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Portfolio > Mutual Funds

Branding Pays Off, Says Cerulli Study

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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.”

The consulting group notes that Franklin Resources, Vanguard Group, T. Rowe Price Group and Fidelity Investments are among the mutual fund firms that spent more than $5 million on ads in the first quarter of 2007. For fund groups looking to “judiciously allocate” resources, Cerulli suggests advisor-focused trade ads and “cheaper media outlets.”

Janet Levaux is the managing editor of Research; reach her at [email protected].


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