Small Number of Blockbuster Products Gain Most of Assets

Since the financial crisis, institutional asset holders are selecting fewer strategic partners and even fewer products, according to Strategic Insight, an Asset International company.

In 2010, global net cash flows to long-term funds reached $850 billion. Of that total, 95% of flows went to only 0.5% of registered products around the world (300 long-term funds). In Q1/2011, the number was even higher: 0.3% of the products globally (200 long-term funds) took in over 100% of flows, totaling $210 billion in net cash flows.  

SI found this trend has benefited global fund houses with powerful brands such as Franklin Templeton, Pimco, Fidelity, Schroders, Aberdeen, JP Morgan or Blackrock. According to the report, “David and Goliath in the Global Asset Management Industry,” some of these international firms have been able to provide a powerful combination of excellent client service, investment/operational support, marketing and blockbuster products to become a leading strategic partner for distributors or win prestigious institutional mandates.  

However, SI also noted the increasing growth of boutique firms and, for three reasons, expects this trend to continue: 

  • They have a clear investment process and a clear product positioning around one or two flagships; 
  • Asset holders looking to use external fund managers are often interested in satellite investment strategies or emerging market trends and boutique brands focused on these areas (in some cases, to offer something exclusive to their clients or boards); and 
  • The financial crisis tarnished the brands of many global investment names, especially those part of a larger group with other activities under the same brand, leading asset holders to look for independent asset managers – and boutiques. 

The extreme growth of investment boutiques due to blockbuster flows to flagship funds is a global trend, with names such as Carmignac or Bluebay in Europe, Value Partners or Huashang in Asia, or Double Line or Pacific Heights in the U.S. The report features case studies from the fastest growing boutiques around the world.  

SI found, in addition to clear fund positioning/investment process and competitive performance – which a number of fund managers can demonstrate, blockbuster firms in almost all cases have highly visible fund managers, outstanding marketing, and proactive communication.  

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