Maintaining highline performance in its mutual funds is a key strategy for MFS Investment Management to regain its position in the marketplace, according to C. James Prieur, president and chief operating officer of MFS parent Sun Life Financial. Prieur made his remarks at a recent UBS Global Financial Services Conference in New York.
Fund performance improvement has always been a leading indicator of future fund flows, so [our improvement in this area] helps give us confidence that MFS will be able to regain market share in the domestic retail mutual fund market in the U.S., Prieur said. MFS has significantly improved its short- and medium-term fund performance in 2004 with 82% of funds over one year and 77% over three years in the top half of the Lipper ranking.
Prieur said that Rob Manning, who took the post of CEO over a year ago, made investment performance his top priority. Improvements in performance have had an immediate effect of boosting flows in the institutional marketplace. Net flows went positive in the fourth quarter of 2004 with $100 million net inflows, climbing to $700 million net inflows in the first quarter of 2005.
One problem with MFS former strategy for fund distribution is that it was inadequately diversified, Prieur said.
If you look at the sales profile we had five years ago, it is clear that MFS was overweight in U.S. equities, Prieur explained. If you fast forward to the end of 2004, [there is] much more diversification by asset class. Recent trends in sales would also reflect a similar diversification across investment styles.
In 2000, 84% of fund investments were in U.S. equities, whereas only 31% of assets under management were allocated in U.S. equities in the first quarter of 2005. International equity has been an enormous boost, from 4% of assets in 2000 to 39% of assets in the first quarter of 2005. Balanced funds rose from 2% of assets to 18% during the same period.
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