In nature, when one animal helps another it's called a symbiotic relationship. In the fund industry, magazines that rate top funds have a similar relationship with the funds they rate.
Magazines publish such lists because they keep readers happy, offering them a quick way to find the best, most suitable funds. It also offers the magazines a ready-avenue for perusing fund advertising.
For fund companies, inclusion on a list allows them to gain free endorsements from independent third parties, which provide valuable marketing collateral and exposure.
That may explain why so many publications offer the lists. Money, Smart Money, Fortune, Forbes, Kiplinger's, Worth, Mutual Funds and Business Week are just some of the better known magazines that make at least annual endeavors into this field.
For instance, in its December issue now out on newstands, Mutual Funds takes a look ahead offering the "10 Best Funds for 2002." Similarly, at the end of September Money published its "Money 100" list in which it listed the industry's top 100 funds.
While most publishers claim that there is firm division between editorial and sales and marketing, these lists do help provide sales leads, confirmed one advertising manager with a financial publication who wished to remain anonymous. "Everybody's a prospect," he said. "And if they make the list I make sure that they are aware of that when I talk to them."
Moreover, inclusion on such lists provides a valuable marketing tool and can lead to added revenue in the form of reprints from the fund companies which in turn give them to their wholesalers and mail them to brokers and planners.
For small fund complexes, inclusion in a magazine's list can provide invaluable exposure and a low-cost means of marketing their products. Leuthold Weeden Capital Management, a small asset manager based in Minneapolis, has benefited tremendously from the buzz created by making two lists, said Paula Diemer, the firm's director of institutional client services. The firm, which has $164 million in fund assets and another $60 million in privately run managed accounts, had its Core Fund featured in a Kiplinger's ranking this past spring and in December's Mutual Funds magazine issue.
Despite year-to-date performance of -6.41% (according to Morningstar), the fund's inclusion on the two lists has prompted strong interest from retail investors, Diemer said. "We've had an influx of phone calls," she said. "What comes through as new assets is another story, but you can never tell."
While Leuthold did not actively lobby to get its funds on the lists, Diemer said the firm will take advantage of the publicity by creating marketing collateral out of the positive press. "When a piece comes out that we're happy about, we sometimes get reprints to include with the [shareholder mailings]," she said.
In fact, the firm purchased more than 1,000 reprints of the Mutual Funds article in which it was named among the 10 Best Funds for 2002.
The reprints can be valuable marketing tools because they offer an outside, third-party endorsement of a fund, said Andrew DeCurtis, a wholesaler with value shop First Eagle SoGen Funds of New York.
DeCurtis says it was difficult to get anyone to notice his firm's funds a year and a half ago when value investing was out of style. Suddenly adjectives that once described the firm's investment philosophy as "boring, risk averse and conservative" have new appeal with investors and the media alike, he said. That no doubt helps explain why the firm's global fund was also included in the Mutual Funds list.
Making the List
Of course, the process is not that much of a mystery. Generally retail magazines follow the best performing funds for the rankings they compile, he said. "Now value is back in favor and holding cash is not considered too cautious," he said.
That knowledge helped DeCurtis position the global fund in front of Mutual Funds' editorial crew. The firm's PR representative knew about the list beforehand and submitted a press kit. The company has also created press kits for other publications, he said.
While it is impossible to finagle a fund onto a list unless it meets the publication's criteria, by talking with the media, fund companies improve their odds of being included on a list, said Dan Sondhelm, with PR firm Sunstar.
But while good press offers the appearance of an objective, third-party endorsement, not every publication's backing is marketable, he said. For instance, being highly rated by Money magazine, which appeals to self-directed investors, carries little weight with registered investment advisers, DeCurtis said.