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Some Funds Push for and Use Top Manager' Awards


Getting high fund rankings from independent firms like Morningstar is always important for fund marketers. But with equity performance down virtually across the board, fund companies have shied away from promoting individual products. As a result, portfolio manager ranking has taken on a greater focus.

It's not easy promoting a fund's performance if it has a low yield, even if it is good relative to its benchmark and/or peers. Over the past year, leading equity funds have had best-of-the-worst type yields, and even negative yields in some cases. Firms can highlight the relative' success of their funds, but slightly beating an index that has tanked is not terribly sexy for investors, according to industry observers. Promoting portfolio managers, however, is a way of ultimately bragging about performance without having to admit actual numbers.

"It's indirectly selling funds on performance," said Jim Atkinson, a principal at Los Angeles-based Orbis Marketing Group, which specializes in mutual funds. "There's a temptation there to promote that and bring in assets on the short-term, but it's really a double-edged sword because promising performance is not a good long-term approach to selling funds."

Last July, Barron's published its list of the top 100 fund managers of the previous year. The annual list is compiled by Value Line, a New York-based financial services research and data firm, and is basically a measure of risk-adjusted returns of one- and three-year periods, according to Michael Santoli, mutual funds editor at Barron's. The rankings are purely numbers-based and completely objective, Santoli said.

OppenheimerFunds of New York is still using last July's rankings in its advertisements. Earlier this month, it ran a full-page ad in The Wall Street Journal, which said, "In Barron's annual ranking of fund managers, OppenheimerFunds, Inc. had more portfolio managers in the top 50 than any other company. Just like last year."

The firm has been advertising that since the rankings came out, according to Greg Stitt, a spokesman for Oppenheimer.

Morningstar selects top managers of the year as well. But it only chooses one from each major category, and, unlike, Barron's, its decision is largely subjective.

"We look for good performance during the year, good long-term performance and a courage of conviction to stay with a style even if it's out of favor," said Russ Kinnel, a senior analyst at the Chicago-based rating firm. "It gets pretty fiercely debated around here, though, and at the end of the day, it can be fairly subjective."

Consequently, there is a lot of lobbying on the part of fund companies to get their managers selected, especially for this past year, Kinnel said. Although it has little effect, funds are constantly calling Morningstar and sending the firm information about its fund managers.

"We get a lot of stuff. People are very interested in having someone named manager of the year," Kinnel said. "People always call and ask if they can nominate someone. We say, Yeah,' because we consider pretty much everyone already."

Last year, PIMCO advertised the fact that portfolio manager Bill Gross was named manager of the year for 2000, Kinnel said. While he was unaware of firms other than PIMCO and Oppenheimer that have used those types of rankings in advertisements, he said a lot of firms promote the awards in their publications and on their Web sites. Merrill Lynch and Oakmark Funds are two examples of firms that issued press releases following the publication of Barron's rankings.

"I think anytime you can get an award like that it helps your business," Atkinson said. "It's really good publicity, especially recently."

However, there is a potential downside for a fund company that promotes its managers because they can always leave the firm, he added.

"Fund companies have to grapple with the decision of whether to turn their managers into stars," Atkinson said. "That can be a huge problem if your managers leave. It's a decision that every fund company has to deal with."