A Study On Determinants Of Fund Family’s Market Share

China’s open-end fund industry has undergone more than ten years of booming development. The total number of funds and the industry’s amount of assets under management has reached a considerable scale, corresponding with the increase of fund management companies from 3 to 105 in year-end 2015. The more funds a fund company possess, the more influence a fund family can exert on the market by coordinating its funds and resources under management. In the meantime, under the overall prosperity of fund industry lays intensifying competition between fund families. Under the shock of new market entrants, the existing leading fund families’ market share is shrinking, and families continues fighting against each other; the market share of the small and medium-sized fund families is occupied by big families, which leads to fierce competition between small fund companies to struggle and keep their positions in the market.With the fund family as research subject, this paper investigates the strategies families take to deal with intense market competition from two perspectives, the price competition and non-price competition. Fund families can control their competency by changing fees rates, implementing differentiation strategy, and active innovation, while individual investors and institutional investors will respond differently to these strategies due to their own characteristics. Therefore, this paper firstly uses comparison analytic method to compare the fund industry development history and investor characteristics between US and China. Secondly it uses qualitative analysis method to study current situation and market behavior of fund families in China. Then it combines quantitative analysis to empirically analyze what factors and to what extent these factors will affect market share of fund families through system GMM regression of unbalanced panel data. Based on the empirical analysis of influencing factors of fund families’ market share of whole industry, this paper distinguish the market share forming by individual investors from that of institutional investors. This paper also divides the whole market into 3 market segments by fund types:equity, hybrid and bond.The main conclusions of this paper are as follows. First, fees has no significant impact on fund families’market share, so the price competition between fund families is ineffective. Specifically, although the fund operating expenses cannot affect family market share, the back-end load may help preventing investors from withdrawing funds, encouraging long-term holding, and maintaining stable market share. Second, product differentiation (non-price competition) is an effective measure to increase fund family market share. Product innovation and marketing can significantly increase the market share of every market segments, except in stock fund market, the efforts to improve family overall performance have limited effect on capital inflow. A more productive strategy of differentiation is to create star fund, which can brings significant inflows into fund family and increase its market share. Third, individual investors and institutional investors in the open-end fund industry prefer different competition strategy. Institutional investors are more rational in investment decision, whereas individual investors tend to blindly pursue star fund and new fund, failing to identify funds’ real performance.