Market share is one of the most commonly used measures of success in the mutual funds industry. To be sure, tracking market share gains or losses is easy enough. But is it enough? Against the backdrop of the Fundland’s intensely competitive landscape, fund companies are increasingly keen to dig deeper into the roots of their gains or losses. Enter Investor Economics’ market share attribution analysis— an analytical framework first introduced in the spring of 2006 and since then further refined.
Our model isolates the impact of the key elements of the asset growth equation: flow activity (sales and redemptions), investment performance and asset mix. In brief, the surest way for a fund company to gain share is to sell and retain, have superior investment performance, and be overweighted in the best-performing and best- selling asset classes to boot…and do it all better than the competition. In any given period the net share gains and losses for individual firms will represent a mix of these factors, with some moving in tandem while others travel in opposite directions. The mix of growth components varies widely from firm to firm and reflects each company’s specific strengths and/or weaknesses.
This month’s Insight research feature uses our market share attribution framework to quantify the asset growth drivers during 2007 on an industry-wide and company-specific basis.