Are Your Investment Sales Team’s Performance Up to Par?

Key Points

• Asset managers are using artificial intelligence to revamp their product distribution through distribution analytics.
• Understanding and evaluating the sales team’s performance is crucial for investment management.
• Focusing on sales and relationship strength, marketing and brand strength, product performance, and luck drives asset flows into an investment product.

Recently, there has been a focus on target prioritization and qualification, and now we shift the focus to sales performance evaluation.

A common question that arises is how to determine if the sales team is effectively doing their job, apart from just looking at their commissions. Ray Dalio’s book “Principles” suggests paying more attention to the process than the outcome.

Asset flows into an investment product are influenced by factors like sales and relationship strength, marketing and brand strength, product performance, and luck. Understanding how to evaluate the performance of the sales team amidst these factors is crucial.

Many asset managers struggle to effectively attribute these factors, leading to challenges in holding teams accountable and understanding what parts of their business are working. This is where Genpact’s framework, starting with the balance sheet equation, comes into play.

Breaking down a product’s total return into market, category, and product returns allows for a deeper understanding of the performance. For example, analyzing PIMCO’s Active Bond exchange-traded fund (ETF) as of July 13, 2020, provides insights into the market, category, and product returns.

Calculating the “Category vs. Market Return” and “Product vs. Category Return” helps in evaluating the portfolio management team’s performance within the confines of its mandate. This analysis aids in attributing each aspect to a different team, providing useful distinctions.

Understanding asset flows, analyzing market share dynamics, and attributing returns and flows to different teams are crucial for effective evaluation. The ability to isolate sales from product performance and marketing from category performance provides valuable insights into the performance of sales and marketing teams.

Using regression analysis and various methods, clients can gain deeper insight into how their sales teams are performing and identify areas for improvement.

Notes

We are indebted to Jan Jaap Hazenberg’s “A New Framework for Analyzing Market Share Dynamics among Fund Families,” from the Financial Analysts Journal for providing a framework and analysis for this content. Hazenberg’s work provides valuable insights into attributing market share changes and analyzing flows and returns.

Analysis of the PIMCO ETF’s flows involved the use of several sources including ETFdb.com, Baird, SIFMA, and historical ETF net asset value (NAV) from PIMCO. The real figures are available from sources such as Lipper, ICI, Broadridge, and MarketMetrics.