The need for companies that sell mutual funds to create a brand identity was a key topic of discussion here last week at the first USA-Ireland Mutual Conference.
Over time, building a brand identity for a fund company can prove more beneficial than simply advertising the performance of specific mutual funds, said Arnold D. Scott, a senior executive vice president at MFS Investment Management Co., Boston.
In addressing participants in Dublin's offshore fund servicing business, Mr. Scott and others sought to draw from the experience of American mutual fund companies and their efforts to tap U.S. investors in recent years.
"Performance is a double-edged sword," said Mr. Scott. "Sometimes you have it, sometimes you don't."
MFS uses both performance and branding in its advertising, said Mr. Scott. However, he said brand identity is the key.
Name recognition can mean that investors will not bolt at the first downturn in the stock market, he said. If investors are comfortable with the brand, they are more likely to move their assets to other instruments within the family rather than out the door, he added.
"When the correction comes-and it will-we will be able to hold our investors in the family of funds," Mr. Scott said.
In Europe, the nascent fund business still leans toward advertising performance, lagging the more mature U.S. market. However, Mr. Scott predicted that European companies will develop brand identities as the business develops.
Indeed, some European institutions have already pioneered brand-driven advertising for investment products. Last month Barclays Group in Britain kicked off a campaign for a savings account linked to a mutual fund.
Last week's discussion also touched on how some fund companies have expanded by simply going out and buying management capabilities, instead of trying to build through brand advertising.
Franklin Templeton Group "made acquisitions and did exceptionally well," said Timothy C. Pillion, a senior vice president at Federated Investors, Pittsburgh. Franklin, based in San Mateo, Calif., bought Templeton Galbraith & Hansberger in 1992 and Michael Price's Heine Securities in 1996.
But others have succeeded simply by building their image in the market, said Mr. Pillion. "Putnam Investments did an exceptional job convincing the intermediaries that the consumer knew who they were," he said.
However, though acquisitions clearly build size, adding a name to the equation brings its own branding issues, said Mark A. DeSario, a managing director at Merrill Lynch Asset Management.
Mr. DeSario said Merrill is working out what to do with the Mercury Asset Management Group moniker. Merrill bought the British asset manager last year for $5.3 billion.
"If you were to use the acronym MLAM, no one would know it," said Mr. DeSario. What's more, the Mercury name probably has more clout internationally, he said. However, Mr. DeSario told American Banker that a decision on the name has yet to be made.