Innovative product launches in recent years are attracting greater interest, with 97% of growth in the European fund industry since 2001 coming from products launched over the same time frame. However, UK investors still prefer those with some history, shunning new launches in favour of those with some proven capability.
In its research Lipper broke funds into two camps: new launches or those it refers to as ‘backlist,’ those launched before the year examined began.
Ed Moisson, head of UK and cross-border research at Lipper, noted: “The UK was not only the most successful industry in 2010, but also the one with the greatest proportion of sales into backlist funds, accounting for 81% of net sales.”
This preference for a track record has been long seen in the UK market and only once since 2002 have new launches surpassed backlisted funds in popularity, 2008. So far this year around 90% of fund flows are to backlisted funds, Lipper’s research shows.
In stark contrast to the UK is the rest of Europe’s strong preference for new launches over older funds. In six of the eight years to end of 2010 net sales of backlisted continental European domestic funds were in outflow territory. The main difference between the UK and continental Europe is the manner in which funds are distributed – the former is controlled by intermediaries and the latter by banking and insurance groups.
“While the FSA’s Retail Distribution Review looks set to shake-up the way that intermediaries are remunerated, the way that platforms generate revenues (or the way they disclose this), and the formal qualifications intermediaries must have, the benefits that the current model has achieved in not simply pushing the latest product to hit the market should not be underestimated.”
