Fund Architects LLC, which promises to provide small investors with institutional-quality money management, legitimately can claim that it thinks outside the box.
Under the guidance of chief investment officer Todd Porter, who had been the chief investment strategist at Morningstar Inc. in Chicago, Fund Architects has created Asset Builder Portfolios, which are based on a manager-of-managers investment style and designed to appeal to registered investment advisers, insurance companies and broker-dealers.
The aim is to maintain a flexible approach to portfolio management that allows the firm to adjust to rocky markets and to changing economic conditions, said Mr. Porter.
Chicago-based Fund Architects offers its funds through The
Charles Schwab Corp. of San Francisco, and it is in the process of joining the platform of an insurance broker-dealer with at least 2,000 representatives. Mr. Porter declined to name the broker-dealer, saying that the companies are still in negotiation.
He said that the manager-of-managers approach has gained momentum in recent years as a way to provide several investment styles. Mr. Porter favors managers who position up to 40% of their portfolios in international stocks and bonds.
A veteran of the investment business, he received approval from the Securities and Exchange Commission to begin operations for Fund Architects last month.
Financial advisers will take a wait-and-see approach to determining whether the firm can do a better job of delivering strong performance than its competitors, said Howard Schneider, president of Practical Perspectives LLC, an industry consulting firm in Boxford, Mass.
Mr. Porter's past affiliation with Morningstar will motivate advisers to take a look at the fund group, Mr. Schneider said.
TRACK RECORD
"Having a track record matters, and [Mr. Porter] should be trying to leverage his performance record at Morningstar," Mr. Schneider said. "What it comes down to is if you can deliver or not."
Fund Architects will offer seven asset allocation strategies: dynamic growth, moderate growth, growth, moderate, conservative, preservation and dynamic income.
The firm employs the funds of 25 managers across those strategies, including the CGM Focus Fund (CGMFX), which is managed by Ken Heebner of CGM Funds in Boston; the Hartford Capital Appreciation Fund (ITHAX), which is subadvised by Saul Pannell of Wel-lington Management Co. LLP in Boston; and Ivy Asset Strategy Fund (WASAX), which is managed by Michael Avery and Daniel Vrabac at Overland Park, Kan.-based Ivy Asset Management Corp.
Fund Architects requires that clients have a minimum of $25,000 in assets, and charges yearly management fees of 0.15% to 0.25%. Advisers who opt not to do the custodial work will pay a fee of between 0.4% and 0.5%.
LOW MINIMUM
"The firm's low minimum account size could be very helpful to many advisers for their smaller accounts," said Charles "Chip" Roame, managing principal of Tiburon (Calif.) Strategic Advisors LLC. "This is often a business that advisers need to fill, and it seems like a really smart strategy."
Fund Architects' objective was to create a platform that offers many options and that will help investors to reach their financial goals, Mr. Porter said.
"This platform allows me to look at the funds I like, and allows me to use any money manager that I want. I was previously limited to the funds on the Morningstar platform," Mr. Porter said.
The new firm offers a "much more entrepreneurial environment," he said.
While at Morningstar, Mr. Porter managed $14 billion and was the portfolio manager for the Trans-america Idex Asset Allocation funds and the Aegon Transamerica Series Trust funds, both offered by Transamerica Capital Inc. of Denver.
Aaron Siegel can be reached at [email protected].
