Most fund companies have not made it through the current bear market without losing assets, but some have been hit harder than others. With a few exceptions, large firms have lost a smaller percentage of their assets than smaller firms since the Nasdaq peaked last March, according to statistics from Financial Research Corp. of Boston, a mutual fund research and tracking firm.

Of the 393 fund firms with at least $100 million in assets tracked by FRC, 71 lost more than 25 percent of their total assets from the end of March 2000 to the end of February of this year, according to FRC. The average asset pool for all firms is $12.26 billion, but the average assets for those 71 companies is $6.48 billion. Of those 71 firms, only seven had assets of over $12 billion before the decline, according to FRC.

Furthermore, 23 of the 25 firms with the largest percentage losses of assets, since last March, began with assets under $12 billion, according to FRC. Those firms had average assets of only $3.16 billion. Conversely, the largest 25 firms in terms of assets, which had an average of over $133 billion in assets, lost slightly more than seven percent of those assets. The industry, as a whole, lost 13.3 percent of its assets, according to FRC.

One reason larger firms might not be affected as severely by the down market is that they have proportionately larger retirement plan asset bases, according to Jim Folwell, an analyst at Cerulli Associates of Boston.

"Retirement assets [are] stickier than retail, fully-taxable investments," said Folwell. "People tend not to move those assets around as much simply because [they] have to stay in the plan, and those are, obviously, longer-term dollars. The bigger firms are more likely to have a presence in the 401(k) market and have assets from big qualified plans."

The introduction of a group of new firms with specific, and in most cases aggressive investment strategies to take advantage of the now bygone bull market is another reason smaller firms have been hit so hard during the market turn-around, according to Kunal Kapoor, senior fund analyst at Morningstar of Chicago.

"Clearly, over the last couple of years, some of the smaller firms are ones that were born very recently and some of those have had very growth-oriented offerings," said Kapoor. "And, financially they've been smacked."

While large firms certainly have growth-oriented products, they also have alternative offerings into which investors can run in a down market, according to Folwell.

"Smaller firms may tend to be more niche-oriented," he said. "If that niche falls out of favor, then those assets are going to shift dramatically, whereas a larger fund complex may have a broader range of investment options that you could transfer into - more fixed income portfolios, money market funds, etc. You might be limited in terms of your breadth of choice in smaller fund companies."

Also, when the market is down, a big brand name may be more crucial than ever, said Folwell. Investors who might have had money in a number of fund families may keep that money only in the larger, more established ones when they limit their investments, he said. Also, for investors using fund supermarkets, there is no incentive to remain with any particular fund family, he said. That is because supermarkets do not charge transaction fees.

"A lot of those [smaller] funds are being distributed through groups like Schwab or Fidelity through the supermarkets and ... the reasons to stick with an individual manager are greatly diminished," said Folwell.

Not all large fund firms have sustained fewer losses than smaller firms. For example, Janus of Denver, which had nearly $214 billion in assets at the end of March 2000, was down 21.42 percent from that total by the end of February 2001. Still, Janus is know for having predominantly stock funds and its relative lack of diversification, a small firm trait, is one of the reasons for the company's loss, according to Avi Nachmany, director of research at Strategic Insight of New York.

"To the extent that a bigger proportion of your assets were in new economy stocks and stock funds, you're more susceptible [to losses]," said Nachmany. "If you had bonds and money market funds, you are much more secure. It's the mix of your products."

While smaller firms seem to have been more susceptible to large losses in the down market, they also represent a large majority of the fund firms whose net assets grew during the recent market downturn. Because they are, in general, more heavily concentrated in one area of investment, small firms are more likely to see above average increases when that sector or style performs well, according to Folwell. In fact, of the 107 firms that have actually gained assets since the end of last March, only seven began with assets above the industry average of $12 billion, according to FRC.

"You've got to look at both ends," said Kapoor. "There are other small firms that either are doing quite well or doing ok. It really depends what you're looking at."

"I'm not so sure it's a large firm versus small firm [issue]," said Nachmany. "There may just be an indirect correlation. It's a function of how you are organized as a company."

Still, how a company is organized is largely based on its size and while smaller firms have both benefited and been harmed by the market downturn, it is apparent that they are more susceptible to dramatic changes in assets than large firms during these times.

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