Global Fund Distribution:
Best Practices, Key Trends, and Opportunities to Grow Sales Worldwide

Far from scaring investors away from mutual funds, the current international financial crisis will support continued growth in the global fund industry in the long term, according to a new research report from data/consulting firm Strategic Insight. But changes in the fund distribution landscape could create a different set of winners within the mutual fund industry, the report warns.

“Despite lower sales and a flight to safety in the near-term, the global financial crisis is an opportunity for the many benefits of mutual funds – including transparency, liquidity and diversification – to become even more accepted worldwide. Uncertainty will only make mutual funds look better relative to derivatives-based structured products, hedge funds, and direct stock investing”, stated Daniel Enskat, Head of Global Consulting at Strategic Insight and author of the just-published, 150-page report, ‘Global Fund Distribution – Best Practices, Key Trends, and Opportunities to Grow Sales Worldwide’.

Some of the report’s key findings include:

• The center of growth in the mutual fund industry is shifting towards Asia, as seen by the region’s positive net inflows this year despite sharp declines in Asian fund performance. Asia is building a culture of fund investing, and is in many ways where the US fund industry was 20 years ago.
  
  
• Shifts in demand open opportunities to new competitors within the fund industry. The field of rivals in Europe and Asia is notably different from each other and from the US. Firms that are not participating in the growing links between Asia, the Middle East, Latin America, and Eastern Europe, may be left behind over the next decade.
  
  
  
  
• Fund distributors – such as banks, brokerages, etc. – are taking on increasing fiduciary responsibilities, a trend that the financial crisis will accelerate. As a result, those firms are centralizing distribution philosophy and mutual fund selection processes, which tends to concentrate fund flows among asset managers that have established strategic relationships with the distributors.
  
  
• At the same time, many global distributors are decentralizing the front-line sales of mutual funds by taking centralized approaches and adapting them locally. With the empowerment of local distribution, local fund analysts also take on more power – and make distribution strategies even more complicated for asset managers.
  

“The book is a blueprint for companies contemplating global distribution initiatives or expansion, while also offering established international fund managers a detailed analysis of important changes in distribution trends around the world and how current events are shaping the landscape and opportunities going forward,” says Enskat.

The report is divided into three sections:

• Part 1, “Global Forces Changing the Mutual Fund Industry”, provides an action plan for customer retention and growth in the current challenging times, strategic changes of offshore and onshore fund flows, and the details of the long-term shift of assets under management globally by region in light of a broader approach to asset management.
  
  
• Part 2, “Trends Impacting Distributors Around the World”, discusses fund selection methodologies and how distributors are attempting to move from select lists to asset allocation advice, changes in the operational structure of fund selection units, and detailed case studies for global and regional distribution.

• Part 3, “Best Practices for Asset Managers To Grow Sales”, highlights product innovation and management in a global fund world,  strategic versus tactical product lines, and wholesale distribution through global distributors versus the need to be fully operational on the ground.  As part of SI’s best practices recommendations is the establishment of “creative data analyst” teams and creating a “selfless”, breed of integrated sales teams to ensure long-term growth.
  

“The crisis provides a rare window of opportunity for firms to attract affordable talent, and for forward-thinking companies to lay plans to strengthen themselves,” Enskat says. “Roughly two-thirds of the top 50 mutual fund managers today were not on the top 50 list ten years ago. Fund companies that are not adapting to the increasing speed, change, and complexities of the business of global distribution risk being left way behind.”

Strategic Insight put the new report together with input from dozens of global CEOs, Heads of Sales, Product Development and Strategy – all of whom shared details and feedback on their firms’ strategy and distribution efforts. It also includes data from over 100,000 on- and offshore funds and share classes using SI’s proprietary Simfund Global database.

For a detailed discussion of the book’s key findings please contact the author at +1-212-217-6859 or Daniel@sionline.com