There is no shortage of mutual fund managers who imagine the rich possibilities of running their own shop, with the chance to manage business as they see fit and keep a fat slice of the pie.
Most would rather not think about the hard realities that go hand in hand with that dream -- first and foremost, the distribution of their own funds. Even hot money managers find a tenuous connection between investment fame and the ability to attract customers to their own mutual funds.
Every now and then there is an exception, like former
manager Tom Marsico, whose 2-year-old
Marsico Focus fund has attracted about $2 billion. But most fund managers who strike out on their own struggle in the world of fund supermarkets and other forms of distribution on a budget.
That's why Fred Kobrick seemed to be onto something when he left
State Street Research and Management
two years ago, striking out on his own but taking on a partner in
. Not only did Cendant have deep pockets, it had scads of higher-end customers who were probably mutual fund investors. Cendant had a controlling interest in the venture, but CEO Henry Silverman wasn't going to tell Kobrick how to run his investment company.
Of course, the Cendant meltdown began less than a year later, and the deal that looked so promising on paper quickly became an albatross. By last week,
of Boston had acquired the Kobrick fund business, and the Cendant arrangement was history (Kobrick still owns his $200 million hedge fund, which continues to count Silverman as a shareholder).
It is debatable how successful the Kobrick fund business, originally called
, has been so far. But there's no question that shareholders have done well with the firm's three funds.
High Returns Don't Draw Cash
Kobrick Capital fund has earned 46.2% over the last 12 months, more than double the average 19% advance among capital-appreciation funds tracked by
. Kobrick Capital ranks 26 in a field of 257 funds over that period. The newer
Kobrick Emerging Growth fund is up 33.1% over the last year, ranking 13 in a Lipper field of 681 small-stock funds.
But Kobrick hasn't been managing huge sums of money. The entire company invests about $200 million in the mutual fund assets, about half in the Kobrick Capital fund. The other half is roughly split between Kobrick Emerging Growth and an even newer fund,
So how successful does that make the Kobrick funds? Their $200 million is short money compared with the Marsico billions, but many other investment start-ups would be more than happy attracting $200 million in the retail fund world.
Kobrick doesn't sound like he is one of them. His assessment: The Cendant disaster made it all but impossible to pull in really big money, no matter what kind of performance numbers the Kobrick funds achieved.
"As soon as they ran into trouble, my distribution and marketing became a nightmare," says Kobrick. "Everyone told me the public isn't that sophisticated, and they're not going to look beyond the Cendant name -- it won't matter how well you do. It turned out they were right."
Cendant Selling Assets
Meanwhile, Cendant was trying to put out its own fires. Last month's $5.4 billion deal to hand over its auto-leasing business to
Avis Rent A Car
is an example of the company's strategy to focus on its core business lines. The Kobrick funds were a speck in the Cendant ocean, and they certainly weren't going to be part of a core strategy.
"I just felt I shouldn't be sitting on my duff looking out the window and doing nothing about it," says Kobrick. "Cendant didn't want to be more committed to financial services. They wanted to be more committed to their core services and reconstructing themselves. Nothing was going to happen there."
Kobrick says Silverman recommended hiring
to find a new partner, but a solution first appeared during an unrelated breakfast meeting five months ago with Peter Voss, the chief executive of Nvest and a longtime Kobrick friend. Kobrick says Voss brought up the idea of trying to strike a deal, and the details were hammered out over the next several months.
Nvest owns 17 investment firms with a combined $135 billion under management. The Kobrick funds are its ninth acquisition since 1993, a pattern that normally involves the purchase of larger and more mature money-management companies.
Distribution Is Key
Why are Kobrick and Nvest a good match for each other? Our guess is that the union looks like a distribution pact made in heaven.
The two big sales forces that were selling Kobrick's State Street Research Capital fund years ago were
(which owns State Street Research and Management). Both of those sales forces sell Nvest funds and can effectively reunite Kobrick with his best distribution channels (Met Life owns 46% of Nvest).
Nvest officials believe Kobrick funds will be popular products with those reps who have known the money manager for years. They say there's no reason the Kobrick funds can't bulk up to $2 billion in 12 to 18 months with a big sales push.
Kobrick says the Nvest deal does not mean the end of no-load access to his mutual funds. Expect a multiple class of shares for Kobrick funds that will allow them to be sold directly and through advisers.
Meanwhile, Kobrick has hired money manager Michael Nance, formerly of
, to replace partner Michael Carmen.
Carmen, who had followed Kobrick from State Street Research and Management to his new firm, joined
Steven Syre & Steve Bailey write for the Boston Globe. This column is exclusive to TheStreet.com. At time of publication, they held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy stocks or funds.