What is advisory discretionary fund?

What is the lifetime value of a marginal dollar invested in a mutual fund to the company that runs the fund?  Put another way, what would a mutual fund be willing to pay to get a marginal additional dollar?

• How is this value affected by type of customer, type of fund, and size of fund?  What other factors have I failed to include?

• Answer:

  If it's a typical actively-managed, US-based, retail-investor-seeking equity fund, offered by a large company, with the money invested directly or through a discretionary scheme (one where it can be moved at the investor's whim), and placed in a large fund with a solid fan base, the lifetime value is probably about USD0.02-0.04. That assumes a rough average of 50bps in annual fees retained and a four-to-eight year holding period. It will be less for any other kind of vanilla mutual fund or for a smaller company. Fee retention may go up for direct (especially electronic) purchase but those customers tend to have much shorter holding periods. Budgets for marketing a fund to retail investors (above and below the line) are unlikely to exceed 1/40th of the estimated lifetime value of the buyers targeted when times are good, That fraction will get a lot smaller in two-way or falling markets. I know I narrowed that down a lot - possibly too much to make the answer useful to you - but you might want to consider the math shown above as the highest of all possible lifetime values/spends for a mutual fund company, with any other example likely to produce lower results. Values/spends where retirement funds and other collective investment schemes are concerned are entirely different and beyond my expertise. The value/spend relationship is roughly (really roughly) equivalent in many European markets. In most of Asia, the fund access routes for mass retail are different enough that you can't really compare the numbers.