Select lists are still an important lever of D2C investment distribution even if they are not pushed as hard as they used to be by the direct platforms that compile them. This is according to our latest research – UK D2C: Investment Distribution – published this week.
Assessing the influence of select lists involves unpicking the paradox of whether funds are bought because of existing popularity, or made popular because of inclusion. This isn’t obvious, but the proportion of direct platform sales attributable to select list funds has halved since 2020 suggesting a significant reduction in the influence of the lists.
Select list promotion has softened after the widespread inclusion of the Woodford Equity Income Fund damaged their collective reputation. In response, governance has been strengthened and a more editorial tone is taken when highlighting their benefits. It’s more about robust processes and less about sales promotion these days.
In addition, D2C services are looking to broaden their appeal by helping investors who don’t have the experience to build their own portfolios. Solutions wrapped up in a fund structure are more prominent on direct platforms, perhaps at the expense of select lists. However, these tend to be own-brand funds and so not much of an opportunity for third-party fund groups to target.
Select list inclusion therefore remains an important goal for asset managers with some notable success stories illustrated on the chart shown. Differentiation is important here with opportunities for active (Baillie Gifford, Fidelity and Jupiter), passive (BlackRock and Vanguard) and ESG (Royal London).
Despite being a slightly less prominent form of guidance, we expect select lists to remain an important lever of D2C distribution. Some adjustments to the dialogue with direct platforms may help asset mangers to optimise inclusion of their funds going forward.