A small fund adviser's lack of marketing for two of its strong performing funds has prompted some industry observers to question if the firm is engaged in a strategy to pump up the funds' performance by keeping the asset level in the funds low.

The American Eagle Capital Appreciation Fund and the American Eagle Twenty Fund were launched last December by Jundt Associates of Minneapolis, an investment adviser with nearly $400 million in assets under management. Both funds have had strong performance, posting 105.43 and 81.79 percent returns respectively, as of Oct. 3, according to Marcus Jundt, the chairman of the firm.

Yet, Jundt Associates has done nothing to market the new funds. Its website has no mention of the two no-load funds and while the firm has purchased a website domain name for the funds, there is no website.

"Hopefully, that will be done in the next six to 12 months," Jundt said. While the firm is interested in eventually hiring someone who will handle marketing for the funds, it is not a priority and the firm is more concerned with building the funds' performances, he said.

The firm appears to be using a strategy that involves incubating the two funds by enhancing performance through making it difficult for the public to invest in them, said Roy Weitz, a financial advisor and publisher of FundAlarm.com, a website that tracks manager changes in the fund industry.

Incubating new funds is not a new practice but usually involves a larger fund company that offers new funds to only its employees. By offering a fund to only its employees, a company can keep the asset level low, allowing the fund to move in and out of investments easily, thereby enhancing performance, Weitz said. And if the fund performs well, the company can offer it to the public with an established performance record, he said.

While incubating funds behind the closed doors of a large firm may be a fairly common occurrence, using the public to incubate the funds is rare, Weitz said.

"I've never seen anything like this," he said. "Some good funds are probably under-marketed because the people really don't know what they are doing. But these guys are smart ... this is not a case where they just forgot to market the thing."

Both funds are the first two no-load funds under the American Eagle brand name and the firm will probably launch more at the beginning of next year, Jundt said. It is also considering adopting the American Eagle brand name, he said.

"We've come to the same conclusion that Fidelity and Janus and a lot of other people have which is that the lines [between load and no-load] are blurring," Jundt said. "If that continues, it's my guess that we'll have one name and that would make it slightly easier to market the funds."

If the firm is shifting its focus to no-load funds, it would stand to reason that it would want its first no-load products under its new name to have strong performance, Weitz said.

Currently, the American Eagle Capital Appreciation Fund has $15.4 million in assets under management and the American Eagle Twenty fund has $10.24 million in

assets under management, according to MaxFunds.com, a website that tracks small and new mutual funds.

Another indication that the funds are being used as incubators are the high number of IPO allocations that have been designated to each fund, said Jonas Ferris, president and CEO of MaxFunds.com.

There have been 12 IPO allocations designated between the two funds so far this year, said Jon Essen, treasurer for Jundt Associates. "Twelve IPOS is a lot for two new funds," Ferris said. "Especially since, if I'm not mistaken, they don't have that many holdings. There are only about 20 or so holdings, maybe 25 in both those funds. So that's one-third of all the stocks they own that are IPO shares."

That could have a profound impact on the funds' performance, said Dennis Dolego, the director of research for the Optima Group of Fairfield, Conn.

"If you spread out six IPOs in a concentrated fund, then you can get some extraordinary returns without trying that hard, if the IPOs turned out pretty well," he said.

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