All aboard, equity fund investors and fund firms...

by Katie Bird

Katie Bird

A new year means new trends for investors, and as a result fund companies need to shift their marketing approach for 2011. While domestic equity funds may have limped along throughout 2010, analysts expect them to rally this year as many investors are peeling money away from bond funds. As Jeff Cox explained in his CNBC.com article US Stock Funds Could Be Back After Sitting Out 2010 Rally, strategists are expecting that the money being taken out of bonds will find a new home in domestic mutual funds. This provides an exciting opportunity for equity funds to attract new investors and establish a stronger foothold in the market.

With the instability regarding foreign currencies, Cox explains that U.S. investors are likely to turn to their home turf. He quotes Curt Lyman, managing director at HighTower Advisors, who says, “What we're going to see is a flow of funds back into U.S. domestic funds. As an American, where would I rather invest—in Europe where there are increasing concerns over the systemic stability of the euro, or at home in the U.S. dollar?” However, much of this is contingent upon the market performing as well as strategists expect. The S&P 500 is expected to see gains of 10 to 20 percent, assuming the economy continues to recover. There is a lot of pressure on this month to set the tone for the remainder of the year.

Will you miss the train?

So what does this mean for fund companies? Get on the equity train before it takes off.

Michael Evans in a guest column for MutualFundWire.com reports that fund flows are expected to move away from bonds and toward stocks in his article FUSE 2010 Recap: A Period of Reassessment, Reevaluation, and Redefinition. This means firms with equity funds need to position themselves for eager investors.

As kasina CEO Steve Miyao predicts in More M&A Coming in 2011, by Armie Lee of MutualFundWire.com, ETF companies are in a good spot considering that they are accounting for one-third of mutual funds. The newfound confidence in the economy acts as a spark to gain potential investors, especially considering that the third year of a presidential term is historically bullish.  

In a recent blog entry, our own Dan Sondhelm illustrates that in order to be competitive in the mutual fund marketplace, your strategy needs to hearken back to the 4 P’s: product, place, price and promotion. You know you’re offering a good product, so ensure investors know it too by highlighting the opportunities of your asset class and explaining your investment strategy. To put your products in the right place you must select the best distribution channels relative to your fund. Be sure to set competitive prices—don’t undersell your stocks as many underpriced funds don’t sell. Make your prices appropriate for the advisor types you’re targeting. There are many avenues available for promoting your funds, such as advisor firm research teams, proactively engaging the media, updating your website with timely news and commentary, hosting webinars and employing an active social media presence.

With the expected trends for 2011, it looks to be a good year for U.S. stocks. Now that bond funds have had their turn in the spotlight, take advantage of the investor confidence and make this year your time to shine.