Baron Funds Comments on Financial Engines Inc

Author's Avatar
Mar 24, 2015

Shares of Financial Engines, Inc. (FNGN), a service provider to defined contribution plans and individual investors, have declined by approximately 50% from their peak in early 2014.The Fund took advantage of low share prices to add to the position it established in the previous quarter. The stock remained weak in the fourth quarter following an unexpected management change. The new CEO has substantial operating and marketing experience, and has worked for Financial Engines since 2001. Accordingly, we think this change could be a positive and our long-term investment premise still holds. Financial Engines is the dominant player in a $5 trillion defined contribution retirement market. The company currently has contracts encompassing approximately $1 trillion in plan assets and manages over $100 billion. We believe there is significant potential to increase both figures through increased sales to plan sponsors, improved marketing to plan participants and broadened product offerings. Additionally, we believe the company can eventually use its expertise to service the IRA and defined benefit market, each with an additional $5 trillion in assets. We believe Financial Engines’ essential advice offering and plan connectivity advantage should result in significant client growth and a profitable recurring revenue stream. (Michael Baron)

From Ron Baron (Trades, Portfolio)’s Baron Focused Growth Fund Q4 2014 Quarterly Report.