World Revolves Around Retail, So TCW Puts Galileo On Shelves: Pension specialist figures advisers are 'mini-institutions'

The Los Angeles company, which manages $55 billion, mostly from pension plans and endowments, last week put nine of its TCW Galileo mutual funds on Charles Schwab Corp.'s fund supermarket -- a favorite of fee-based advisers. It expects soon to be listed on other fund supermarkets operated by the likes of Fidelity Investments and Waterhouse Securities Inc. The funds are available in two share classes. One is a retail class, with a minimum investment of $2,500, offered on Schwab's OneSource, allowing purchases at no transaction fee. The other is an institutional class on Schwab's other marketplace, which charges a transaction fee. The retail class will charge a 12b-1 marketing fee of 25 basis points; the institutional class won't.

Room at the top?

"We're not late to the game," insists David E. Prichard, the newly hired senior vice president in charge of TCW's adviser unit. "The dance has started, absolutely. But there's always room for high-quality, top-performance products." Chief among those is the TCW Galileo Select Equities Fund, run by star manager Glen Bickerstaff, who migrated to TCW nearly a year ago from Transamerica Investment Services. Mr. Bickerstaff, whose fund gained 38% last year, has beaten the Standard & Poor's 500 stock index in 10 of the last 11 years. More eye-popping numbers came from lesser-known Doug Foreman, whose Aggressive Growth Equities Fund, a mid-cap offering, returned 63% last year. But TCW isn't counting on advisers to flock to the offerings just because they're available for the first time. It's designing a corner of its web site for advisers only, providing them with institutional-style research and other information. It's also organizing mini-conferences for advisers in cities around the country on topics of interest to investment pros. So what kind of research do advisers want to see on a web site? And what topics could be addressed that aren't already explored at the zillions of other conferences advisers attend? TCW doesn't know yet, but it's canvassing advisers to find out. If this approach sounds familiar, it's because Mr. Prichard did exactly the same thing for J.P. Morgan & Co. when the old-line bank began reaching out to advisers three years ago. It was then that Morgan began hosting conferences for high-end advisers. "We really know institutional investment management," Mr. Prichard says of his new employer. "Financial advisers are another subset of institutional advisers. They're really mini-institutions." Chip Roame, a mutual fund consultant with Tiburon Group in Belvedere, Calif., doesn't think TCW's late arrival by itself will reduce the program's chances of success. "The institutionally oriented managers who come in to make their product available to the financial adviser market are actually doing quite well," he says. "All of the traditional pension managers are looking for ways to enter this field of high-net-worth investors and the registered-investor-adviser channel is certainly the booming one."

TCW's goals are ambitious

"The No. 1 goal is developing relationships (with advisers)," Mr. Prichard says. "Having said that, we're in business. We want to see $300 million this year." At $500 million in assets, the effort breaks even (the Galileo funds' $1.5 billion is all from institutions). Longer term, TCW wants to diversify its asset base to 60% institutional, 40% non-institutional (meaning advisers, 401(k) plans and direct investors). To this point, TCW's retail exposure has been confined mostly to a seven-year-old alliance with Morgan Stanley Dean Witter & Co., for which TCW subadvises several mutual funds. They ended the exclusive nature of their partnership more than a year ago, and TCW since has entered the separate-account-management programs of other heavies, including Salomon Smith Barney and Prudential Investments. The firm also is negotiating with Schwab to become part of its nascent separate-account program for independent advisers. Mr. Prichard calls advisers "our distribution channel to the retail market. To try to go out and beat Fidelity in advertising -- we can't compete at that. We don't want that."