(September 5 – 17:30 ET) – With Canadian mutual fund firms consolidating at a faster than ever pace, a new study by Boston’s Financial Research Corp. and Credo Consulting Inc. says the last thing fund companies want to be is stuck in the middle.
The study notes that buying rather than building has emerged as the favoured route to top tier status in the Canadian fund industry, which it defines as having at least $10 billion in assets under management.
However it suggests that niche players can thrive in this environment by utilizing superior strategy and taking advantage of large firms who face consolidation issues. “The success of a niche strategy is more prevalent in the U.S. which clearly shows a more highly evolved approach, both in terms of effectiveness of sales and marketing spending and in reaching the threshold level of assets under management necessary to achieve essential spending efficiencies.”
That said, there are advantages to being big. The study finds that it costs mid-market players, those with between $3 billion and $10 billion under management 23% more than a top level firm to generate $1,000 in gross sales, and that rises to 29% for those firms with less than $3 billion in assets. In this environment mid-level players are the worst-positioned, “with neither the range nor the capital to take on Tier-One firms, nor the focus and clearly defined competencies of the niche players.”
This study, “Mutual Fund Distribution in Canada: Costs and Critical Success Factors”, is based on in-depth interviews with 36 senior marketing and sales executives and extensive data gathering from a representative sample of the top 50 mutual fund firms in Canada.
-IE Staff