In a crowded marketplace, large advertising budgets and careful branding strategies can play a significant role in a fund family's success, explains Cerulli Associates, the Boston-based industry consulting and research firm. That's because such strategies can help "firms emerge from the marketing clutter and maintain resilience through difficult periods," says the September 2007 "Global Edition-Cerulli Edge" report.
How crowded is the marketplace? In the past five years, more than 320 new open-end funds have been launched on average each year, Cerulli reports: "As more funds emerge, especially those in the mainstream asset classes, the distinguishing factors between them become ever [hazier]."
In the large-cap value category, for instance, more than 25 of the roughly 400 funds registered in the U.S. have 5-star Morningstar ratings. Along with the expansion of lifecycle, target-maturity and other such funds, performance appears to "becoming as commoditized as the products themselves," Cerulli adds.
Effective branding demands a strategic, pro-active approach. This is because marketing efforts seem to have a major impact on asset flows, some research shows, only after a minimum threshold has been achieved. And the same appears to be true with respect to fund performance, according to Cerulli; in other words, "only extreme results appear to have the required impact on fund flows."
