02.09.2015
By Terry Flanagan

Hennessy Crosses $6 Billion

Hennessy Advisors, a Novato, California-based mutual fund company with $6 billion in assets under management continues to grow by expanding its distribution.

The company has grown assets, both from acquisitions and organically, by increasing its distribution base. Assets under management were less than $1 billion as recently as 2012, when it acquired a family of mutual funds from FBR Funds, several of which were merged into its existing funds. Currently, Hennessy manages 16 funds, virtually all equity-focused.

“We don’t do any separately managed account business, we don’t do any institutional business, we just do mutual funds, and that’s it,” said Neil Hennessy, chairman and CIO of Hennessy Advisors.

Since the FBR acquisition, all of Hennessy’s asset growth has come organically through fund performance and expanded distribution. It’s added 7,000 Registered Investment Advisors  in the last two years, and approximately 3,000 of its 15,000 RIAs own two or more of its products.

“What the RIA market looks at is how well we’ve done for the shareholder,” said Hennessy. “Eight of our 16 funds are four stars or better, and eleven of the 16 are three stars or better. We’ve made our shareholders money on a year-to-year basis 82% of the time, and that includes 2008, when everything was down.”

The RIA channel today accounts for virtually all of Hennessy’s distribution, whereas only a few years ago it accounted for half, the other half being retail direct.

In choosing products, RIAs track not just one-year performance, but three-, five-, and ten-year performance. “That’s how our RIAs are looking at it,” Hennessy said. “Once you have the three, five, and ten, and the numbers are good, they’ll stay around for a long time.”

Mutual funds typically have a long lifespan, but undergo significant shareholder turnover. “The lifespan goes on until you close it, or someone buys it, or you merge it,” said Hennessy. “The shareholder lifespan is about three years on the equity side, for a myriad of different reasons. It could be the market, it could be somebody died. Your assets are always turning over. Last year, we brought in $2.2 billion in new money, and $1.2 billion went out, so we netted about $850 million, which from our standpoint is a great net number, especially for a small company in Novato, California.”

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