- New research on product innovation in asset management highlights the generally low success rate of fund groups in their product launches
- Innovation has always been the lifeblood of the fund management business but with regulatory pressures growing it is taking longer and getting harder to introduce new ideas
New research highlights the generally low success rate of fund groups in their product launches. Analysis by specialist research house, MackayWilliams, reveals that just 3% of funds launched between 2006 and 2011 reached more than €1bn of assets under management by 2014 (1) and less than 30% ever achieve assets of more than €100m.
“Most groups set the success bar for new products much higher, at around €500m, and with this target they have less than a one in 10 chance of hitting the mark” says Diana Mackay, CEO of MackayWilliams.
In the heavily regulated arena of asset management, the success of new funds has become a critical measure of a group’s asset building achievement. In the course of a year fund groups will launch 2,000 funds, on average, and yet the overwhelming majority will fail to gather meaningful assets. With a product choice of around 35,000 in Europe, why do investors need more?
“New funds are the revenue generators of the future and, like it or not, they are responsible for significant net sales inflow, regardless of whether they are launched by a group with captive clients or are reliant on third party distribution”, explains Diana Mackay. “Of the €2.5trn of asset growth that has occurred over the last five years, nearly half (€1.1trn) has come from funds that were launched during the period. Innovation has always been the lifeblood of the fund management business but with regulatory pressures growing it is taking longer and getting harder to introduce new ideas. Nowadays, product developers and strategists must make every fund work for its space on distributors’ shelves and this means culling the dead wood as well as launching funds that really have appeal with changing investor appetite.”
Increasingly success will be linked to independent evaluation of feedback from fund selectors about where the product gaps exist. An extensive interview process conducted by Fund Buyer Focus provides the voice of clients, and represents a vital additional source of information for product developers. The latest product innovation report highlights rising interest amongst distributors for ESG products, some niche appetite for frontier funds and other thematics, as well as more ‘solutions’.
(1) Analysis based on Lipper data of funds launched between Q4, 2006 and Q3, 2011. The success rate is based on the maximum AUM size reached by Q3, 2014 to ensure that all funds measured have a minimum three-year track record.
About the research
The MackayWilliams Product Innovation report is a bi-annual study monitoring the changing appetite of investors through intensive interviews of over 1,000 of Europe’s most significant fund selectors. These selectors account for €2trn of third party assets. The research is conducted by Fund Buyer Focus, the Berlin-based subsidiary of MackayWilliams LLP (London).