Highland Capital Management is plotting a stronger push into the independent broker-dealer space. The firm hired 14 external wholesalers including a new head of independent B-Ds.
Six additional external wholesalers will be added by year’s end, Brad Ross, president of Highland Funds, the firm’s retail affiliate, told FA. He added Highland derives around a quarter of its roughly $5bn in mutual fund assets from independent B-Ds. The firm hopes to generate around 60% of its AUM from this channel within the next 24 months, Ross said.
Highland is planning to target the space with its income offerings including a suite of interval funds which it plans to launch in July. Interval funds are closed-end funds which do not trade on the secondary market. Instead their shares can be periodically repurchased from investors, thereby allowing investment in more illiquid assets. Highland will also pitch its exchange-traded funds, mutual funds, traded and non-traded real estate investment trusts and its health care business development company to this channel, Ross, told FA.
Highland is making a push into the independent B-D space now given the potential for asset growth in this channel, Ross explained. “AUM has moved over there in faster pace over the past five years,” he said. “In my business plan, when I got here four years ago, there was always going to be a foundation laid for the independent broker-dealer channel. For two-and-a-half years we’ve laid that foundation, we’ve got the right product mix, we believe and it’s going to be the growth engine for Highland going forward.”
As of 2012 Highland only had about $15m in sales from this channel. Sales jumped, particularly from 2013-2015, when the firm experienced 90% year-over-year growth in sales. This channel now represents about 25% of Highland’s roughly $5bn in mutual fund assets, according to Ross. The firm hopes its mutual fund AUM will increase to about $7bn-$8bn within the next 24 months, of which the independent B-Ds will account for a greater percentage—60%.
The new hires boost Highland’s reach into territories such as New York, Seattle, California and Florida, Ross added. Seven internal wholesalers will also work alongside the team.
Ross added advisers in the independent B-D channel are very open to new products and are looking for long-term partnerships. This differs from the registered investment adviser space which is a harder sell, he added. “The pure RIA is one in which it takes at least a year to build a relationship with,” he said. “We do that as well but it’s a much longer relationship build.”
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