smaller trades, we can get more value for investors."
"We can see more opportunities by managing these items separately," he added.
Breckinridge manages about 1,200 portfolios; each is customized and traded individually. The firm says it is the largest provider of municipal bond portfolios to private banking entities and to separately managed account providers.
Mr. Coffin said he plans to expand the business steadily this year but does not want to take on too many customers and "expand beyond Breckinridge's capacity."
"We couldn't take on 10 new banks in 2004; that isn't what we are about," he said. "We have 12 relationships that account for 80% of our assets under management. We don't want to grow beyond our means."
Nuveen Investments and McDonald & Co. Securities Inc. both offer separately managed municipal bond portfolios, but each also offers other investment products, including municipal bond funds.
"We do this one product. Because of that we are able to manage our growth well and maintain our focus," Mr. Coffin said. "Since we have only one product, there is never any question of what our time and resources are delegated to."
He said some banks still try to manage their own bond products but "they aren't doing as good a job as can be done."
"Banks relegate bond products to a second tier," he said. "There is a lot of opportunity by properly structuring and trading these products and being attentive in a changing market."
