Tuesday, June 24, 2008

The changing world of mutual fund distribution

Mutual fund distribution sure has changed since my days as a staff reporter for Dalbar's Mutual Fund Market News (now Money Management Executive) back in the 1990s.

Darlene DeRemer's presentation on "U.S. Retail Distribution Trends" at the NICSA General Membership Meeting on June 23 drove home that point.

Here are some of the key changes impacting asset managers that I heard in the presentation by
DeRemer, partner and head of the advisory practice at Grail Partners LLC:
  • Financial intermediaries--especially fee-based intermediaries--are more important than ever with the rise of wrap programs, defined contribution platforms, and variable annuity and subadvisory platforms.
  • It's harder to know the ultimate client because of omnibus accounting
  • Fees are under pressure, yet revenue-sharing is costing 45 basis points or more
    • Distribution costs are coming out of fund sponsors' profits, rather than simply out of the fund expense ratio
    • There are new, lower cost share classes, such as W or P shares for wrap or platform shares with about 10 basis points of 12b-1 fees
  • Fund selection at broker/dealers is shifting from individual reps to the firms' fund selection units (see my other June 24, 2008 post for more on B/Ds' fund selection)

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

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