Acorn Investment Trust, a small-cap mutual fund company with a faithful following, is branching out into mid-cap investing.

The company is offering two new funds, called Acorn Twenty and Acorn Foreign Forty, that will invest in a limited number of stocks with market capitalizations between $1 and $10 billion, said Merrillynn Kosier, vice president for marketing for Acorn Investment of Chicago.

"It's an extension of what we've always done," Kosier said. "Our shareholders said they wanted more choices in the mid-cap sector ... a more core positioning fund with fewer stocks and bigger positions."

Acorn is introducing the funds with its most aggressive marketing campaign ever. That is because the new funds are investing in stocks of companies larger than other Acorn funds. As a result, there is no concern -- as there is with small-cap funds -- about having too much money to invest and possibly being forced to purchase more shares of a particular company than is desirable.

"There are no capacity issues with mid-caps," said Kosier. "With small caps, there's only so much money you can put in any one company" before possibly influencing the price or becoming a majority owner.

Acorn is sending out special marketing packages to several thousand affluent non-Acorn investors and is advertising in the Wall Street Journal, Worth and other financial publications. On its website, Acorn is also adding news about the new funds and establishing links with websites of other financial organizations.

"In the past, we would do limited advertising in Forbes and Money Magazine," Kosier said. In addition, the company would alert existing shareholders of new fund offerings. The initial ad campaign for the two new funds will run during a 30-day pre-subscription period that began Oct. 20, with a secondary campaign currently being planned, Kosier said. She would not disclose the amount of money being spent on advertising.

The marketing materials and ads focus on the successful history of other Acorn funds, the strategy of the two new funds and Acorn's investment philosophy.

"We're leveraging our existing research," Kosier said. "Some of these companies we have already researched as small caps."

The two new funds, as the names imply, will invest in 20 and 40 stocks and will inherently be more volatile than three other Acorn Funds, which have between 90 and 200 stock holdings. An initial investment of at least $1,000 is required and the pre-subscription price is $10 per share.

"The new funds will highlight our stock-picking ability," said Kosier. She characterized Acorn's roughly 125,000 shareholders as "fanatics," faithful to the Acorn philosophy of buying small-cap and selling when a company reaches the large-cap level.

Acorn was founded in 1970 by Irving Harris, a Chicago businessman who created the "Toni" home permanent hairstyles, and by Ralph Wanger who was then an investment management apprentice to Harris. Harris, an investment manager, envisioned building his investment management company by investing in small, innovative companies.

"He liked the idea of talking to the management of these small companies and he saw that his own personal portfolio was loaded with small cap stocks," Kosier said.

The strategy worked. Today, Acorn Investment has about $7 billion in assets and an earnings track record that has produced a loyal following for Wanger, who has managed the Acorn Fund, the company's flagship, since its start.

Acorn Fund, a global small cap fund with more than 200 stock holdings, has an average annual return of 17.2 percent since inception in the early 1970s. It returned 26.1 percent to investors for the year ended June 30.

Acorn International, which invests in about 200 foreign companies, has an annual average return of 16.6 percent since its creation in 1992. Acorn USA, founded in 1996, has averaged 36 percent annual returns. Acorn's past reliance on direct-mail advertising to existing shareholders is indicative of the confidence the company has in its strong following, says Kosier.

"Our investors are the best marketing tool we have," Kosier said. "We have a sunset law around here. Every phone call must be returned by the end of the day. They tell us they love what we're doing."

Wanger, an MIT graduate with a masters degree in industrial engineering, is a marketing tool in himself that the company exploits. He is somewhat of a legend in the Midwest for his plain-speaking style, wit and double-digit returns. He communicates almost weekly with shareholders on Acorn's website.

"He walks to the beat of a different drummer, which is what our shareholders like about him," Kosier said."

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