Utilization of one brand message across channels, often a tried and true staple of popular consumer names, are penetrating mutual fund company board rooms as lead executives explore the gamut of marketing options to distribution channels.
In an international survey last month, which included U.S., European and Asian managers, Cerulli Associates said global fund managers are looking for more control over all business operations, which includes having one brand message, supporting sale distributions and marketing operations.
The Boston-based firm's "industry roamap" highlights that about 50% of international managers will bump up marketing budgets next year in favor of thought leadership and investment education. This is meant to support brand recognition in investor circles, the independent research firm said.
"Thought leadership is a highly effective brand-building tool if the right resources are devoted to both the content and the manner of communication," says Yoon Ng, associate director at Cerulli.
Elizabeth Krentzman, mutual funds leader at Deloitte & Touche, notes that fund companies are advocating for more brand recognition by making collected decisions when it comes to fund launches. She says that more money has been pointed to researched decisions rather than seeing what sticks without supporting evidence.
According to Deloitte's "2013 Mutual Fund Outlook," released in June, the audit, financial advisory, tax and consulting company said that the more than $13 trillion U.S. mutual fund industry needs to be selective in fund launches due to the associated high costs.
Morningstar data confirms that U.S. open-end mutual funds have slowed over the past six years. In 2007, new funds reached a total of 2,155, but have dipped to the under 2,000 range from 2009 through 2011. For 2013, total new mutual funds reached 1,406.
"The big emphasis today is on these alternative products being offered in the registered environment and so folks are trying to make one alternative play as opposed to 10 different alternative plays," Krentzman said.
One alternative manager looking to gain substantial brand recognition, without new fund launches, is Highland Capital Management. The SEC-registered investment advisor with a focus on global alternatives credit is exploring an opening for growth in the retail space.
"I think the way Highland approaches it is a little bit different because they have been very successful on the institutional side and they saw an opportunity on the retail side to provide access to a lot of these strategies that weren't available to the retail investor," said Highland Capital Director of Marketing Ondina Purcell. "So the vehicles that we create (the 40-Act Funds, the ETF fund) are a means of getting access. While a lot of asset managers may be looking to create products, we're starting from the vantage point of we just want to provide access, expertise in strategies that are already in place."
Highland currently offers 17 mutual fund with alternative, income, equity, asset allocation and ETF exposures. The Dallas-based firm has more than $18 billion in assets under management.
While agreeing that "there is a lot of confusion" on the retail alternative investment landscape, Purcell explained that Highland's marketing goal is focused on "sharing our intellectual capital, providing thought leadership education and looking to help advisors and clients in this space."
Registered investment advisorshave become the new focus of fund company outreach. According to Deloitte's analysis, the use of intermediaries to spark uptick in fund subscriptions is the new status quo.
Highland's Purcell, who was appointed to her position Oct. 15 after working at UBS Financial, agrees that going through the intermediary distribution channel is a vital component.
Brad Ross, president of Highland Capital Fund Advisors, mandates that "the retail space is a growing part of Highland." For the year, the retail industry has contributed to the firm's positive flows and overall net sales of $1 billion.
"We have a great base going into 2014, and that's one of the reasons the final piece of our management team was Ondina Purcell to help us think about our branding positions and to grow the marketing of Highland," Ross said. "We're exploring exactly how we're going to focus on our pure marketing side. On the sale side, we will grow head count and add more regional directors in the field to talk to financial advisors."
Other forms of engagement are through sub-advisement platforms. Hartford Investment Management Company or HIMCO has incorporated this business model into its now institutionally focused offering. The Hartford subsidiary undertook a vast marketing campaign, which led to a new brand and emphasized HIMCO image.
Less than six months ago, the Hartford mutual fund business consolidated under Wellington Management. As a result, HIMCO is limited about being able to directly access the market. As a result, Erica Evans, executive VP and head of sales and marketing HIMCO, says the firm has "reenergized" efforts to enter the retail space with a sub advisement partnership with Advisors Asset Management. HIMCO first began this relationship last October though a unit investment trusts, which focused on global equity dividend exposures. Over the past year, this UIT effort has sparked three other strategies in high yield, utilities and real estate investment trusts.
"We do have some limitations about being able to directly go into the retail mutual fund business, so this is a way that we can bring our capabilities and expertise to the market by partnering with someone else," Evans said in a phone conversation. "It's a win win for us."
Evans adds that through this partnership, HIMCO plans to also launch a series of mutual funds under the sub-advisement relationship. However, with the exception of an initial short-duration fund, the exact taste and feel of these funds are still being developed.
Additional assessment is whether fund companies should enter the ETF space as attraction picks up due to the vehicles low fees and relative flexibility. Deloitte said in its report that market volatility and cost-cutting needs may push more firms into the ETF space as they seek to capture investor demands.
Deloitte & Touche's mutual funds leader explains that the ETF industry is still a play of scales and niches."It's either sort of scale or niche, and I think niches are getting harder potentially to find. The fee wars really make it a difficult environment," Krentzman said, while noting that innovative moves from large market players "are potential game changers in the industry."
