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Hey I just met you
And this is crazy
But here’s my number
So call me maybe.

~Carly Rae Jepsen

 “Call Me Maybe”



At Havener, when we meet with an asset manager who is launching a mutual fund and looking for marketing help, one of the questions we ask them is, “What is the capacity limit for this strategy?” This question is usually met with a chuckle, snort, or sideways look as the mutual fund may only have $25 or $50 mm in seed money. Yet, there we sit, pens poised, awaiting an answer. Why is it important to think about the asset level at which you would close your mutual fund when you just opened the doors?


1. Many mutual funds fail at knowing when to say when.

This industry phenomenon is seen time and time again: talented portfolio manager with solid, repeatable investment process generates strong performance, garners attention from investors, assets grow and grow some more, until the fund is too big, performance suffers, investors redeem, assets decline, performance suffers and suffers some more, and the vicious cycle continues until … the party screeches to a grinding halt. It’s the investment management version of Icarus flying too close to the sun; he gets burned and the investors do too.


2. Alpha, Alpha, Alpha

Asset bloat might be kryptonite to alpha generation. The direct source of any causal relationship has been the subject of many academic papers (diseconomies of scale, investor behavior, etc.) I’m not an academic, but my street sense view of the scenario is – asset bloat is a problem. Active management is challenging enough without introducing additional hurdles. If one of your values is to strive to deliver consistent outperformance for your investors, then perhaps a worthwhile exercise is to identify the known obstacles that could derail that mission as well as your mutual fund distribution plan. Identify them and be ready to steer clear (or pump the brakes as the case may be).


3. You will be asked. You need an answer. You need to stick to it.  End Zone

As Vince Lombardi said about the end zone, “Act like you have been there before.” Don’t laugh when someone asks, “What is your capacity?” The behavioral read is thatEndZone.png you find it humorous to think anyone would ever invest that much money with you. Take the question seriously. If you are lucky, it will be a “problem” you will face in the future. Realize too that the number you say in the early days will be the number people expect you to honor. If it feels better, give people an AUM range (a range within reasonable bounds like $2 – $3 billion, not somewhere between Infinity and Beyond), and let them know you will monitor capacity as assets grow to watch for deterioration of alpha (if that is indeed a true statement).


4. The soft close is the power play.

When we say close, we mean a soft close. Why? A soft close can create some urgency in your mutual fund distribution strategy since investors can’t drag their due diligence on too long lest they miss the proverbial boat. It fosters loyalty and affords respect to your early investors who found you “first”. Above all, put yourself in the shoes of the advisor facing a hard close: Most of my clients are in Fund X, but now you are hard closing, so all my new clients have to be in Fund Y (which I have to go find now, thanks a lot) and that can create all kinds of dispersion issues and operational headaches. Why don’t I just move everyone to Fund Y? Nice one, Fund X. Total botch job.

The time to contemplate your capacity limits and AUM number is well before you reach it – as in, when you are starting your mutual fund and are building out your distribution plan. Be thoughtful about your approach to asset gathering. Honor your commitment to your existing investors to be a good steward of their capital. Remind yourself of the whole Icarus thing, and if that doesn’t resonate, there’s always this one: Pigs get fat, hogs get slaughtered.

Is Mutual Fund Wholesaling Dead?

On the way out the door the other day, someone said to me, “Don’t you think mutual fund wholesaling is dead?” My answer was, “No” – but then I couldn’t stop thinking about the question… and whether I want to change my answer. Maybe wholesaling is dead, at least the way most firms do it. So how do you keep your mutual fund distribution effort from going the way of the walking dead?

Your wholesaling effort is dead or dying if:

 1.  You are all about old-school cold calling

For obvious reasons, a salesperson banging the phones and leaving voicemails, “My name is X, from Y firm, we run Z mutual fund, give me a call at 555-no-one-cares” doesn’t often result in a high-probability sales opportunity.

2.  Delivery of materials is the primary focus of your sales communications

Your materials are on your website (please say you have a website?). So you don’t need a sales person to send 40 emails a day to his sales funnel with these two sentences, “Here’s a link to the commentary on our website. Let me know if you need anything else.” Salespeople should be closing deals not delivering links to commentaries. Definitely not a good ROI of your $ or that salesperson’s time.

3.  Your expensive salespeople are mass-senders of email templates

Most email templates sound like… templates. Pretty difficult to fool the recipient into thinking it’s “about them”. Especially when you forget to change the name – c’mon, we’ve all done it. If you have something worth saying to a lot of people, use an email service like Vertical Response for cents on the dollar.

Mutual Fund Wholsaling

Your mutual fund wholesaling effort is alive and thriving if:

1. You are pulling like-minded target investors to you

If your PMs write/talk about things that are important to them and to investors: risks in the markets or opportunities to take advantage of, questions investors are grappling with, cool topics being discussed in the industry … like-minded people will gravitate to you. They’ll find you. They’ll read what you are writing. They’ll listen to what you are saying. And the odds of your salespeople closing deals from this group of target investors are a lot higher than from a list of names/numbers pulled from SEC data and ranked by AUM descending.

2. Solving problems is the primary focus of your sales communications

Your team puts in the work to understand what the investor’s current challenges are and then you think about how you would solve them if you were in their shoes… with the products you have to offer. And then your team puts in more work to articulate that to the investor, to help them think through the role your product will play in the portfolio, how it will help them build a portfolio that is better aligned with their client’s needs. People are busy. If you want them to look at your fund a certain way, you need to show them. Don’t expect your target investors to do more work than you’re willing to do.

3. Your salespeople are actually being people

As in… your salespeople understand that an investor might have more important things to do on a Monday morning at 9 am besides talk to a wholesaler about some new mutual fund. Your salespeople have hobbies, they read things, they lead lives outside their offices, and they have other things to talk about with a human besides the current hot mutual fund you are pitching. Your salespeople are smart and they are cool. #winning


At Havener, we spend a lot of time putting ourselves in other people’s shoes. If I was an advisor, would I be totally overwhelmed by the amount of unsolicited emails and phone calls I receive from wholesalers -90% of which are not about me, or my clients, or the issues I’m facing? Um, yes, I’d be overwhelmed … and annoyed.

Before your salespeople write their next email or leave their next voicemail, perhaps it’s worth thinking about it from the recipient’s perspective. Who is the email or voicemail about? If the answer is you, hit the reset button ASAP.

Maybe wholesaling itself isn’t dead, but the old school methods typically used in mutual fund distribution certainly are. Some of us will put in the hard-work and effort to pivot and adapt, and some of us will just wander around the halls of wholesaling like zombies, flinging fact sheets in the air, wailing “Call me if you have any questions”… then wonder why the phone isn’t ringing.



Havener Capital