Scudder Kemper Investments of Boston is not the first no-load firm to blur the lines between no-load and load, but it could be the most noteworthy, according to at least one analyst in the industry.

The firm announced Oct. 30 that it will stop offering no-load Scudder funds to new investors and will add loaded shares, which it will begin selling through intermediaries starting Dec. 29.

Although Scudder Kemper is not the first firm to give up on the direct, no-load channel, it is the largest and most prominent no-load firm to do so, said Dennis Galant, an analyst with Cerulli Associates, a mutual fund consulting firm in Boston. Scudder's switch embodies a sea change that has been going on in the industry, he said.

"The trend is towards advice and guidance in the market," he said. "The pure direct market is plateauing or dying in terms of flows."

What makes the move most significant is Scudder's reputation for being an advocate of the direct, no-load market, Galant said.

But the firm, like many other no-load fund companies, may have been feeling the pinch of slowing sales in the direct channel, Galant said. The company was forced to scrap its mutual fund wrap program in August 1999, after the program attracted only 400 investors in two years. (MFMN 8/19/99) And in what could be seen as a harbinger of things to come for its U.S. business, Scudder-Kemper's Canadian arm was forced to align with Investors Group of Winnipeg, Manitoba, Canada's largest fund sponsor, after it failed to successfully market itself in Canada as a direct seller of funds. (MFMN 5/17/99)

Scudder will allow its existing investors to continue to purchase Scudder no-load funds directly and will allow investors in its AARP investment program to continue purchasing no-load shares of the 40 funds offered through the program, the company announced. Scudder may have been somewhat reluctant to cut off the AARP program to direct investors because it has produced strong flows for the firm, Galant said.

One of the advantages Scudder has in converting its funds to be sold through intermediary channels is that it has Kemper's distribution platform through which to sell, Galant said.

The firm has also announced it will drop Kemper from its name and become simply Scudder. That move could raise some red flags with brokers who recognize the firm as a no-load firm, but Scudder is a strong brand and the name change is probably a good move, Galant said.

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