Engaging the direct investor: Montgomery’s way

Given the gloominess of the mood in equities funds management, and the persistence of net outflows from Australian equities funds in particular, it can be hard to pick out any bright spots.

But there are a few success stories which offer hints around product and marketing.

We have previously noted Denning Pryce, which offers a well differentiated equity income approach, available through products such as the Zurich Equity Income Fund. Their investment approach has worked well in the difficult investment conditions of recent years, but then so has Perpetual’s. But while Perpetual suffers net outflows, Denning Pryce has quietly gathered north of half a billion in Australian equities AUM. Not bad.

Denning Pryce’s marketing has been relatively traditional, combining the intermediary channel via a distribution partner with a low key HNW direct offer.

An interesting contrast is offered by Montgomery Investment Management, which targets the engaged direct investor, offering a useful case study. Roger Montgomery is a personal investment brand which is now becoming an investment management brand. His credibility comes primarily from consumer finance gurus, rather than the asset management industry, so he is coming from a different direction.

Probably best known for a regular column in the Weekend Australian, he also appears frequently on specialist financial media programs such as Ross Greenwood’s Money News. He has used new media effectively to share thoughts and build a network of mostly direct investors and prospects. It’s quality content (whether you agree with his conclusions or not), presented well and delivered effectively.

Montgomery has in the past focused on selling individual investors tools based on his views and insights. These have included books discussing his value-based investment approach, such as Value.Able, and subscription based software providing market and company analytics called Skaffold (priced at $1,330 pa).

This is not the only success we have seen around subscription models to direct investors. The recent sale of Alan Kohler’s AIBM (which produces Business Spectator) made it clear that most of its value related to investors paying $385 pa subscriptions for the Eureka Report.

But returns on asset management business models can be much better than subscriptions, so perhaps not surprisingly Montgomery has turned his hand to asset management via Montgomery Investment Management.

MIM’s first product was the wholesale Montgomery Private Fund. It has a minimum investment of $1m, targeted at HNW investors and small institutions, and claims a substantial outperformance record since inception.

One of the interesting parts of the fund’s value proposition is access to the investment ideas generated, not just asset management. This is another theme we are starting to see more of – offering investors a more transparent, engaged relationship with their asset manager. It’s a stark contrast to the opaque experience offered by most managed funds, and fits with the view of seeking to accommodate the preferences of key investor segments, which are both engaged and account for a disproportionate share of assets.

MIM has now launched a retail fund – the Montgomery Fund. This targets a wider retail client set, including smaller investors (minimum investment is $25,000), advisers, and platforms.

It’s far too early to assess MIM’s prospects of success; if you are on their email list, you received an invitation to invest in late August. But it’s another interesting initiative which responds in a creative way to the changing nature of investors.

Mind you, it’s not cheap. Management fees are 1.44% plus a performance fee of 15.38% for outperformance of the S&P / ASX 300. Investors may well get a more engaged experience, but they are going to pay for it.

Posted In: Trialogue