Ameriprise Financial Inc. hopes its new Threadneedle Funds brand will appeal to third-party financial intermediaries.
Two new funds — the Threadneedle Global Equity Income Fund and the Threadneedle Global Extended Alpha Fund — are expected to make their debuts in August. The funds will join four RiverSource funds that were re-branded as Threadneedle funds in March.
The name change helps differentiate funds managed solely by Minneapolis-based Ameriprise's RiverSource Investments from those subadvised by its London-based subsidiary, Threadneedle International Ltd., according to a statement from Ameriprise.
Perhaps more importantly, the establishment of the Threadneedle brand creates a fund group acceptable to third-party intermediaries, industry experts said.
SUSPICIOUS OF FUNDS
Such intermediaries may be leery of using the RiverSource funds, as they are proprietary, and intermediaries don't like using proprietary funds, said Geoff Bobroff, a mutual fund consultant in East Greenwich, R.I.
"I'm not sure any broker is inclined to jump on RiverSource," the consultant explained. "But Threadneedle is an interesting and new name."
Of course, Ameriprise will have to work to ensure that advisers view Threadneedle as separate and distinct from RiverSource, Mr. Bobroff said.
So far, it appears that that is what Ameriprise is doing.
In May, Threadneedle hired two dedicated senior product specialists to focus on increasing institutional and retail business in the United States
"A fundamental part of our U.S. strategy is to expand our activities in the retail mutual funds and variable annuity markets, both through Ameriprise financial advisers and by promoting the funds to third-party financial institutions," William Lowndes, head of U.S. distribution for Threadneedle, said in a statement. "The hiring of two senior product specialists helps advance Threadneedle's commitment to this strategy."
It is a tricky strategy to get right.
Merrill Lynch & Co. Inc. of New York tried to do it when it created the Mercury Funds group in the late 1990s, but that effort was largely a failure, Mr. Bobroff said. Merrill Lynch got out of the mutual fund business altogether in 2006 when its funds were taken over by
BlackRock Inc. of New York.
Citigroup Inc. of New York had slightly better luck with its Smith Barney fund group, Mr. Bobroff said.
However, the Smith Barney funds were never a smashing success, and in 2006, they were taken over by Legg Mason Inc. of Baltimore.
Proving that it is not impossible to create a fund group with its own identity that appeals to third-party intermediaries, Morgan Stanley of New York has had success with its mutual fund unit, Van Kampen Investments Inc. of Oakbrook Terrace, Ill., Mr. Bobroff said.
That success, however, is in jeopardy due to recent poor fund performance.
Morgan Stanley co-president James Gorman acknowledged Van Kampen's performance problems during a conference call last month.
Performance could be a problem for Threadneedle.
Morningstar Inc. of Chicago has given two Threadneedle funds lukewarm reviews.
The Threadneedle Emerging Markets Fund "knows its areas well," but with a 1.82% expense ratio, "it's not easy to make a case for it," Gregg Walpor, a senior mutual fund analyst at Morningstar, wrote Jan. 26.
Threadneedle International Opportunity has a cheaper price — it had an expense ratio of 1.34% at the end of 2007, down from 1.65% at the end of 2003 — but "those changes aren't enough to make the fund worth owning," Mr. Walpor wrote March 31.
A third Threadneedle fund, the Threadneedle Global Equity Fund, got better marks.
"This is a solid option, and with fewer top-notch competitors, it would merit more attention," Mr. Walpor wrote April 30.
Threadneedle International is confident in its ability to manage money.
Because it has a "strong" hedge fund business, Threadneedle has the ability to bring hedge fund strategies to its mutual funds, Mr. Lowndes said.
For example, the planned Thread-needle Global Extended Alpha Fund will gain exposure to equity securities through holding long and short positions.
E-mail David Hoffman at [email protected].
