Morningstar's 30 plus page research report concludes that “investors really do respond to a wide spectrum of information about mutual funds when making their investment decisions. Data on past performance, investment recommendations, firm quality, management continuity, fund structure, style tilts, and fees all have meaningful impacts on investor behavior."

Morningstar's reseach (which is planned to be updated annually) looked to determine what really drives an investor to one fund vs. its more than 70,000 competitors. To do this, they studied 26 fund-specific factors including past performance, fees, strategy type, manager characteristics, and firm quality. 

Key Takeaways

  • Low Fees Matter More in the U.S. Than Globally
  • Indexing Drives Flows Into Equities but Not Into Fixed Income
  • Funds of Funds Drive Inflows in the United States
  • Morningstar Ratings Strongly Drive Fund Flows.
  • Socially Responsible Funds Reap Large Inflows
  • Funds With Style Tilts in Certain Markets Get Higher Flows
  • The Effect of a Manager Change on Flows Cannot Be Ignored
  • Structural Patterns Exist Between Flows, AUM, and Fund Age
  • Firm Size Matters in the Cross-Border Region.
  • Investors Seek Out Funds From Higher-Quality Firms
  • The Consistency of Preferences Globally for Fund-Specific Factors Is Remarkable.


How Can You Attract Fund Flows? 

Which of these factors can you influence? If you are opening a new fund, if possible, lead with more than one portfolio manager and ensure they are visible in your marketing and PR efforts. For existing one-manager funds, we have always counseled our clients to name assistant or co-portfolio managers to their funds early on, particularly if the lead manager is nearing retirement. Having a second name on a fund helps ensure "manager tenure" is not seriously impacted should a manager leave. Carefully evaluate your ability to keep fees low - or if you have an exisitng fund, can you lower fees? If you do, make fees part of your story. Do SRI considerations factor into your investment process - are you highligting that as an important selection criteria?

Read the full report, and let us know what other actions you might consider making.

Perception is reality.

How you tell the story of your fund and get that story in front of advisors and investors is crucial to attracting investors. They can't buy what they don't know about. 

SunStar Strategic has helped hundreds of fund companies articulate a story that sells. Call us at 703-299-8390 or visit our website


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