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Investment Trends Drive Name Changes

An increase in the number of funds filing proxies for name changes reflects trends in mutual fund investment styles and investor preferences, according to mutual fund analysts.

Increased investor interest in brand name funds and funds that offer portfolios with very focused investment strategies is driving the increase in name changes, according to Geoff Bobroff, president of Bobroff Consulting of East Greenwich, R.I.

"Transformation of investment style is reflected in funds' names," said Bobroff. "In recent years, people have been pigeonholing themselves in certain types of funds like small-cap or large-cap funds. Fund companies are trying to take advantage of this by coming out with fund names that reflect those buying patterns." Investors today are more brand-oriented than in the past and an increase in funds that include a brand in their name reflects this preference, he said.

As a result, a fund's name is more important today than it ever has been, according to Bobroff.

"It's what first grabs an investor's attention," he said.

There has been an increase in the number of SEC proxies for name changes, according to Wiesenberger of Rockville, Md. In 1990, 0.6 percent of all funds filed for a name change compared to 18.6 percent in 1998, according to Wiesenberger. From 1994 to 1998, an average of 13 percent of all funds filed for a name change.

State Street Research of Boston, for example, recently filed with the SEC to change the name of its State Street Research Capital Fund to State Street Research Mid-Cap Growth Fund. The company filed the proxy because the fund's investment strategy is changing to focus on mid-cap growth securities, the company said.

"We wanted to change the label to reflect the change in investment strategy," said Elizabeth Mckown, vice president of product development for State Street Research. "The new name was particularly important because we wanted to make a big statement and make it easier for investor's to identify the fund's strategy. Niche funds are popular right now and State Street wanted to change the name and investment strategy to capitalize on that trend."

Earlier this year, American Express Co. of Minneapolis decided to change the name of its IDS Mutual Fund Group to take advantage of American Express' strong brand name, said Tom Joyce, a company spokesperson. When weighing the decision, IDS funds' strong market standing and the considerable costs associated with changing the name were not a strong enough factor to keep the IDS name, Joyce said. Costs in changing fund names include notifying shareholders, creating a new prospectus and filing with the SEC, he said.

"The American Express brand name translates well with customers," he said. "In point of fact, the IDS name wasn't equal to American Express."

The Quantitative Group of Funds of Lincoln, Mass., in an effort to attract new investors, recently changed its name to the simpler, "Quant Funds."

"Our goal is that we want people to more easily recall our name, and still make a positive connection to our investment style," said Willard Umphrey, chairman of Quant Funds.

The new name is part of a company marketing strategy designed to ease communications with investors and improve its on-line presence, Umphrey said.

"The Quantitative Group of Funds, by nature of its quantitative investment style, can be confusing just by its name," he said. The new name is simpler and closer to common usage, he said.

Ideally, a fund's name lures investors. But it can also invite legal battles. That possibility is prompting fund companies to weigh name choices carefully, according to Linda Finnerty, a spokesperson for DLJdirect of Jersey City, N.J. A fund's name needs to appeal to investors, but also needs to adhere to SEC regulations and copyright laws, she said.

SEC regulations require at least 65 percent of all securities in a fund's portfolio to be representative of any descriptive word in a fund's name, said Bobroff.

"This has been a hot issue with the SEC," he said. "If you call yourself something, you better be it. One doesn't throw around a name indiscriminately."

Often, a fund's name is changed because it is too vague. For example, Pacholder Associates of Cincinnati, Ohio changed the name of its Pacholder Fund in early November to help investors identify the fund's investment objective, according to Jim Gibson, executive vice president. The fund's new name is the Pacholder High Yield Fund.

"There was no identifying factor. We've been a high yield fund since 1988 and we decided to change the name to reflect that," Gibson said. The fund's previous name was often a source of confusion, he said.

"We'd get calls from confused people wondering what the Pacholder Fund manufactured," he said.