Integrity Mutual Funds Inc.’s interim president and chief executive, Bradley Wells, said that the company needs to stick to fixed-income products if it is to recover from a year of heavy outflows from its mutual funds.
“We understand that we have to be a strong niche fund provider,” Mr. Wells said in an interview Monday. “We can’t compete with companies like American Funds who have tons of funds and markets. We have to find the right niche for our funds.”
The Minot, N.D., company, whose assets under management declined 10.5% last year, to $395.7 million, announced Friday that it had named Mr. Wells interim president CEO.
Mark Anderson resigned as president and CEO on Feb. 29, to pursue other interests, Mr. Wells said.
A spokesman for Integrity said that the company’s assets under management “reached a new high” by the middle of last year before “succumbing to the turmoil and uncertainty of the subprime mortgage meltdown.”
Though none of Integrity’s funds held subprime mortgages directly, the company said home building and other related industries were hurt, leading to outflows.
Another factor in the decline in assets under managemeent was that Integrity eliminated some funds that were either too small or were inconsistent with its growth strategy, Mr. Wells said.
“I think over the years, we have been tempted by the equity side,” he said. “I think we really thought we had opportunity with equities and now we’ve realized that offering smaller funds is really going to be our niche to compete.”
Integrity has 15 funds after closing two equity funds last year.
Mr. Wells said that the company had launched equity mutual funds over the past two or three years, including some small-cap products.
“The drive for our mutual fund division is going to be all about getting back to basics,” Mr. Wells said. “We want to get back to what we know on the fixed-income side. These are products that have done well over the years, including tax-free funds and high-income funds.”
Mr. Wells has worked in the financial industry for 20 years and at Integrity since 2001 as a senior vice president and director of retail administration. For the past seven years he has run Integrity’s broker-dealer arm, Capital Financial Services, which has continued to attract assets despite difficult market conditions.
Capital Financial Services is one of the nation’s top 50 broker-dealers. Its broker-dealer team now numbers 400 after a 50% head-count increase in 2007 to go with a 50% production increase.
“Integrity started as mutual fund company and we will always remain a mutual fund company, but we also have a strong broker-dealer unit that is growing and becoming an important part of the company,” Mr. Wells said. He said he is “playing a bit of catch-up” in mutual funds, which Mr. Anderson ran.
Integrity will keep some of its equity products, including its growth and income funds and its socially responsible fund, but it wants to focus on fixed-income products, Mr. Wells said.
Integrity has state-specific tax-free fixed-income funds in Oklahoma, Nebraska, and Kansas. “We believe that if we can get in the door with tax-free products, we can then present them with our taxable offerings,” Mr. Wells said.
