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What Portfolio Driven Distribution Means for Fund Directors

The consequences of fund distribution reaching a trillion-dollar model-driven ‘tipping point’ are significant for fund directors.


US mutual fund flows have been dominated by the myriad of decisions made by intermediaries on behalf of individual clients to buy or sell a mutual fund. Today, we estimate that $2.7T of the $11.2T in intermediary sold funds that we track are “model-driven,” that is, dictated not by an individual advisor acting on behalf of an individual client, but rather resulting from decisions by gatekeepers, third party model makers or other financial institutions to add, delete, or reallocate portfolio assets.

The implication for directors is that performance standards are now trending toward risk/return within the model, relative to potential peers that could also occupy that “slice” of the asset allocation pie. In this environment, which investor’s viewpoint are directors meant to represent?

There are now compelling claims that directors will need to consider the perspective of the asset/allocator fund selector’s perspective; to look more closely at perhaps a separate performance peer group; and better understand third-party assessments that are used to build and evaluate models.

Learn more in our new report

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