Tearing Down `Fashion Industry' Image of Mutual Funds is One Mission for Larry Halverson, President of MEMBERS Mutual Funds

MADISON, Wis. – It’s been 18 years since Larry Halverson came to CUNA Mutual Group and the scope of the company, particularly in the area of investments, has morphed into an entity that has kept pace with its competitors. Halverson, who serves as senior vice president of MEMBERS Capital Advisors (MCA), CUNA Mutual’s registered investment advisor affiliate and president of MEMBERS Mutual Funds, is considered by many in the industry to be one of the go-to guys when it comes to investment trends and nuances impacting the credit union industry. His other roles include vice president of the Ultra Series Fund, one of MCA’s nine mutual funds and providing investment direction for MCA’s separately managed accounts and investment advisory services to MEMBERS Trust Company. With such a full plate, Halverson writes a monthly investor friendly “I’ve been thinking” column that has sharp wit and enticing leads devoid of the typical stodginess found in many expert commentary. He’s in a position to write from the hip since he’s been at MCA since 1987, coming aboard when the investment operation was still green and Mike Daubs, president of MCA and CIO of CUNA Mutual, was one of eight employees here. “It was very small,” Halverson recalled. “I was the only person in the common stocks area. The culture was very much investor oriented.” MCA traces its roots to a small group of clergy in central Iowa that formed an insurance company to protect family members from financial harm. In 1982, that company founded Century Investment Management Company (CIMCO) in Waverly, Iowa, with just under $800 million in assets, to frugally invest premium dollars to pay claims. Daubs became its president. In 1984, CIMCO’s parent company, Century Life of America, pioneered the launch of Variable Universal Life Insurance with assets managed by CIMCO. Five years later, Century Life and CUNA Mutual announced a permanent affiliation, and CIMCO moved to Madison, Wis. Prior to coming to MCA, Halverson was president of Hawkeye Investment Management, Inc. in Des Moines; an investment analyst with State Farm Insurance Companies in Bloomington, Ill. and prior to that, was an investment analyst with American National Insurance Company in Galveston, Texas. The Spencer, Iowa native met Daubs, who was working at another company, while at State Farm. When Daubs made the move to MCA, he sought out Halverson’s expertise in stocks and funds for a new position. Halverson recalls how he was ready to make a philosophy shift. “I wanted to get in an environment that would allow me to get closer to the investors,” he said. “I wanted to be an investment person not just in investment sales.” Once he came aboard, his role was to put together a team of professionals as well as launch new products and services. MCA already had three mutual funds at the time – the Ultra Series Fund, which had roughly $10 million invested in them then. The funds were originally variable annuities. In 1997, with extensive feedback from credit union CEOs and other representatives, MCA built on the success of the funds by launching six more. Today, those funds account for more than $910 million contributing to the more than $13 billion in MCA’s assets under management. Of the $910 million, $735 million is directly managed by MCA and $175 million is subadvised by other management firms. Halverson said more funds are scheduled to be launched in the future. Meanwhile, CUNA Mutual along with MCA rolled out its investment advisory services program in February. Aimed at CFOs, it combines investment analysis, advice and solutions with traditional asset-liability management (ALM) services. An integral part of the program is the assessment phase, which features a thorough review of the credit union’s ALM and investment policies and investment portfolio holdings. The goal is to assure alignment with current balance sheet liquidity and cash flow needs. Halverson has seen his share of investment activity over the years but he would have to say the main thing that has impacted credit union members are the fund’s long-term reach. “They’ve provided much better return than they would have had with savings accounts,” he said. “(Members have) learned that long-term money needs to be invested for the long term to get optimal return.” Indeed, Halverson said all nine of the MEMBERS Mutual Funds have outperformed their peers according to Morningstar. While the funds may not have the razzle dazzle of some of the more known funds, he admitted, MCA is not interested in them being the flavor of the month. “That’s been the mentality of the national media – what’s the best stock to be in right now. The fact is, there isn’t a best. Don’t expect to find something that is the best, leave your money diversified.” He said the best and most recent example he could provide on how this rings true is tied to the Federal Reserve Board raising interest rates. Investors sold bonds and moved into investment real estate for example. The interest rate on a 10-year Treasury bond is lower than when the Fed started raising rates 18 months ago going from 4.7% to 4%. “This is a great example of not knowing what the future holds,” Halverson said. “It’s a hype industry. Our mantra is help not hype.” Halverson said while the litany of scandals that plagued the mutual fund industry has made investors become more educated about where they’re investing, the fact remains that they still aren’t saving enough, of what they do save, they don’t invest enough and they don’t diversify. Meanwhile, CUNA Mutual CEO Jeff Post recently said more members need to know about the company’s high-performing mutual funds (June 1, Credit Union Times). Halverson totally agreed but also touted the funds’ success over the years. “The fund program has been very successful,” he said. “Yes, there are a lot of members out there who aren’t aware of them. Year to date, the funds that we’ve managed, we’re actually bringing them to members from managers other than ourselves.” Halverson is speaking of a group of firms MCA is working with: Wellington Management, Lazard Management and Shenkman Management. MCA manages the funds and the three firms are the sub advisors. He said MCA may bring in more sub advisors in the future. When he’s not involved in the day-to-day at MCA, Halverson, who admits he doesn’t have a whole lot of down time, spends most of it with his wife Colleen of 24 years and two sons Quinn and Schuyler. Quinn is in college studying to become a police officer while Schuler is a nuclear engineering major at the University of Wisconsin-Madison. He’s also become the highly sought after Bucky Badger mascot for the school this year, Halverson boasted. The Halverson’s are also proud owners of six cats, one bird and a recent addition, a Belington Terrier. Going forward, a number of factors will have an impact on how members and investors at large will invest. Halverson said the influence of developing economies in Asia including China will have an impact on economies worldwide over the next decade. Diversification still remains a challenge for most investors and a shift from self-guidance prevalent in the 1990s to more help from professionals today are a few notables. “We are owned by credit unions and members,” Halverson said. “We aren’t owned by shareholder groups so we don’t have conflicting interests. Our focus is to simply make lives easier.” [email protected]