Mutual funds are playing the name game more than ever these days, and while marketing or mergers and acquisitions compel most changes, sometimes it's a sign of a more significant shift.
For example, according to a recent report from The Wall Street Journal, Bank of America did some name changing when it acquired the former Columbia Funds, and Wells Fargo did the same when bought the assets of Strong Financial. Merrill Lynch, meanwhile, recently switched its eponymous funds to Princeton Research & Management to make them more marketable through third parties.
Those changes typically don't require shareholder approval. But sometimes a name change is a sign that the fund is headed in a different direction. So to protect shareholders, the Securities and Exchange Commission has a rule on its books that requires funds that invest more than 65% of their assets in a sector, geographic region or type of security implied by the name to seek approval before changing names.
For instance, the Westwood Realty Fund changed its name in July to the Westwood Income Fund so it could broaden its investment focus and mitigate risk. The fund's investment advisor, Gabelli Asset Management, was required to seek shareholder approval.
But outside of altering the investment focus, why do funds continually play the name game? Studies have shown that customers react favorably to funds with names that imply the hottest investment topics. In fact, one study showed that funds that changed their name attracted 22% more assets than funds of the similar size and focus that hadn't changed their name. And, according to researchers, funds that change their names typically don't lose investors; they only gain them.
There's a flipside to the name game, too. In 2004, Goldman Sachs dropped the word "Internet" from one of its funds because it felt the word had a negative connotation, although it retained its e-commerce investment focus.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.