Russel Kinnel, 06.21.04, 7:00 AM ET
Fund companies are having a tough time figuring out how to advertise their funds these days. The old standby was to advertise recent returns in the hope that some people would think short-term returns were good indicators of future returns. However, the bear market proved that tack was a dead end. If you tell an investor to buy based on short-term returns, then they'll probably sell when the inevitable downturn comes.
Now, the market-timing scandal is adding to that challenge. Investors are more focused on integrity and are rightly wary of slick marketing campaigns. So, the industry has responded with two approaches. One is an informational ad that has a rather sober message and encourages investors to do more research. No mention of returns that will get you rich quick. No managers staring down at you like Greek gods.
The other approach is to push the firm's integrity. It says "Trust us (this time)." Scandal-marked shops such as Janus and Putnam are among those that have adopted this line. Some have argued that it's a little early for companies reforming their practices to speak of integrity. And I'll go one step further and point out that there won't likely be any correlation between fund companies with integrity and ad campaigns highlighting integrity. The real relationship is between the size of ad budgets and ads highlighting integrity. Many of the most ethical firms have little or no advertising budgets because they never lost sight of the fact that they were fiduciaries, and not salespeople.
http://www.forbes.com/finance/feeds/mstar/2004/06/21/mstar1_2_16206_132.html