Crabbe Huson Group mutual funds have always flown solo, but that may soon change.
Executives at the firm have decided to add new distribution channels- including banks-to its direct-marketing strategy in order to spur sales and stay independent and competitive.
The Portland, Ore.-based company, which has nearly $1 billion in assets under management, is known for contrarian investment strategies and investing in undervalued stocks.
"What's hard for people to understand about Crabbe Huson, and why an intermediary is important for us, is that we don't behave like the market," said Charles Davidson, chief operating officer. "But it makes sense to people once they sit down with someone who can explain it."
With that in mind, the company is considering appropriate places and partners that might successfully sell Crabbe Huson's relatively conservative funds, Mr. Davidson said. Banks are attractive options, he said, because bank customers are partial to conservative funds and they might not buy Crabbe Huson portfolios on their own.
Any player serious about the mutual fund business needs alternative methods of distribution to stay competitive, said industry consultant Burton Greenwald, managing director of B.J. Greenwald Associates, Philadelphia.
"Until now, they've been purely opportunistic, with no (marketing or distribution) structure," Mr. Greenwald said of Crabbe Huson. "They are probably saying that to be a player in this market, they need not only good performance, but they need a distribution plan and they need to cover their bases."
For the most part, Crabbe Huson's no-load funds are sold directly to investors. About 25% of the company's sales are through financial advisers who use a mutual fund mart from either Charles Schwab & Co., Fidelity Investments, or Jack White & Co.
The company is looking at pricing options-such as adding a class of shares that charges a load-that would help it move into other distribution channels, Mr. Davidson said. Although the fund family does not have a load now, a small volume of Crabbe portfolios are sold through brokers, he said.
Another firm that has recently looked to banks to expand its distribution is Dean Witter & Co., which last week announced a deal that calls for Wells Fargo & Co. to sell its funds and investments. The agreement allows the investment firm, a unit of Morgan Stanley, Dean Witter, Discover & Co., to reach bank customers who are unlikely to buy Dean Witter's products on their own.
The firm has similar arrangements with Banc One Corp., Columbus, Ohio, and NationsBank Corp., Charlotte, N.C.
In addition to distribution channels, fund families need strong performance to catch investors' eyes, Mr. Greenwald said.
Crabbe Huson's contrarian investment strategies tend to either do very well or very poorly, said Laura Lallos, an analyst with Morningstar, a fund rating agency in Chicago.
For example, James E. Crabbe, president and portfolio manager of the Contrarian Small Cap Equity fund, has bet technology stocks will decline in value, Ms. Lallos said. But the sector's strong performance has kept the fund's performance down, she said.
The fund company could have a tough time signing on distributors, like banks or financial planners, to sell its funds since it has not recently been out selling itself.
"I think they will have to ring a lot of doorbells and do a lot of footwork to get back in a lot of channels they've ignored for a long time," Mr. Greenwald said.