The industry essay presented at the beginning of the 2010 Insight Annual Industry Review looks back in detail at the events of the past 10 years, and examines the pace and drivers of change in the Canadian investment funds industry. The article discusses the slowing pace of growth (prompted to some extent by a renewed faith in deposits); the developments of products, once plain vanilla in flavour, that have now been packaged into solutions; the one-step- forward and one-step-back approach to risk; and the emergence of safety and income as the successors to growth as the core goals of the majority of retail investors.
If there are overriding lessons to be learned by the funds industry from the past decade, it is to expect the unexpected and to recognize that planning on the basis of linear growth is a recipe for strategic failure. To a great extent, the mutual fund new millennium soothsayers should return their tea leaves, their crystal balls and their tarot cards, for much of what was predicted failed to materialize and events that were considered unlikely become drivers of change.
Change across the board was the norm of the past decade, and there is no sign on the horizon that this will be different in the future. Product invention (and re-invention) will continue, and we expect that fund wraps, segregated funds and GWBs—now all at different stages of development—will continue to evolve in line with the demands of investors, distributors and regulators.
Fund manufacturers’ strategies around the major themes underpinning the development of Canada’s financial wealth market (retirement, income, tax efficiencies, principal guarantees, high net worth) will determine who wins in the long term. Those that manage to position themselves ahead of the curve will win the takeaway game. The enduring question for all contestants in the fund industry competition is how to best position themselves across product types, distribution channels and investment platforms to take advantage of a mature business that is expected to grow at single-digit rates over the decade ahead.