The impact of brand awareness
In recent years, firms have been battling with increased regulation and heightened scrutiny, as well as attempting to shake off a negative public perception in the wake of the financial crisis. As communications teams are assembled and responsible investment guidelines are drawn up, fund managers now have to find ways of growing their brand in a bid to attract the most sophisticated investors, and they cannot afford to disregard the impact of this, according to a new study.
A whitepaper recently published by service provider eVestment looked at the impact of a firm’s branding by measuring its inflows and outflows through its database. Institutional consultant activity was tracked through their review of GPs’ investment strategy profiles on the platform.
The analysis found that asset managers with both high firm and product awareness achieved asset growth as much as 20.3x that of firms with low awareness. While the positives are significant, only a select few (2%) can achieve such growth due to the difficulties of reaching a broad audience across multiple products, the paper added.
Not so competitive edge
Competition is a factor in achieving good brand awareness, based on the study. The average institutional consultant reviews less than two strategies per asset manager within a quarter, according to eVestment, suggesting that investors and consultants are likely to be searching for products agnostic of the firm. eVestment said this “clearly illustrates the challenge asset managers have in building brand awareness.”
Despite larger firms managing a greater number of strategies, they do not necessarily have an advantage over smaller competitors as they seek to attract LPs. eVestment found that having more products to market does not correlate with an increased ability to cross-sell and does not automatically translate to higher brand awareness.
For managers that do achieve high firm and product awareness, the negative effects wield the same impact as the positives. The whitepaper claims that managers with the highest brand awareness can experience some of the biggest asset losses. Firms operating in the top decile of brand awareness who experienced outflows did so at a rate of 1.7x higher than those who experienced inflows. This can be be triggered from events such as poor performance, lacking stability or the departure of a key figure.
Brand awareness is only “one piece of the puzzle” however, and positive perception also has a role to play. Coupled, both factors lead to the best outcome for asset managers, claims the service provider. “The globalisation of the industry and competitive landscape mean that today more than ever, standing out matters,” the paper concludes.