Peer Group Analysis: How to Choose the Right Competitors

Wealth and asset managers need to thrive in an increasingly saturated market. Many firms fall into the trap of using generic descriptors like "long-term," "well-rounded," which only add to the investment industry noise without creating an engaging narrative.  

To stand out, firms must effectively communicate their unique value proposition. 

With thorough peer analysis, firms can reveal their strengths, highlight competitors' shortcomings, and identify areas of differentiation. Done right, this analytical process can yield data-driven marketing insights that resonate with investors and help establish a firm's distinctive voice in a crowded market. 

But to do so, teams need to start with an accurate peer group. This blog post outlines pitfalls of peer group analysis, three steps to build peer sets, and applications of peer benchmarking across departments. 

For more practical guidance on turning competitive benchmarking data into insights, download Morningstar’s 5-Step Competitive Analysis Framework. 

Peer group analysis is an assessment methodology used by firms to compare their investment products to a defined set of relevant offerings. The process aims to pinpoint strengths and weaknesses of mutual funds, ETFs, separately managed accounts, and more. Peer group analysis sharpens the focus on relative performance to ultimately understand a firm’s position in the market landscape.  

Peer group analysis can help firms accurately compare their funds and portfolios to industry counterparts and identify potential opportunities for growth. With a structured approach, investment firms can establish a reliable benchmark to assess where they offer value that others don’t. 

A well-defined peer group enhances the precision of your competitive analysis by ensuring that comparisons are relevant and insightful.  

One major challenge is incorrect peer selection, which can lead to skewed comparisons and misrepresented performance metrics.  

By focusing on competitors with similar strategies, structures, and market focuses, your analysis can identify meaningful differentiators rooted in real-world market dynamics rather than inflated or irrelevant comparisons.   

Other challenges include: 

• Selective Data Presentation: Cherry-picking favorable metrics harms credibility. Present a balanced and transparent view to both internal and external teams for better decision-making. 

• Excessive Information: Comparing too much data at once can obscure the underlying message. Be selective and precise about the data points you want to review. 

• Static Analysis: Infrequent updates reduce relevance. Regularly update your data pulls to see how dynamics change. 

• Siloed Insights: Insights left in isolation lose value. Share your findings across teams to scale their impact.

Initially, it's vital to identify your competitors by pinpointing firms with comparable products, sizes, and performance attributes. Too often, firms default to an arbitrary list of competitors or broad benchmarks. Effective analysis starts with precision.  

Start with established classifications. Morningstar groups portfolios into categories based on their underlying holdings, adding context to the stated investment objective. Other common frameworks like the Lipper Classifications or style factors can help whittle down the investment universe to relevant comparisons. 

• Apply quantitative filters. Refine your search and screen by asset allocation, assets under management, fund structure, or track record. Look at what’s inside competitor products to see how closely they parallel your offerings. 

• Customize the list for niche or thematic strategies. What industry players are thought leaders in your space?

Marketing campaigns can apply peer analysis to strengthen your messaging. When investors and advisors have many options to choose from, peer benchmarking can highlight true competitive advantages. For example, funds with above-average active share can highlight their flexibility to move with the market compared to other active managers that more closely replicate indexes. 

Presenting clear and contextual reports to clients, bolstered by peer analysis, ensures transparency and builds investor confidence across the client journey. 

Sales teams also benefit from peer analysis. Clear and convincing peer comparisons help to articulate the value of your products or services. This not only boosts confidence but also increases win rates, as potential clients can more easily understand the advantages of choosing your firm over others. 

Lastly, product strategy can apply peer analysis to inform product positioning, pricing strategies, and portfolio management decisions. This allows you to refine your offerings to better meet market demands and stay ahead of competitors. 

Incorporating peer analysis across these organizational functions paves the way for a more cohesive and strategic approach. 

Competitive analysis is a vital component of any brand strategy. Through differentiation, you can: 

• Clearly define your investment's value proposition 

• Develop data-driven messaging for marketing enablement 

• Deliver compelling narratives through comprehensive reports, decks, and more 

• Gain investor interest and trust 

Morningstar’s 5-Step Competitive Analysis Framework is designed to help you identify where your firm stands out, and how to translate that advantage into clear, data-driven narratives that resonate with investors and drive business outcomes.   

Morningstar Direct empowers asset and wealth managers to build and manage their assets with the help of robust data analytics. Our unique blend of data, research, and ratings service supports your market research, product creation, and portfolio management decisions. Our global dataset, one of the broadest in the industry, not only facilitates effective analysis but also builds trust with your clients.