TCW Takes a Second Shot at the Retail Fund Market
For the second time this decade, TCW Group, a Los Angeles-based money management firm that focuses on institutional clients, is trying to make a push into the lucrative--but highly saturated--retail mutual fund market.
The company, which manages $55 billion in assets for corporate and public pension plans among other institutional investors, on Monday made nine institutional funds it runs under the Galileo brand name available to financial advisors and individuals.
The funds are being sold as no-load, meaning with no sales fee, through discount brokerage Charles Schwab’s so-called fund supermarket, but company officials said they hope to distribute the funds through other fund supermarkets too.
For TCW, “it’s their second chance,” notes John Rekenthaler, director of research for the Chicago-based fund tracker Morningstar Inc.
In 1992, TCW formed an alliance with what was then Dean Witter to sell a slate of mutual funds through that company’s brokers. These funds, sold under the TCW/DW nameplate, “tilted toward TCW’s expertise in high-risk asset classes, like high-yield [bonds], the emerging markets, Latin American stocks, and small-cap stocks,” Rekenthaler said.
But because these were the very asset classes that got slammed when the ‘90s bull market narrowed three to four years ago, the TCW/DW funds had difficulty attracting assets, Rekenthaler said.
Although TCW continues to sell its TCW/DW funds through Dean Witter brokers, the relationship is no longer exclusive. And TCW officials announced their intent to convert TCW/DW funds to the Morgan Stanley Dean Witter name.
“This is really our first effort at the retail market where we are controlling the message,” said David E. Prichard, 39, TCW’s senior vice president who was recruited from Franklin-Templeton to oversees the Galileo funds.
This time around, TCW is attempting to stake a foothold in the retail market not with high-risk products, but with so-called core funds, a smart move, according to Geoff Bobroff, an independent industry consultant in East Greenwich, R.I.
Among the Galileo funds that individuals will now have access to are TCW’s Select Equities Fund, run by the well-known manager Glen Bickerstaff; its Large Cap Growth Fund; its Large Cap Value Fund; its Core Fixed Income Fund; and its European Equities Fund.
Still, Bobroff says, “it’s going to take some time” for TCW to establish its name, given that there are now more than 12,000 mutual funds available to individuals.
Prichard acknowledges this but believes the firm can build name recognition quickly by winning over the financial advisor community first, rather than going directly to individuals the way many no-load direct-market fund companies do.
“We are not going to engage in high-end advertising,” he said.
Mutual funds currently represent only 3% of TCW’s total assets. Prichard said the company eventually hopes to build the business to the point that they account for 25% of total assets.
