Firms risk cannibalizing their products when they launch too many funds at the same time, Morningstar says in a new report.
Morningstar has developed a new measure of fund competition within a firm and found launching multiple products at the same time can affect asset growth. From the “perspective of forward flows, the cannibalization effect is the most significant factor driving assets into a new fund,” says the report about newly launched funds.
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If a firm transitions from launching the most funds in an asset class to launching the least amount, its individual funds gain 16.4 percentiles in higher category flows for equity, 9.6 percentiles for fixed income and 16.2 percentiles for allocation asset classes, Morningstar says.
“In a centralized firm structure, there is a limited number of marketing and sales resources dedicated to promoting a new fund,” the report says.
The report also says managers who invest in their own funds have historically performed better and garnered more assets. A typical equity fund will have, on average, 5.5% higher risk-adjusted returns and move up its rank for flows by 6.5 percentiles, Morningstar says, when the manager invests in it.
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Morningstar also found that female portfolio managers garner more assets than male managers. “[W]e assume women face significant headwinds in advancing their careers in the financial industry. So, the average woman who does advance to become a portfolio manager should be higher performing than the average male portfolio manager,” the report says.