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About a year ago,

Dresdner RCM

wanted to know the prospects for



, which was rolling out the incontinence drug Ditropan XL.

Ditropan XL was Alza's first high-profile drug offering, and the pharmaceutical company's success was largely contingent on that drug's prospects. Faraz Naqvi, portfolio manager of


Dresdner RCM Biotechnology, wanted to know if Ditropan XL could succeed against Detrol, the



incontinence drug that was dominating the market. "The Street was saying, 'There's already a drug on the market, how can this unseat it?'" Naqvi says.

To get the lowdown, the fund company didn't just check the usual suspects: analysts' projected sales figures, Alza's recent filings, etc. Who did Dresdner turn to? Freelance reporters.

Naqvi asked a team of reporters to talk to doctors who tested the new drug and doctors who prescribed it. They concluded from their research that the upstart could, in fact, steal market share from Detrol. "They talked to urologists who said they would probably prescribe Detrol to half of their patients and Ditropan XL to

the other half."

The result: Naqvi bought shares of Alza for his portfolio in mid-1999. The stock is up 88.5% this year alone.

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In a world where investment decisions rest on knowing a little more than everyone else, Dresdner RCM has been sharing the research reins with people who may not know their way around a spreadsheet or a Power Point presentation. Its Grassroots Research team comprises 300 "reporters" from the worlds of journalism and academia who are the company's "eyes and ears," says Misha Derkavski, director of Grassroots Research.

For the last 15 years, Dresdner has been using this unconventional program for its mutual funds, believing that anecdotal knowledge is as valid as hard-core analytics in making investment decisions. If Dresdner's recent performance numbers are any indication, the approach is paying dividends.

Many of Dresdner's funds are outperforming their competition. Its best performers have been in technology, health care and overseas. The biotech fund is in the top 10% of health care funds, up 87.3% year to date.

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Global Small Cap, up 15.2%, beats 98% of other world stock funds and the


Global Technology fund is up 18.9% and among the top 10% of technology funds.

"It allows us to test our thesis early on, when Wall Street hasn't figured out these ideas," says Naqvi, who is also the head of biotech research at the firm. Naqvi says he tends to use reporters who know the health care field or have contacts among doctors and researchers.

"It's hard to differentiate your investment process," says

Burton Greenwald

, a mutual fund consultant, who adds that investors don't much care about the research process -- as long as it produces results. Greenwald says the program is appealing to financial planners and advisers, who recommend it to clients.

Dresdner began the Grassroots program in the mid-80s after getting burned by a bad investment in the video-game market involving


, the once-hot maker of the game Pong. "The answer was obvious: You needed to go to stores and ask why the game wasn't selling," Derkavski says.

Since then, Dresdner has made the Grassroots team available to analysts and portfolio managers. The reporters work in 29 countries and produce about 50 to 60 reports a week. It works like this: A portfolio manager wants to test a hunch, so he or she designs a study, usually asking the reporters to talk with people on the ground about products and services. The reporters don't do any financial research; that's the purview of the real analysts. Recent studies include a probe to determine the market for interactive TV and a survey of how Japanese senior citizens plan to invest proceeds from their postal receipt accounts (safe and low-yielding savings accounts) when they started coming due in April.

"We're trying to come up with a better investment decision," Derkavski says.

It's not unusual for institutional buyers to draw research ideas from a wide variety of influences. But Dresdner stands alone among mutual funds in formalizing the process. An analyst might call on friends or experts outside the financial world to give an opinion about a company, but few would rely on them on a continuing basis.

But is Dresdner's Grassroots program, because it relies on nonexperts to conduct pivotal research on which stocks to buy, hazardous to investors? "It would be, if left without interpretation," Naqvi says. He acknowledges that the research hasn't been 100% on the money, but he also says that he sometimes disregards the reporters' findings if his convictions contradict the results.

So who are these reporters? Dresdner itself says little; it keeps their identities secret. About 80% are journalists, and the others are academics or have expertise in a particular field. The firm also won't say how much they're paid.

The main criterion is a "willingness to talk to strangers," Derkavski says. For that reason, journalists are a natural fit. The firm advertises the position on journalism message boards and through journalism schools.

Investors don't appear to be footing a hefty bill for the additional research. The funds charge average expenses of 1.37%, below the 1.44% average of U.S. domestic stock funds.