Following in the footsteps of Zurich Scudder and other no-load shops who have defected from the direct sales channel, Credit Suisse Asset Management announced last week that it will begin selling all of its no-load mutual funds as load products, marketing them under one brand, Credit Suisse Funds.
Twenty-eight funds will be affected by the decision, which goes into effect Dec. 12. Those products include the Warburg Pincus funds, which were merged into the Credit Suisse complex more than a year ago. That merger prompted the firm to name all of its funds under the Warburg Pincus brand. Now, all of those funds will be branded under Credit Suisse.
Migration to Advice
The move is part of an ongoing migration across the industry in which fund companies are identifying a demand for advice and are shifting from no-load to load in an effort to tap broker and adviser channels. In August, for example, GE Asset Management abandoned efforts to sell its 21 funds through Charles Schwab's no-load supermarket and began charging sales fees and distributing through advisers instead. Acorn Investment Trust also switched to load products in September of 2000. William Blair & Company did the same in October 1999.
Perhaps one of the more notable defections from the no-load arena was Zurich Scudder, which, almost a year ago, announced that it would stop offering no-load Scudder funds to investors and add loaded shares. The move was notable because of Scudder's prominence in the no-load channel and the fact that it embodied a sea change taking place in the industry, observers said.
Rethinking Strategies
Firms are also rethinking their strategies as dismal markets and investor unease have sparked an outflow of assets. Since January 2000, for example, Credit Suisse has posted net outflows of $2.3 billion, according to Financial Research Corp. of Boston. Investors pulled $917 billion from the firm's funds last year and the leak worsened this year; as of November, investors had pulled $1.4 billion from Credit Suisse products in 2001 alone.
Shiv Mehta, who oversees product management at Credit Suisse, said the complex has been considering a change in strategy since the beginning of the year, including converting to a combination of load and no-load vehicles. After deliberating with clients and advisers, the firm opted for a total load option because "it suits our investment style, global reach and broad product line," he said. "It really does focus us on growth."
Outflows Reflect Market Trends
But he said the move is not a defensive reaction aimed at stemming outflows. Rather, Mehta said the firm's outflows have reflected broad marketplace trends where firms have ditched unfashionable investments styles prompting outflows from those funds. "When a style is out of favor, you tend to have large redemptions in a market like this," he said. "We're reflecting what's going on in the marketplace, which is pools of assets in places that are out of favor."
Making the Change
Mehta said all current investors will be grandfathered into the newly loaded products and will not have to pay the same fees new clients will. In addition, he said the firm is not worried about alienating potential clients who might seek primarily no-load vehicles because those clients are less likely to seek out Credit Suisse anyway.
"If you look at the actual flows in the no-load business, they have been going to a very concentrated list of fund families," Mehta said. "The investor may be looking for brand. That's a marketing reaction. So, we see this as enlarging our footprint, not reducing our footprint....We'll find out in dollar terms on Dec. 12."
Top 20 Retail Fund Web Sites Named
kasina, a New York-based e-business consulting firm that specializes in asset management firms, announced last week its selections for the top 20 retail mutual fund web sites. The firm also named the top 10 sites for small fund complexes.
kasina reviews retail, intermediary, and institutional mutual fund Web sites and selects the top ones annually. This year, the firm reviewed 478 retail sites, 57 more than the year before. It evaluates sites in five categories: branding, content, online services, usability, and Web technology.
While sites have improved throughout the industry, there are still several servicing features that are largely absent, according to kasina. For example, only 53% allow investors to view account balances online, although that's up from just 12% five years ago. Also, while 66% of firms encourage direct investments, only 5% of the retail sites allow investors to fully open an account online.
"In general, the top 20 sites and the top 10 small fund sites are doing a much better job servicing clients than the overall industry," said Steven Miyao, CEO of kasina, in a statement. "While this gap continues to be large, we are seeing the margin decreasing as the industry strives to follow the lead of the top sites. One area where we continue to see slow growth overall is the adoption of innovative and value-added Web technologies."
Since kasina began naming the top 20 retail sites five years ago, eight companies have made the list each year. They are: American Century Investments, Fidelity Investments, Charles Schwab & Co., Zurich Scudder Investments, Stein Roe & Farnham, Strong Investments, T. Rowe Price and The Vanguard Group.
Top 20 Web Sites - Mutual Funds
(alphabetically):
AIM Management Group -
www.aimfunds.com
American Century Investments - www.americancentury.com
Berger Funds - www.bergerfunds.com
Calvert Group - www.calvert.com
Charles Schwab & Co. -
www.schwab.com
E*TRADE Group - www.etrade.com
Fidelity Investments - www.fidelity.com
INVESCO Funds Group -
www.invescofunds.com
The Montgomery Funds -
www.montgomeryfunds.com
One Group Mutual Funds -
www.onegroup.com
Salomon Smith Barney -
www.salomonsmithbarney.com
Stein Roe & Farnham -
www.steinroe.com
Strong Investments - www.strong.com
TIAA-CREF - www.tiaa-cref.org
T. Rowe Price - www.troweprice.com
The Vanguard Group -
www.vanguard.com
TD Waterhouse Group -
www.waterhouse.com
Wells Fargo - www.wellsfargo.com
Westcore Funds - www.westcore.com
Zurich Scudder - www.scudder.com
Top 10 Web Sites - Small Fund Firms (alphabetically):
Berger Funds - www.bergerfunds.com
Calvert Group - www.calvert.com
Gabelli Asset Management - www.gabelli.com
The Montgomery Funds -
www.montgomeryfunds.com
Pax World Funds - www.paxfund.com
RS Investments -
www.rsinvestments.com
SAFECO Mutual Funds -
www.safecofunds.com
Sentinel Funds - www.sentinelfunds.com
Stein Roe & Farnham - www.steinroe.com
Westcore Funds - www.westcore.com
