On Investing

Which came first: the chicken or the ad?

How performance, marketing and flows relate to one another is a fascinating problem. Which came first: the chicken or the ad? Or indeed the chicken or the ed(itorial)? By tracking ad appearances and editorial mentions across the trade titles, Research in Finance endeavours to help groups better understand the interplay between press advertising and asset movements.

Looking at flows first, equity funds have seen substantial redemptions in recent months. Notably, Japan funds and Europe funds have bucked the overall trend – unsurprising given their strong YTD performance. ‘QE To The Max’ and changes in corporate governance have encouraged investment in Japanese companies; investment in Europe has also been spurred by QE, as well as some attractive Price/Earnings ratios.

Meanwhile the mixed asset space continues to report healthy net sales figures. A flurry of multi-asset income marketing campaigns have launched in response to the new pension freedoms. Many advisers voice scepticism around new fund launches and say they prefer to focus on tax planning (in particular IHT planning), cashflow modelling, risk profiling and increasingly ‘bucketing’ clients’ short-term and longer-term income needs. As such, multi-asset income funds may not represent a panacea for drawdown, but there is evidently a place for these funds as a relatively low-cost solution for smaller pension pots.

Honing in on the RiF Tracker data on advertising, we can see that general brand building and multi-asset funds – largely represented by the Mixed Investment 20-60% Shares IA sector – were big focal points for fund houses in H1 2015. Naturally, the biggest sectors in terms of number of funds and assets have strong ad representation. Interestingly, Japan and Europe Ex UK have not been heavily advertised in the trades relative to other sectors, despite inflows. US funds have enjoyed good ad representation, over a period where the NASDAQ has been performing well compared to the S&P, encouraging a move from passive to active for US equity. However, it’s really just a couple of fund houses driving ad activity in this sector: Artemis and Fidelity to a lesser extent.


Intuitively, one would think that editorial sentiment is typically more strongly correlated with performance than advertising. Overall the UK Equity Income sector has had a great year so far for positive coverage. Performance has been reasonable, but lagging UK Smaller Companies, which has had comparatively stellar performance in 2015 and a fraction of the coverage. True, the UK Equity Income sector is much larger and thus attracts more attention, but there is still a bit of a disconnect between performance and positive trade press mentions. Moreover, the ‘Woodford factor’ cannot be ignored: trade journalists have been writing reams about his funds. Unfortunately this concentrated focus may have been at the expense of other good investment ideas receiving coverage.

Funds in the Europe Ex UK sector have been getting a high number of positive mentions across publications, and performance has been very respectable. Conversely, Japan funds are very low down the priority list for the generalist mags despite very strong performance, although coverage has been better in discretionary mags.

Many of the funds in the Mixed Investment 20-60% Shares sector received strong positive mention in H1, although less so across publications targeting discretionaries than more generalist titles. YTD performance has been muted, but one acknowledges that shoot-the-lights-out performance in rising markets is often not the primary reason behind investing in a multi-asset fund.

The Global Emerging Markets sector does well in terms of both trade ad and editorial coverage, and yet has experienced negative performance YTD. Short-term spikes in performance a few months back could be responsible for some of the positive mentions in magazines; sadly indications of economic slowdown in China were quick to extinguish any short-term gains.


These are just a few high-level take-outs from the RiF Tracker, underlining the complexity of monitoring the impact of trade press coverage, and what drives coverage in the first place. Sometimes flows, performance and coverage all seem to move in tandem; other times the feedback loop leaves room for improvement.


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