The $10-billion question of distribution is the next step for a Washington State-based mutual fund shop as it crosses a key milestone.

Last week Smead Capital Management [profile] confirmed that its sole mutual fund, the Smead Value Fund, crossed the $1-billion mark. The milestone comes after the large-cap value equity boutique asset manager spent last year "building economies of scale to get leverage" in distribution, managing director Cole Smead tells MFWire.

"For most boutiques, it's not whether they can have success in a given channel, it's whether they can have success in multiple channels," Smead says.

Last year, the shop boosted its distribution team to six. And they've expanded their pricing options, too.

"We went from having a three-share-class mutual fund structure to having a ten-share-class mutual fund structure," Smead says. "We created a lot more revenue sharing avenues."

Historically, Smead says, most of the firm's growth has come from distribution through RIAs and wirehouses. He says "there's still massive opportunity there" in the advisor channel, but for now he has sights set on another channel for growth.

"The expansion of our share classes is pointedly for the retirement world," Smead says. "Can we crack the 401(k) market?"

Smead notes that the firm's investing team is still positive about the equity market, a story they see resonating broadly.

"Even today we don't think people understand how strong the U.S. economy is," Smead says. "The runway is longer than people expect, but it's narrower than most investors understand."

The firm will celebrate its eighth birthday in July, and its flagship mutual fund turned seven earlier this year. The firm managed $1.35 billion in total, including separate accounts and UCITS in Europe as well as the mutual fund, as of March 15. 

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