Remember the mirror that told Snow White's evil stepmother she was the fairest one of all?

Wiesenberger

, a leading provider of mutual fund data, has created something similar for mutual fund distributors.

Wiesenberger recently rolled out a beta version of

FundEnterprise

, a software system designed to find something good to say about even the ugliest of funds. The software compares a fund to its peer group based on more than 200 criteria, giving a marketer a decent shot at finding at least one area where a fund's performance is above average.

"FundEnterprise makes it easier for mutual fund marketing and sales executives to promote any fund, even if its performance is currently not near the top of its category," Wiesenberger's Web site explains in a password-protected area.

In other words, mutual fund marketers have a new tool to devise factually accurate but potentially misleading advertising and sales pitches aimed at consumers.

Take Ameritor Investment, for example. This fund, which rates a bottom-rung one star on

Morningstar's

five-star scale, has returned an average of negative 3% annually over the past 10 years, while the

S&P 500

index has an annual return of 14.8%, on average, over the same period.

But leave it to FundEnterprise to turn this ugly duckling into beautiful swan.

With just the click of a mouse, the fund's makeover is complete. For the fee-conscious investor, FundEnterprise picks out the types of fees where Ameritor outshines the competition. The fund charges no

12b-1 marketing fee, redemption fee or front-end commission, putting it in the top 1% in each of these categories. With such impressive numbers, surely investors can ignore the fund's 1.6% expense ratio, which puts it in the bottom half of its peer group.

Still not impressed? The fund, which was launched in 1956, also is in the top 1% of its group for longevity. Its longevity is particularly impressive in view of its investment performance, which places it in the bottom 7% of its peers over the past 10 years.

Further, it boasts a top-24% rating for portfolio turnover, and its dividend yield beats out 84% of its peers. Never mind that this may simply mean the fund keeps losers too long and its investments are valued so low that their dividends look large in comparison.

Pssst, Wanna Buy a Rolex?

The program's "Single Fund Highlight Report" automatically generates a table showing areas in which a fund ranks highest among its peers. If the Wiesenberger-defined peer group is too tough, a marketer can create his own.

One way or another, FundEnterprise will transform a toad into an undiscovered prince awaiting technology's transformative kiss. The only thing the program doesn't generate is a selling script, but that may be under development.

FundEnterprise can even find beauty in the lowly Roulston Growth fund, with its five-year average annual return of 0.27% -- compared with 15.17% for the S&P 500.

FundEnterprise highlights the fund manager's eight-year tenure -- in the top 14% of its peer group. Its low initial investment minimum of $250 is in the top 2%. Its portfolio's

price-to-earnings ratio? Top 6%!

Tidbits like these can sweeten a salesman's pitch or a fund advertisement. But in truth, the fund's performance indicates that the long-tenured manager should have been canned years ago, and that the low investment minimum reflects a fund so desperate for assets it probably would let you open a 10 cent account as long as you bought your own stamp for the envelope.

For more examples of what FundEnterprise can do for a fund that's down on its luck, visit Fund Democracy's

Web site.

Guns Don't Shoot People ...

Asked about the potential for FundEnterprise to be used to mislead investors, Wiesenberger's president, Bill Chambers, points out that the service merely provides a powerful, user-friendly tool to analyze fund characteristics.

The more powerful the research tool, he says, the greater the potential for it to be used for good and bad purposes.

True enough. If used for the right purposes, FundEnterprise may benefit shareholders by giving fund directors more and better quality ammunition with which to grill management about a fund's deficiencies. In fact, the legal departments of at least two fund complexes have subscribed for exactly this purpose, says Chambers.

That these and other subscribers would not authorize Chambers to identify them, however, makes one wonder whether they plan to put the service to less honorable uses.

Where All the Funds Are Above Average

FundEnterprise calls to mind a question that former

Securities and Exchange Commission

Chairman Arthur Levitt once asked, incredulously: "How many funds have we all seen claiming to be the 'No. 1- performing fund?'"

FundEnterprise seems to be designed to enable every fund to claim it is the fairest one of all. The program ranks funds against so many criteria that every fund will be able to score in the top 10% in some category. Distributors can then use these cherry-picked features as selling points with their customers.

Discovering a fund's weak points, however, is left to investors.

Fund distributors who use FundEnterprise, however, may run afoul of an SEC interpretive bulletin to be issued this week that will provide guidance to the industry about the kinds of ads the SEC staff considers misleading.

Douglas Scheidt, chief counsel of the SEC's funds division, has said the bulletin will focus on the gray areas, where fund ads that literally comply with advertising rules and are factually accurate nonetheless are fraudulent because their overall effect is misleading.

Fund distributors using FundEnterprise to put a fund's best face forward may create a distorted picture. Examiners from the SEC and the

National Association of Securities Dealers

, which is responsible for reviewing fund ads, probably will pay close attention to how distributors use this new program.

In the meantime, Wiesenberger will be hosting its next client conference at

Garrison Keillor's Lake Wobegon -- where all the mutual funds are above average.

Mercer Bullard, a former assistant chief counsel at the Securities and Exchange Commission, is the founder and CEO of Fund Democracy, a mutual fund shareholder advocacy group in Chevy Chase, Md. He welcomes your feedback at

bullardm@funddemocracy.com.