As British fund investors evaluate their investment options in one of the many fund supermarkets springing up in the U.K., they will increasingly rely on performance figures to make their choices, according to industry analysts.

The increased use of performance data to market fund products in the U.K. will be driven by the growth of supermarkets in the country, said Thomas Marsh, a consultant with Cerulli Associates, a research and consulting firm in Boston.

On the crowded shelves of fund supermarkets, impressive performance records are the most effective way to catch investors' attention, he said.

At the same time, regulators are taking steps to insure the integrity of data. In the U.K., there are no established performance presentation standards and this provides the possibility that a fund's advertised performance could be presented in a confusing manner that obfuscates funds' recent performance, Marsh said.

"(Funds) can list 193 percent returns and then in small brackets state that it was over a three year period," he said. "So, it's difficult to really figure out what you're getting."

The Financial Service Authority, the U.K.'s version of the SEC, has been closely watching the development of supermarkets and the increased use of performance data in advertisements, Marsh said.

"The FSA is going to be really pushing for greater transparency," he said.

The new supermarkets' need for data and an easy method for investors to differentiate the supermarkets' funds has sparked competition among data firms, Marsh said. Morningstar of Chicago opened a European headquarters in London in late May to address that need and the firm's star rating system is expected to be widely used by supermarkets, he said. Lipper Analytical of Summit N.J. began offering one-, three- and five-year performance figures on all major funds in the U.K. in 1998. The firm applies a gold, silver and bronze ranking system to the funds, Marsh said. Cerulli has had a staff member in London collecting European sales data for the past eight months and opened an office there in May.

Still, there is no prescribed format for this data.

The Financial Service Authority announced in October it planned to provide online comparative tables of funds' performance by 2001. The authority hopes to have a website that will provide British investors with uniform data on the country's fund products including unit trusts, open end investment companies, investment bonds, savings endowments and mortgage endowments, according to the authority's proposal. The proposal was published on the authority's website.

The authority is hoping competitive pressure will compel investment firms to provide data using the same format as the tables, but it may issue a rule mandating the program, said Jackie Blyth, an authority spokesperson.

In the meantime, the authority is monitoring the industry to insure that data is, "clear, fair and not misleading," said Blyth.

As fund supermarkets become a more popular distribution channel and firms rely more heavily on performance data to market, that will become an increasingly difficult task. Within three to five years, fund supermarkets in the U.K. could account for as much as 35 to 40 percent of net new flows, Cerulli Associates said. In the past month alone, 13 new supermarkets have begun operating in a country that had no online supermarkets at the beginning of this year. By the end of the year, there could be a total of 55 supermarkets, Marsh said. But competitive pressure to provide the greatest product breadth, competitive pricing and advanced technology and service will ultimately winnow the field to only four or five large supermarkets, he said.

Competition to provide the cheapest supermarket is already starting to heat up. Virgin Direct, a subsidiary of Virgin Ltd. of London, introduced its supermarket last week and is claiming all of the funds it offers will be no-load, Marsh said.

Currently only a few of the existing supermarkets are operating fully and allow investors to download and send applications electronically, Marsh said.

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