There are fears of market saturation in Britain following an explosion of new retail investment fund launches over the past six months.

The pace in 2012 has not slowed despite a whopping 32 new fund launches in the final quarter of 2011, with at least half this number of funds entering the market since Christmas.

This onslaught has intriguing implications for an industry already struggling to support more than 2,000 funds.

Like dying stars, for many funds that fall out of favour they either die a slow death (not usually a fate shared by the portfolio manager or CIO responsible for the underlying investments) or are eventually merged into other vehicles.

In some instances, funds merge due to structural changes at the corporate level, such as what happened when Henderson bought Gartmore; and also what is likely to happen after Old Mutual announced plans to merge its two asset management arms – OMAM and SIG.

Mergers and closures aside, it is clear fund numbers are increasing and one would have to assume the costs borne by asset managers.

Interestingly, this was outlined in part within a recently released paper looking into asset manager efficiency that outlined some of the competing operational differences in the UK investment sector.

http://www.coredataresearch.co.uk/blog//research/view/asset-manager-efficiency/

All of this aside, a clear challenge for the retail fund’s industry is that the expanding number of investment vehicles on the market are chasing a finite level of investable assets.

This poses the question of how much does an asset management group need to spend to raise awareness of a fund or attract adviser-client assets?

The likely answer is more and more as advisers are bombarded on all sides from existing funds and the 50-odd new fund launches.

In light of this, CoreData in the UK is looking into the full range of costs involved in running a fund by creating a hypothetical frontier to assess whether asset managers spend heavy from day one or adopt a more steady approach to raising awareness.

This will include some key assumptions around costs – advertising, roadshows, materials, communications and media engagement.