SAN FRANCISCO - As Ray Cunningham gazes out on a sunlit San Francisco Bay and the Bay Bridge from the 27th floor at 50 California St., he explains his mission in persuading banks to sell GT Global mutual funds.
Known principally for its international bond and equity funds, GT Global has now undertaken a serious bank sales effort that is 18 months old.
Because of the efforts of eight bank-dedicated wholesalers and aided by a few hot international government income funds, bank sales are picking up from nearly nothing in mid-1992 to 8.5% of total sales this year. Though GT Global would not disclose its sales volume, industry observers estimated gross sales for 1993 at $2.5 billion to $3 billion.
"People reflect on us as the niche player," says Mr. Cunningham, senior vice president for bank marketing. "We're the niche but the niche is the world. I can make the argument that Putnam is the niche player; they have international funds but focus on the United States."
A Wide Reach
London-based GT Management PLC manages $17.5 billion in 95 funds stretching from Australia to Brazil, South Africa to Germany. In the United States, GT Global's total mutual fund assets under management are $7.3 billion.
In 1986, GT Global went public in London and three years later, the holding company that owns Bank In Liechtenstein, BIL Group, bought GT Global.
GT Management, which is responsible for managing both the mutual funds and the institutional portfolios, has divisions in London, Tokyo, Hong Kong, Sydney, and San Francisco. Each division has satellite offices around the world.
16 U.S. Funds
The San Francisco division is responsible for the U.S. group of 16 funds, not including B share funds, with assets of $7 billion in public funds and $3 billion in private U.S. money.
GT Global named former Putnam executive David A. Minella president in 1987. Mr. Minella pushed GT Global's U.S. effort more toward public funds. Prior to Mr. Minella's appointment, GT Global managed five U.S. funds, including the flagship Pacific Growth fund, which was founded in 1977.
But in 1987, American Growth fund and Worldwide Growth fund were added, followed by Government Income A shares (A shares have front-end sales charges; B shares are back-end-loaded) a year later.
One of the newest funds, Telecommunications, has ridden the merger mania pins and racked up a 43% total return through October. Today, it is GT Global's largest fund, with $1 billion of assets.
GT Global's ride hasn't been an entirely smooth one. Although American Growth has averaged a 20% return since inception, the equity side of the portfolio has produced unspectacular results. Japan Growth has averaged 1.3% a year since its 1985 inception; Europe Growth has averaged 4.3% since 1985, and International Growth 8.6% since 1985. Those results are from the company's 1992 annual report and do not reflect 1993 figures.
Eighteen months ago, Mr. Minella lured Gary Kreps from Putnam to run its fixed income department. His managers have been betting on strengthening currencies and lower inflation in developing countries such as Argentina, Morocco, and Poland.
The strategy has propelled GT Global fixed funds to three of the top 10 spots on a 12-month trailing basis for performance, according to Lipper Analytical Services Inc. in the world income category of 102 funds.
Mr. Cunningham says the international government bond funds are particularly attractive to bank customers who want higher results and want to diversify, but are more comfortable investing in government securities.
"We've been very bullish on inflation on a global basis," Mr. Kreps says. "You're having this evolution provided the countries don't reverse themselves from stabilizing the currency and lowering inflation."
Says Morningstar analyst Eileen Sanders, "I have a fairly high opinion of GT's ability in the international fixed field. Their returns are fairly strong, not always the best.
"Their disadvantage is they don't keep their portfolio managers very long."
A Steady Team
Mr. Kreps responded that in the fixed area, the management team has been stable since he has headed it.
Mr. Cunningham, who was recruited from a similar post at American Capital Management Corp. in Houston in May 1992, said that deciding on a major bank sales push was not easy.
"It wasn't as if someone had flipped a switch and decided to get into the business," he says. "GT Global had a franchise in international markets and was respected by the broker community. But this was not the profile for a bank customer."
Adds William Guilfoyle, senior vice president of marketing, "We recognized that distribution channels are changing, that banks are a powerful source of investments. Everyone has a bank account."
Rough Time Predicted
Mr. Guilfoyle said many people in the mutual fund industry predicted GT Global would stumble on its bank effort.
With banks in mind, GT Global created the High Income fund and changed the name and investment focus of Global Bond to the Global Strategic Income fund. It also added B-share back-end loads for all of the U.S. fund group.
Mr. Cunningham also went to work hiring his wholesale support sales staff, beginning with account manager Victoria Hatch from GT Global's broker-dealer marketing department and a wholesaler from American Capital, Philip Schertz, who would cover New York and New England.
No |College of Investing'
In August 1992, Steve Donovick was hired from an insurance company; in September, Philip Christopher from Quest For Value funds to cover the Mid-Atlantic region. Tony Rogers was hired from NCNB to staff an office near Raleigh, N.C., in September.
Others were hired later, with Paul Anderson, a former American Capital wholesaler, coming on in September of this year. Mr. Anderson covers the Midwest.
The first sales contract was with Invest of Tampa. Other third-party marketers followed, and today GT Global has more than 350 selling agreements with bank broker-dealers.
Unlike many fund groups, GT Global has no structured training approach, something banks seem to crave.
"Brokers don't come to the College of Investing at GT Global. It's much more subtle than that," Mr. Cunningham explains. Instead, wholesalers tell brokers on frequent visits that GT Global funds are not the only game in town.
Hoping for One-third at Banks
Despite the doubters in the mutual fund industry, Mr. Cunningham believes that with GT Global's revamped fixed investment management and new funds targeting bank customers, the bank sales effort will work.
"It's unrealistic to think this will overtake our broker-dealer distribution channel. But as bank sales increase, it would not be unrealistic to see one third of the company's business come through banks in three to five years."GT Global's MutualFunds at a GlanceHead-quarters San FranciscoPortfolios 16 offered in U.S., primarily international equity and bond fundsAssets $7.3 billion under managementBank 8wholesalersGT's parent GT Management PLCcompany London