March 2014, BOSTON. According to research from global analytics firm Cerulli Associates, U.S. mutual fund product launches tripled in the second half of 2013, compared to the first half of 2013.
"We have seen an increase in development, across stock, bond, and international asset classes," states Pamela DeBolt, associate director at Cerulli. "More specifically, there was an increase in the number of launches in international strategies, including global equity, emerging markets equity, and bond strategies, as well as U.S. equities including large blend and large value."
In the Products and Strategies 2013: The Changing Landscape of Product Development and Delivery report, Cerulli focuses on asset managers' product strategy and development across different asset classes (e.g., fixed income, alternatives) and vehicles (e.g., collective trust funds, exchange-traded funds, CEFs, and mutual funds), and product groups' organizational structures and governance processes.
"Many firms disclosed that they expected product development to slow last year, and it in fact accelerated," explains DeBolt. "Nearly 50% of managers reported they planned to launch less than 4 new products in 2013. Only 13% of firms indicated they planned to launch more than 6 new products in 2013, which was down from 18% in 2012."
"The demand for income is the main driver of retail product innovation," DeBolt continues. "Managers that are innovative in their approach to provide income-oriented solutions will be well positioned to gather flows from both the retail and institutional marketplaces."
Product developers have expressed the desire to focus on selling their existing product repertoire, rather than put more resources toward new development ideas. However, pressure from sales makes it challenging to slow product development.