Breaking · Asset Management
Fund Company Responds to Decade of Underperformance by Renaming Itself “Five Star Fund Company”
Sales up 340 percent since rebrand; every fund in lineup now carries the words “Five Star”; rival announces plans to become “Top Quartile Capital.”
Boston — The asset manager formerly known as Cresthaven Investment Management announced Monday that it has completed its transformation into Five Star Fund Company, a rebrand executives credit with reversing a ten-year decline in sales that had, until recently, closely tracked the performance of its funds.
“We conducted an extensive review of what was working,” said chief executive Alan Whitcombe. “It turned out to be the name.”
Whitcombe said the firm had studied every fund in its category that was gathering assets and identified a common trait. “They all had five stars next to them,” he said. “Ours had the word ‘Cresthaven’ next to them. We addressed that.”
Under the new structure, each of the firm's 31 funds carries the brand in its name: Five Star Large Cap Value, Five Star Mid Cap Growth, Five Star 2045, and Five Star Money Market, which Whitcombe described as “the first money market fund with five stars in the name, and we're very proud of that.”
Asked whether any of the funds had received five stars from an independent rating organization, a spokesperson said the firm did not comment on third-party ratings, and then said, “We received them from us.”
Sales have risen 340 percent since the change. Flows into Five Star Mid Cap Growth, which had been in net outflows for 38 consecutive months as Cresthaven Mid Cap Growth, turned positive within a week of the announcement. The fund's holdings, manager, and expense ratio are unchanged. Its one-year return is also unchanged, a fact the firm's marketing materials describe as “consistency.”
Retirement plan committees have taken notice. An investment committee in Scottsdale, Ariz., added three Five Star funds to its lineup at a meeting last week. The minutes record the rationale as “five stars.”
“I'm not going to put my clients in a three-star fund when there's a five-star fund sitting right there,” said financial advisor Brent Kessling, who advises the plan. “That's just math.” Asked who had assigned the three stars to the other fund, Kessling said he would “have to look,” and then said, “Nobody, I guess. It's just a fund.”
Competitors have responded. Lakeshore Asset Partners of Chicago filed paperwork Friday to become Top Quartile Capital. A third firm, which asked not to be named because the new name is not ready, said it was “exploring the outperformance space” and had narrowed its options to “Alpha,” “Alpha Plus,” and “The Alpha Plus Company.”
Whitcombe dismissed the imitators. “Top quartile is a range,” he said. “Five stars is a number. People understand a number.”
The firm's compliance department confirmed that every piece of marketing continues to carry the required disclosure that past performance does not necessarily predict future results. “We've actually enlarged it,” the spokesperson said. “It's the best news we've got.”
At press time, Five Star Fund Company had filed to launch its first new product since the rebrand, Five Star Six Star Fund, and said the name had “tested extremely well.”