My colleague Brian Keating made a great observation in a recent blog about the importance of optimizing the product launch strategy of new mutual funds and ETFs. Using examples from some specific fund launches, Brian observed that funds that reach peak market share faster can generate millions more in revenue than slower-launching but otherwise comparable funds.
However, I wanted to take Brian’s observation a bit further. Using Morningstar data, our team researched the sales trajectories of more than 600 mutual funds and ETFs launched in the past eight years. We observed some commonalities in sales trajectory patterns and classified each fund into one of three generalized launch curves: fast peak, slow and steady, and s-curve.
What we found was pretty amazing. About one-third of funds took the “fast peak” path, nearing their maximum market share within three years. By following that path, those funds generated 30% more revenue than they would have on the “slow and steady” path, and a whopping 53% more revenue than they would have had they followed the “s-curve.”
We didn’t find any clear patterns in terms of which types of funds were more likely to launch quickly or slowly, and most asset managers had funds that followed all three distinct paths. While there likely are some uptake drivers tied to the performance of the funds themselves, that alone is unlikely to tell the full story. Instead, my hypothesis is that the amount of focus a fund receives from marketing and sales, as well as the specific tactics used to drive performance, has a meaningful impact on the launch trajectory. As Brian mentioned, sales and marketing teams could borrow some tactics from other industries to make fund launches more successful, such as adopting a launch readiness review (a plan to win in the current market environment), and a product launch control tower team that’s responsible for syncing up the sales team, marketing materials, sales positioning, customer targeting and compensation plans throughout a product rollout.
All of which goes to show that fund companies would do well to plan dilligently for their fund launches, and to focus their sales and marketing resources accordingly. There’s a lot of revenue at stake in the first few years of launch.