Credo’s Financial Performance Control Model (FPCM) examines the range of performance delivered by funds in an asset class. At the same time, it examines the market demand for each product within the asset class. Based on the performance of a product relative to competing products, the model estimates the level of demand that would have existed if demand were driven by performance alone. Deviations between actual demand (measured by sales statistics) and modeled demand are assumes to be driven by non-performance factors including – but not limited to manager – reputation, sales and marketing. Credo’s monthly reports offer evidence that demand for specific funds is driven by factors beyond performance.
The innovative framework and modeling that Credo uses to control for fund performance in an analysis of demand for a fund product demonstrates how out-of-kilter some funds can actually be with respect to a demand equation that is defined by performance alone. Credo suggests that when the demand for a fund product is out-of-kilter with performance, additional investigation around the fund is possibly warranted. Consumers including advisors are clearly affected by sales and marketing efforts. Credo’s research can be used by advisors to help mitigate appearance of any such issues.