Berger Associates of Denver, Colo. is adjusting its mutual fund expenses and cutting fees in an effort to become more competitive. The 11-fund, no-load group with a combined $5 billion in assets recently notified its shareholders that as of Oct. 1, it would be either cutting the management fee outright or initiating fee breakpoints on all but one of its mutual funds. In addition, effective Oct. 1, Berger eliminated the 10 basis point fee it was charging to provide administrative services to the funds.
These recent cost cutting initiatives are part of Berger's plan to remain competitive, said Sally Carleton, a spokesperson for Berger. The company's latest efforts to remain competitive were initiated with the appointment of Jack R. Thompson as president and CEO of Berger Funds in May. Thompson joined Berger three months earlier as executive vice president. Thompson, who served as executive vice president of Berger's sister fund group, Janus Capital, also in Denver, from 1983 until 1995, is largely credited with boosting the recognition of the Janus Funds and increasing fund assets to over $26 billion in 1995 from under $300 million 12 years earlier.
Berger is taking a dual approach to staying competitive and showing its estimated 250,000 shareholders that the fund manager is committed to them, said Carleton. Besides reducing fees, Berger has announced it is determined to boost fund performance across the board. Berger aims to be in the top quartile of its peer group for each of its funds. Slashing fees can only help shrink fund expense ratios, said Carleton.
The breakpoints Berger is initiating reduces the fee it charges as the level of assets it manages increase.
On five of its funds, two new breakpoints have been added. The original management fee on these funds was a flat 0.75 percent of assets. Now, the fee will be 0.75 percent on the first $500 million; 0.70 percent on the next $500 million and 0.65 percent on all assets above the $1 billion level.
On four other funds, which had flat management fees of 0.90 percent, the fees will be reduced to 0.85 percent on the first $500 million; 0.80 percent on the next $500 million and 0.75 percent on anything above that amount.
One other fund, which had a flat 0.70 percent fee, will now have a fee of 0.70 percent on the first $1 billion in assets and 0.65 percent after that.
Berger has some room for improvement in the performance of a couple of its funds, according to Lipper, Inc. of Summit, N.J. One of the group's oldest funds, the Berger 100 Fund, ranked in the mid-range of its fund peer group over the last 12 months through Oct. 14, returning 41.6 percent versus the 49.5 percent average return for all multi-cap growth funds. Its Berger/BIAM International Fund also ranked 222nd of 560 International Funds tracked by Lipper for the same period. Bank of Ireland Asset Management is the portfolio manager for the fund.
But, according to Lipper, Berger has already met its goal on nine of its funds. Year-to-date, the Berger Balanced Fund has been the number one performing fund in its class, returning 19.6 percent versus its peer group average of 0.23 percent.
While Berger sells directly to investors, it has spent the last four years trying to curry favor with large institutions, financial planners and some broker/dealers, said Carleton.
"In the last four years we've gone from zero to now one-third of our assets coming in through brokers and financial planners," Carleton said. Berger sells its funds through the fund supermarkets of Schwab and TD Waterhouse.
While Berger tries to sharpen its edge, its parent company, Kansas City Southern Industries of Kansas City, Mo., has filed a registration statement to spin-off a new company, Stilwell Financial. Sometime before the end of this year, Stilwell will become the umbrella corporation for four Kansas City Southern financial services subsidiaries.