If last year, you based your entire investing belief system on mutual fund ads, you would have thought that double-digit returns were for weenies and that the paramount yardstick for measuring fund performance was one year.
Fast-forward 12 months, after the tech bull has been tamed and the
Nasdaq Composite Index
has cratered. Fund companies that last year were jumping on the tech-fund bandwagon now act as if they've never heard the words
and the ads that deluged us with performance numbers in mega-large type are nowhere to be seen -- unless they're making "one-year" comparisons that include a quarter or two from the glorious, bygone days of 1999. If there are one-year returns listed, they're more likely to be from the health-care or value offerings that held up well in 2000.
"Coming into 2000, there were literally hundreds of triple-digit-return funds. Sixty, 70, 80% returns were the norm for high-powered growth funds, and people shouted those numbers from the rooftop in their advertising," says fund consultant Burton Greenwald. "Now there's a realization that the numbers are not there to scream about."
What's the payoff, as they say in the ad world? The fund industry, a large portion of which jumped on the momentum-investing train in the late-'90s and got burned for it in 2000, has done a 180-degree turn in their advertising. Gone are ads listing 10 funds and their one-year returns, as well as mentions of aggressive investing.
"Now that markets have returned to normal, we may see fund marketing returning to some of the classic themes of investing," says Dan Ross, president of
Wechsler Ross & Partners
, a financial marketing and design firm. "Over the last few years, people have stopped talking about investing internationally, asset allocation, diversifying, and balancing growth and value." Some of those themes are likely to resurface.
Fund Ads One Year Ago
"In the '90s, there was just one banner year after another," explains Charlie Carr, executive vice president and director of national sales at
, which provides sales and marketing services for mutual funds. "So there was a tendency then to focus on performance."
Judging by print advertisements, this orientation has already changed. "Coming off last year's numbers, it is both prudent and practical to focus back on the long term," says Carr.
There's no question that chastened fund companies have dispensed with the focus on returns. In fact, in a marked departure from last year, lots of ads from fund companies now don't mention specific funds at all, opting instead for references to babies (
) and dogs (
). Compare that to January 2000, when the market was still raging. Ads showed not only jaw-dropping performance numbers, but also, in some cases, turbo-charged visuals, such as
's sporty car (complete with a woman in a take-no-prisoners, Joan Crawford-style hat).
is one of the biggest players to retool its strategy. This fund family comes closest to epitomizing the high-octane growth of the late-'90s, and benefited from massive cash flows based on its performance over the past couple of years. But with most of its funds reeling from the technology meltdown, it can't simply broadcast the numbers anymore.
"Two years ago, they would take an ad and just show the numbers," says Greenwald. "Now they're talking about the process. In effect, the undercurrent to Janus advertising is day-to-day, year-to-year performance is not as important as what's behind it: in their case, a very sophisticated investment process."
A Janus representative declined to comment.
One recent Janus ad did list the numbers for the
Special Situations fund, but the one-year return of 14.58% was propped up by fourth-quarter 1999. (For the calendar year 2000, the fund declined 17.5%. Of course, these ads typically show returns that lag a bit because of it takes time to get create ads and get them to the publisher.)
Fund Ads Today
Other fund companies are styling themselves as paragons of mature responsibility. Gone, for the most part, are the ads for once-hot sectors like telecom and communications. "Long-term gain is never the result of short-term thinking," admonishes
-- a fund family known for focusing on momentum -- in an ad for its
Constellation fund. (One possible reason for the long-term focus: AIM Constellation fund lost just more than 10% in 2000.) The 73-year-old
Pioneer fund calls attention to its long history, pitching itself as "the one for the long term."
"Experience counts!" shouts the tagline over a picture of the gray-haired, suspender-wearing managers of the
Kaufmann fund. That's quite a different tack from an earlier slogan: "Tough guys finish first!" (Calls requesting a comment from Kaufmann were not returned.)
trots out a photo of another gray-haired manager,
Fundamental Value's John Goode, who, the ad says, sat "undeterred" when the Dow staged a record drop last April. "You don't gain his kind of savvy and prescience overnight. It takes years," intones Smith Barney.
In an ad from
Morgan Stanley Dean Witter
, a man regards us with a fond, steady gaze. Last year, this man would have appeared on a page cluttered with jaw-dropping performance numbers. This year, Morgan Stanley's 30-point-tagline says it all: "Life's not fair." In smaller letters the ad continues, "Being smart doesn't necessarily make you a financial success. Believing in yourself only goes so far."
On a less-subtle note,
-- which last year urged investors to "Smile, if you own
an American Century fund" -- now has ads showing a bunch of perspiring guys in dirt-stained sweat suits, doing pushups on a football field. You can't help noticing some of them have shaved heads. Is there a creepy element of penitence here? Of course not. They just want to remind us how essential "American discipline" is to their stock-picking process.
The new ads still post long-term and one-year returns, which run through Sept. 30 and are propped up by late-'99.
Van Kampen offers this sop for the newly impoverished: procreation. "Your most valuable holdings aren't in any portfolio," the fund company reminds us, with a close-up photo of a man's hands holding up a thoughtful-looking baby. "Appreciate life's true wealth," reads the ad. (
You can still make babies! Congratulations.
One other fund company has jumped on the treacle bandwagon in a big way. In a current Fidelity ad, a potential investor proudly reveals to a Fidelity representative (via a made-up transcript of a phone conversation) that his "daughter just this morning blessed us with our very first grandchild." (On hearing the child is named Ernest, the customer service rep offers, "Ah. That's a good, strong name"?)
That ad is part of a new campaign focusing on relations between Fidelity representatives and investors. But other ads from Fidelity continue to focus on performance, a spokesperson says.
That seems to be the game plan for fund marketers this year: Make no promises, and hope you can overdeliver. "It's a more rational approach. I think turning away from just numbers-driven advertising is good for the industry, and it will give investors a longer-term perspective," says Greenwald. "Probably the worst way to invest is by using a rear-view mirror. You want to look ahead, not back."