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Strategic Insight survey points up complexity of mutual fund market

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The U.S. mutual fund market is highly complex requiring new entrants to develop a comprehensive understanding of both broad and nuanced product, distribution and positioning issues, according to a new report.

Published by Strategic Insight, the report, “U.S. Market Entry and Expansion Considerations,” is designed for non-U.S. asset managers seeking to enter or expand within the U.S. by organic means (as opposed to acquisition) and for existing U.S. investment managers considering launching their first mutual funds.

The new study provides prospective entrants into U.S. asset management with a broad overview of the mutual fund, sub-advisory and institutional markets. 

Among the report’s key findings:

  • The order in which major milestones are executed is integral to the success of a mutual fund launch for new entrants. Major milestones for U.S. mutual fund launch include determining distribution strategy, hiring legal counsel, determining the product’s legal structure, and striking selling agreements with key distributors.
  • Mutual fund product innovation has been extremely robust post-market crisis as investors with heightened risk sensitivities seek out global and balanced investments. Excluding ETFs and index funds, international equity has been the area with the most product launches, with nearly 500 new funds since January 2009.
  • The majority (72 percent) of international sub-advised mandates are managed by advisors whose parent is U.S.-based, denoting some home-bias in the hiring of sub-advisors. The reasons most manufacturers stick close to home when seeking international management expertise may include the wide selection of qualified managers within the U.S., cultural and industry differences, and unfamiliarity of foreign brands.