BOSTON — IXIS Asset Management Distributors LP, which saw its main sales channel dry up in 2000, has stemmed the tide of outflows and now ranks among the nation’s 10 best-selling mutual fund firms.
Last year, investors put $7.9 billion more into Boston-based IXIS’ stock and bond funds than they took out, according to Financial Research Corp. That is a big improvement from 2002, when investors yanked out $855 million more than they put in.
In fact, last year’s net inflows accounted for more than a third of IXIS’ $22.9 billion in long-term fund assets, according to Boston-based FRC.
There is a hitch, though.
Loomis Sayles & Co. LP — one of 15 asset management affiliates owned by IXIS’ Paris-based parent, IXIS Asset Management Group — accounted for $8.2 billion of net inflows last year. In other words, without Loomis, IXIS’ funds still would be experiencing net outflows.
“Loomis Sayles is really driving their sales,” said Lynette DeWitt, FRC’s associate director of retail investment markets. “When you speak of IXIS at this point, it’s Loomis Sayles.”
Stellar bonds
John Pelletier, chief operating officer at IXIS Asset Management Distributors, acknowledged that the positive net flows are due to the “exceptional performance of the fixed-income offerings from Loomis Sayles.”
Most of Loomis Sayles’ contribution came from two bond funds run by the same star manager: Daniel Fuss. The Loomis Sayles Bond Fund (LSBRX) took in a net $3.84 billion, while the Loomis Sayles Strategic Income Fund (NEZYX) netted $3.78 billion, according to FRC.
“Bill Gross gets a lot of ink, but I’d rather put my money at Loomis,” said Brian O’Rourke, principal at O’Rourke & Co. Inc., a Boston-based
financial planning firm, in a reference to the famed bond investor, and managing director and chief investment officer, of Pacific Investment Management Co. LLC of Newport Beach, Calif.
Kathleen Gaffney manages both funds with Mr. Fuss, who is 73.
The lopsided contribution of those two Loomis Sayles bond funds to IXIS’ flows is a concern, Ms. DeWitt said.
“That’s one of the risks that we put on them every quarter when we review,” she said.
Loomis Sayles’ outsized contribution to flows shouldn’t be cause for worry, Mr. Pelletier said. Although IXIS Asset Management Distributors is not a large fund complex, it comprises 15 institutional investment managers — each with varying investment styles.
Collectively, the 15 manage about $247 billion in assets domestically, most of it for big investors such as pension funds, foundations and endowments, Mr. Pelletier said. When one manager’s style goes out of favor, others’ styles are likely to be in, he said.
“The key phrase is diversity,” Mr. Pelletier said.
IXIS Asset Management Distributors, which refers to itself as “the name behind the names,” has come a long way from the dark days of 2002, when, according to FRC, its long-term fund assets had dwindled to $6.6 billion.
In the fourth quarter of that year, the fund firm, then known as CDC Nvest Funds, took a “hard look” at its products and decided to “totally change our business model,” Mr. Pelletier said.
The firm, in which New York-based
MetLife Inc. had a 48% stake until October 2000, had relied primarily on selling its products through
MetLife’s insurance brokers and had funds to accommodate virtually all of Chicago-based Morningstar Inc.’s style boxes.
“We were a proprietary fund family until October of 2000,” Mr. Pelletier said. “When we were sold, what had been a major source of our flows suddenly dried up.”
To reignite those flows, IXIS Asset Management Distributors decided to focus on the best disciplines of its institutional money management affiliates. It subsequently eliminated about 15 funds and asked Loomis Sayles — already one of the affiliates owned by its parent company — if it would consider integrating the two stand-alone fund groups.
Match time
“We went to our affiliate Loomis Sayles and said, ‘You have a small fund family, and we have a small fund family,’” Mr. Pelletier said. “‘Why don’t we combine them into a single complex, and we’ll be able to reduce costs for shareholders?’”
That integration combined Loomis Sayles, a no-load fund group, with IXIS Advisor Funds, a load family, under the IXIS Asset Management Distributors umbrella. IXIS Advisor Funds are managed by some of the 15 affiliates, including AEW Capital Management LP and Capital Growth Management LP, both of Boston, and Harris Associates LP, the Chicago-based investment adviser to The Oakmark Funds.
The 15 affiliates also have helped IXIS Asset Management Distributors build its separately managed account business, Mr. Pelletier said. That business, which had no assets in 2002, now manages $12.5 billion, he said.
Some big mutual fund firms at first were reluctant to enter the separate-account business for fear separate accounts would undercut some of their higher-margin mutual fund business.
“We were in a different situation, where we didn’t have business to cannibalize,” Mr. Pelletier said. “So we were happy to go in and build relationships.”
In fact, building those separate-account relationships with financial advisers helped IXIS Asset Management Distributors build its mutual fund business, Mr. Pelletier said.
“It wasn’t a big leap to go from the separate account to this fund that they maybe had never heard of before,” he said.
“We continue every quarter as we watch their growth to be impressed with the way they are running the company,” FRC’s Ms. DeWitt said. “Other competitors watch them in the managed- account business — they are the firm to watch.”
