On DOL Fiduciary

Brinker Capital rolls out DOL fiduciary rule-friendly funds

The firm's new Destinations Funds are designed to meet standards set by the pending regulation

Apr 12, 2017 @ 6:06 pm

By Jeff Benjamin

Brinker Capital, an investment management platform geared toward financial advisers, is jumping on the fiduciary-rule bandwagon by converting $7 billion worth of managed account assets into a family of 10 mutual funds.

The Destinations funds, which were officially launched in March but were seeded with managed account assets last week, will represent an average cost savings of 21% over the prior model, which used outside funds to build portfolios.

The new funds will employ virtually identical strategies as the old managed account format, but the strategies will now be registered as mutual funds and the underlying managers will act as subadvisers.

Brinker, a 30-year-old investment management platform with $19.1 billion in total assets under management, currently manages assets for more than 4,000 registered investment advisers.

Keeping with its history of only working with financial intermediaries, the new funds will not be available directly to retail-class investors.

In addition to Brinker, the Destinations funds will be available to advisers on the institutional no-transaction-fee platforms at Fidelity Investments, Pershing and Envestnet.

The Brinker managed account platform of Destinations strategies has been around since 1995 and includes $9.3 billion in total assets.

The $7 billion that was rolled into the new mutual funds represented the qualified account assets, according to Noreen Beaman, chief executive officer.

The remaining $2.3 billion is represented by taxable accounts, which would be subject to a taxable event if transferred to the new mutual funds.

This represents Brinker's second foray into the mutual fund space.

In 2014, Brinker rolled out the Crystal Strategy fund family, which converted existing alternative managed account strategies into mutual funds.

The three Crystal funds were shuttered after just two years.

The Destinations funds represent a different kind of mutual fund effort, according to Ms. Beaman.

For starters, the new funds are not exclusively focused on alternative strategies, and they are designed to meet standards set by the Department of Labor's pending fiduciary rule.

"This is taking what we've been doing for 20 years and making it more cost effective," said Ms. Beaman, who compared the fund launch to Morningstar's plans to offer its own brand of mutual funds exclusively to financial advisers.

Like Brinker, Morningstar plans to wrap existing managed portfolios inside registered mutual funds.

Todd Rosenbluth, director of mutual fund and ETF research at CFRA, said the success of Brinker's new fund family could depend on brand recognition, which might not be strong with retail investors, but it is solid with advisers.

"Advisers are increasingly looking for third parties to manage portfolios and Brinker can be a beneficiary of that trend," he said. "They would be smart to target the audience that knows who Brinker is."


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