Lowry’s road to RevenueShares went through Smith Barney/Citigroup, where prior to forming VTL in 2004 he was a managing director in Smith Barney’s consulting group. Today, he’s ready to take his RevenueShares to a higher level after a period following the recession when it pared back its sales force and laid low. But the company has new fund ideas it wants to launch, and it needed cash to make that happen.
Lowry says he was approached by several U.S. investors before a law firm headed by a former SEC official introduced him to a Chinese entity that wanted to get a foothold in the U.S.
In May, VTL sold a 22 percent stake of itself to Dalian, China-based Suzhou Industrial Park Kaida Venture Capital Investment for $7 million. Most of that money will be used to expand RevenueShares’ business. In return, Lowry says his company will help its Chinese partners provide education and help further develop China’s equity capital markets, including ETFs.
And Lowry hopes someday to sell RevenueShares funds in China. “We’re a long way off from that because there are a lot of regulatory issues,” he says.
With extra cash on hand, RevenueShares in July hired eight people to boost its marketing and distribution staff to expand its ETF line-up. And despite the recent lack of a sizable sales force behind them, the track records of RevenueShares funds have landed them on numerous platforms in the financial advisory industry. Lowry says 75 percent of the funds’ roughly $600 million in total assets have come from the Merrill Lynch, Morgan Stanley and Wells Fargo platforms.
“We’re getting a lot of business from LPL, too,” he says, adding that mid-sized ETF managers who create their own ETF model portfolios for advisor clients are building positions in RevenueShares funds.
One such firm, Cumberland Advisors in Sarasota, Fla., currently uses the RevenueShares Small Cap Fund for its clients. David Kotok, Cumberland’s chief investment officer, says he uses revenue-weighted, equity-weighted and cap-weighted strategies at different times in the market cycle. And he offers that the current environment of positive inflation of less than two percent, slow yet steady economic growth of about two percent and some––but not spectacular––jobs growth indicates a cycle of rising prices.
“That will reflect in top-line growth first,” Kotok says. “So a little bit of inflation and accelerated growth show up in revenue-weighted schemes.” He adds that he favors small caps right now because he believes the U.S. economy is leading the developed world out of its collective funk and that smaller U.S. companies are domestic plays that should benefit from rising pricing power.
As for RevenueShares, now that the Ultra Dividend Fund is on the market the company expects to have more funds in its pipeline.
“The next thing will be to go international because even though the global markets’ recovery will be slow, the equity markets will be the only place to be over the next five to 10 years,” Lowry says.