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Ticking Time Bomb: Fund Consolidation within Platforms is Eminent at Merging Bank/Wires

By Steven

There is a ticking time bomb that asset managers need to address head on: the consolidation within the platforms due to the overlap as the result of the merging distributors. Our current research with the major distributors' gatekeepers shows that this is going to be significant.

There is no short term danger of this time bomb exploding. All products will be put on the combined shelves at the merged entities. However, over the next 8-12 months all of the merging distributors will evaluate their model portfolios as well as their recommended, approved, and focus lists (the models and lists collectively are up to 90% of assets). Then they will decide which funds they will keep and which funds will be eliminated. The result will be significant and a number of fund companies will see their assets shrink.

Luckily, asset managers have some time to make their case for why they should not be eliminated. Of course, the major driver for whose funds will stay is going to be based on relative performance. But, if all things are equal (or even close), the analysts are going to make a qualitative decision.

National Accounts groups need to have an action plan for every fund that might be in question. Here are a few things that should be considered:

• Evaluate the competitive position of your funds in model portfolios and on recommended, focus, and approved lists
• Select those well-performing products that have tough competing products and develop your competitive positioning
• Be proactive in reaching out to the distributors’ distribution and analyst teams
• Ensure that you provide distributors with access to your portfolio management team to best position your funds

The time is ticking, but there is plenty of time to for National Accounts teams to defuse the fund consolidation time bomb.