Introduction

The asset management industry is filled with award shows each year, from the Profile Data (previously known as the Raging Bull awards) and Morningstar awards, to our very own INN8 Invest Diamond awards. These awards recognise the performance and achievements of asset managers across various categories, time periods and methodologies. Some of these awards, like our Diamond awards, also have a qualitative element to the methodology.

From a commercial perspective, asset managers can capitalise on this success. Awards boost brand reputation and asset managers, large and small, can use this as marketing opportunities. Awards are also beneficial for smaller, less well-known asset managers, who can get crowded out by the size of the industry and are competing with much larger players. Awards may put them on the radars of fund selectors such as multi-managers, discretionary fund managers (DFM’s) and advisers.

The question is, do awards result in any measurable outcomes?

For asset managers, success is typically measured by financial performance, which will largely depend on new business flows. Can awards then help to rake in these flows? Winning awards would suggest this is true, based on the idea that these managers have consistently done well in the past (say three to five years) and the accolades from the awards would at least persuade investors to consider investing with them.

Global research

Globally, this topic has also been researched. A study in the United States by 1 Del Guercio & Tkac, 2008, found that Morningstar ratings (not necessarily awards) had a major influence on retail investors. Their findings showed that positive abnormal flows followed rating upgrades, and negative abnormal flows followed rating downgrades.

While awards are mainly backward looking, perhaps investors find comfort in ratings that include both a quantitative and qualitative element. Where qualitative factors such as the experience of the portfolio managers and the repeatability of their investment process may weigh more heavily on an investor’s decision to allocate to a specific fund.

Example: winner vs non-winner

The graphs that follow show simple examples of the monthly net flows and total assets of a Profile Data trophy winner (graph 1) and a non-winner in 2022. The two funds compared fall within the same category and are relatively small, less well-known asset managers. At first glance, there is a clear spike in flows around the period the asset manager wins (graph 1) and the non-winner (graph 2), after which their flows appear to just trickle along. This is, however, just one example and not conclusive.

Statistical testing yielded mixed results

Intuitively, it is easy to assume that when a fund wins an award, it would naturally attract more investments. We tested this statistically using the winners of the Profile Data awards against all other funds to determine whether award winning managers on average received more inflows than those of non-winning managers..

How we conducted the analysis and findings

We examined the winners of the Profile Data awards from 2020 to 2024. These awards are given in three categories:

• Straight performance (based on three years of returns),
• Risk-adjusted performance (over five years), and
• Manager of the Year.

For our analysis, we included South African-domiciled funds and focused on their main retail-fee share class. We also considered both trophy winners and certificate winners, covering 62 unique winners over the period.

We used monthly fund flow data from Morningstar and assumed that the awards took place in February each year. hen, we measured the flows of each fund, as a percentage of assets under management (AUM), over three periods and here are our findings for each period:

• Over 3 months (March – May) and 10 months (March – December), there was no clear evidence that winning an award led to increased fund inflows.
• However, over the 6-month period (March – August), the data showed that on average, award-winning funds experienced a surprising decline in assets under management compared to non-winning funds.

Possible reasons for a decline in assets over the 6-month period

• Overall market conditions may have negatively impacted net flows. If the industry was experiencing outflows, even award-winning funds would not be immune, which we discuss more in the next section.
• Performance-based investor behavior – some investors might sell after strong performance, taking profits and reallocating elsewhere.
• Smart investor decisions – many experienced investors know that chasing past winners does not always lead to future gains. Instead of “buying high,” they might wait for a more attractive entry point.

Overall, these results do not conclusively support the idea that winning awards contributes to new business flows.

Sector flows

The table below shows the annual net flows for some of the major ASISA categories over the past ten years.

The following can be observed:

• In 2020, the Multi-Asset High Equity, Multi-Asset Low Equity and EQ General categories saw the largest negative flows, whereas the lower risk IB Money Market, IB Short-Term and Multi-Asset Income categories saw the largest inflows. The most plausible reason being investors’ flight to safety in the COVID-19 sell-off, switching into lower risk funds.
• In 2021, the industry saw its largest annual inflows of just more than R144.2 billion, coming off the back of COVID-19, where local equity markets saw a drawdown of more than 20% in March 2020. This detraction was, however, short-lived and investment markets recovered quickly. In 2021, SA equities (FTSE/JSE All Share Index) returned 29.2%.
• In 2022/2023, the industry experienced big inflows to the Multi-Asset Income category. Over this period, the SARB raised rates from 3.75% to 8.25%. The higher yields on offer made income-focused funds very attractive investment options.
• In 2024, when the two-pot system came into effect and SA investors were able to access their retirement savings, the industry saw outflows of R 13.5 billion. This was the first time in ten years that the industry experienced outflows. Interestingly, most of the negative flows occurred in the IB SA Money Market category, followed by the Multi-Asset Low Equity and Multi-Asset High Equity categories. For the two multi-asset categories, the outflows made sense, as this would be where most investors would house their retirement savings.

Conclusion

The relationship between industry awards and new business flows in the asset management sector is not as straightforward as it may seem. While awards can enhance brand recognition and provide marketing leverage, our analysis over the past five years does not conclusively support the idea that winning awards directly results in higher fund inflows. In fact, over a six-month period post the award, the data surprisingly suggests that award-winning funds, on average, experienced negative flows.

This counterintuitive result highlights the complexity of investor behaviour. It suggests that broader industry dynamics, market cycles, and investor sentiment play a far more significant role in fund flows than accolades alone. Events such as the COVID-19 pandemic, shifts in monetary policy, and regulatory changes have had more of a profound impact on where investors allocate their capital.

Ultimately, while industry awards serve as valuable recognition tools and can contribute to an asset manager’s reputation, they cannot be viewed as a guaranteed driver of new business. Asset managers looking to grow their client base should focus on maintaining strong, consistent investment performance, transparent communication, and a well-articulated investment philosophy and process that resonates with both retail and institutional investors.