The European fund industry is currently facing a changing market environment. On one hand, it has become apparent that European investors prefer ETFs over mutual funds as a distribution wrapper, especially in the segment of equity products. This trend has already started to hurt the balance sheets of some fund promoters in Europe. Therefore, any fund promoter in Europe needs to make a strategic decision whether or not to also offer its products in an ETF wrapper in the future.
On the other hand, it seems that the old distribution approaches no longer work as well as in the past, since professional investors and fund selectors have become increasingly demanding when it comes to their data and service requirements. At the same time, investors and fund sectors have shortened the timeframe which they think is acceptable for the delivery of the requested information. This means European fund promoters need to adapt sooner than later to the new market environment to avoid to be neglected by investors and selectors.
In addition, fund promoters need to ensure that their products are fit for purpose since the European fund industry has become a very competitive market in which even long-lasting customer relationships don’t guarantee inflows if the respective funds deliver mediocre results. A painful lesson that some fund promoters had to learn over the past few years.
That said, receiving face time with fund selectors has become an art in itself because investment professionals have become very selective about with whom and for what purpose they spend their precious time. The sales approach, therefore, needs to be in line with the expectations of the target customer. Approaching a fund selector with a bunch of products—some may call them solutions—won’t work anymore since fund selectors don’t want to spend too much time discussing product families or multiple funds which may not be tailored to helping them meet their specific goals. That’s why it is important to know your customer, because this enables an individualized sales approach which suits the preference of the respective investor/fund selector.
Even as the above may sound unpleasant or like an exhausting and expensive exercise, we have seen that those fund promoters which offer unique products and were able to master the art of fund distribution enjoyed healthy inflows over the past few years, even in the actively managed equity fund space.
So, it might be time well spent for the European fund promoters to rethink their product and distribution strategies.
This article is for information purposes only and does not constitute any investment advice.
The views expressed are the views of the author, not necessarily those of LSEG Lipper or LSEG.
