The UK has the second largest funds market – more than £6trn in AUM, run by nearly 300 asset managers. 

The challenge they have is all of them are looking to position very similar products and services in a very crowded market.

Asset management marketing teams have responded to this by spending a significant amount of money crafting campaigns and amplifying 'on trend compliant' messages, in the hope they are the ones that can cut through the noise and stand out from their peers in the wider distribution market. But the reality is, it is very difficult to differentiate a fund. 

Traditional approaches such as focusing on brand (Liontrust), risk-targeting (Santander) and 'in-house' experts (Fidelity) are fine to a point, but in order to get advisers to buy a fund there will always come a moment when the focus will turn to performance. 

After all, you do not buy a sports car for fuel economy and you do not buy a small-cap fund because you like 'supporting' fintech entrepreneurs.

Selection Criteria

While fund selectors can use historical research tools, funds do not really position themselves or market themselves on their performance.

Managers know that not every day can be a stellar one, and they are only setting themselves up for a fall when markets turn against them. It is safer to keep the conversation about the brand, differentiators, and focus on the 'long-term performance'.

This combination of subjective and objective fund selection criteria is difficult to model or call, but when fund groups get it right, and when they can get fund selectors to trust them, that is when they strike gold. 

Research published by FE Trustnet last year showed 80% of fund selectors recommended the same 20% of funds – meaning that a complex decision-making process is effectively being influenced by basic herd mentality. 

In fact, once a fund reaches a perceived critical mass, the success of the fund becomes almost self-fulfilling. 

For example, one of last year's winners was the Fundsmith Equity fund, which saw its AUM jump from £3.9bn to some £8.4bn in the space of a year. 

In contrast, the reasons behind the decision to de-select a fund are in some ways much simpler. 

It is a decision based on trust and tolerance; a trade-off between a belief in the fund brand (manager and team reputation/objectives, etc) and a tolerance for underperformance. How long will you accept fourth quartile performance before you start looking at funds higher up the bell curve?

Marketing strategies

An interesting, and certainly topical, case in point is the apparent fall from grace of Standard Life Investments' (SLI) flagship £26.4bn Global Absolute Return Strategies (GARS) fund. 

The analysts at FE Research have recently sacked it from the FE Invest Approved fund list (our list of preferred funds) stating that GARS continues to experience extended periods of drawdowns owing to the fund management team's inability to fix its risk management strategy. 

However, considering the sheer size of GARS, its performance really has failed to keep pace with its popularity. 

But buyers have not reacted to this at all and they are continuing to add the fund to portfolios despite the difficult year it is having.  

Looking at the portfolio research and construction behaviour of UK fund selectors using our FE Market Intel tool, we see GARS has been added to portfolios or had its weighting increased nearly 50,000 times this year – twice that of Newton's Real Return (the second most popular absolute return fund). 

This is despite the Newton fund returning a solid 6.57% more than GARS in the 12 months to the end of August 2016.

In fact, GARS is the third most popular fund of the 3,500-plus funds available in the Investment Association sector. The trust covenant has yet to be broken – SLI's brand is far more compelling than the cold hard facts.

SLI's continuing success despite its performance issues is no small feat. 

I do not know if the management team will be able to turn it around or if this is the end of a love affair which has run its course.

But while we, as a research business, lack conviction in the GARS fund management team, we are certainly impressed by the prowess of its marketing team.