When new mutual funds and ETFs hit the market, effectively communicating the focus of these investment platforms can often prove critical to their success out of the gate.

Of the 902 mutual funds and 103 ETFs launched during the first half of 2014, many have already built up solid momentum.

Five new mutual funds achieved at least $500 million in estimated net flows by the close of the first half of 2014 and five ETFs numbered more than $100 million, according to Morningstar data.

Barry Fennell, senior research analyst at Lipper, says marketing plays "a big factor" in the success of newly formed funds. Fennell notes that the utilization of wholesalers has taken on increased importance for these new products.

He says an example of the increased role wholesalers play with communicating new offerings was the decision by Boston-based Putnam Investments this past spring to hire 20 new external wholesalers on top of the 40 already in place.

"There is usually a coordinated effort that relies heavily on the wholesaler relationships in the individual firms," says Fennell, who prior to Lipper was a director at Fidelity Investments from 2007 to 2011. "A lot of it boils down to the wholesaler relationship that the fund manager has in the region."

The ETF that hit the market in early 2014 with the most net flows by the end of June was the First Trust Dorsey Wright Focus 5TN with $316.66 million. Ryan Issakainen, senior vice president and ETF strategist at First Trust Advisors, says all new funds are targeted toward advisors rather than investors through wholesalers. The Wheaton, Ill.-based asset manager has 100 external and 100 internal wholesalers on staff.

"We're in financial advisor offices with our sales forces meeting them face to face," says Issakainen, who first joined First Trust in January 2000. "We have had great long-standing relationships with financial advisors that we deal with."


Advertising in print and broadcasting outlets also plays an important role for new funds, according to Fennell. Ads will often be customized differently depending on if they are geared toward advisors or investors. Fennell says crafting that right message is often the most important part of the advertising process rather than just spending money on ink or air time. "Fund managers usually have a good idea of what the targeted audience is going to be," says Fennell. "It usually comes down to product differentiation."

Another effective marketing strategy often key for new funds are due diligence meetings typically held annually in an asset management company's home city where advisors from across the country gather for question and answer sessions with fund managers on a variety of topics. Fennell says these events often serve as a launching pad for fund companies to educate advisors on new products hitting the market.

One asset management company no stranger to successful fund rollouts is PIMCO. The Newport Beach, Calif.-based firm's PIMCO Low Duration ETF had $139.3 million in estimated net flows as of early July after launching on Jan. 22. Jerome Schneider, managing director and portfolio manager at PIMCO, says in addition to traditional advertising in trade publications and on television, a series of commentaries posted on its website and publicized through social media help communicate new product launches. Schenider says educating advisors and investors not just about the fund but also about overall market conditions is vital. "Ultimately you have to prove a need for the strategy you are trying to promote," says Schneider, who prior to joining PIMCO in 2008 was a senior managing director with Bear Stearns. "We are constantly putting out thoughtful pieces."


Often times when a firm rolls out a new fund it will be in the form of a soft launch before heavily promoting the offering, according to Jon Hale, who leads Morningstar's manager research for North America. Hale says the soft launch will allow the fund to build up a performance track record before going full throttle with marketing. The waiting period will sometimes last up to three years since Hale says that is typically the industry standard for tracking fund performance and is also the time frame for when Morningstar begins giving ratings.

"Companies have to justify whether it's worth it to spend the money before there is a performance record," says Hale. "It's a Catch-22."

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