Fund flows double since crisis but fewer winners emerge

Net fund flows have almost doubled in the two years since the financial crisis but the ‘seismic shift’ the industry is undergoing means there are fewer winners, according to a Strategic Insight survey.

The research firm’s report – entitled ‘The Seven Secrets of Distribution’ - revealed that although cash flows have doubled from $475 billion (€344 billion) in 2008 to reach $900 billion (€650 billion), fund distributors are moving to a more guided architecture structure by favouring simpler and more thematic funds, with fewer 'blockbuster funds' compared to pre-Lehman.

‘The industry is undergoing a seismic asset class and regional shift impacting the global distribution landscape for years to come,’ said the report’s author Daniel Enskat, head of global consulting for Strategic Insight.

‘Selected ‘Newcits’ funds are picking up net flows and CEOs expect absolute return and investment solutions to dominate the landscape in the years to come, initially via ‘bridge’ products”,’ said Enskat.

The report also says that a number of metatrends will be impacting the industry in the next ten years.  While small and medium-sized firms are keen to go after new clients and geographies, large firms seem to be more focused on damage control and client service in their domestic markets.

Enskat says that communication is becoming a new battling ground for distributors. ‘Companies that are able to effectively communicate both product details as well as what their firm stands for, are successful, but finding the right communicators is challenging and a war for talent is developing.

‘Client service and the quality of (multiple) relationships were and are the line of demarcation between a blockbuster and being blacklisted.  As distributors reduce the number of firms they work with, they demand more customized support and tailored information.