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Rating:A New Twist On Fund Marketing Not Rated 3.0 Email Routing List Email & Route  Print Print
Monday, July 17, 2000

A New Twist On Fund Marketing

Reported by Paul Braverman

The Internet was supposed to present all sorts of new marketing opportunities for mutual fund, but so far its been mostly talk. But two new start-ups may be changing that.

Stockback.com is a consumer e-commerce site which sells merchandise online from over 75 vendors, including Barnes & Noble, Patagonia and Dell. The site hopes to inspire customer loyalty by offering rebates which will be invested in a proprietary mutual fund. "Airline miles have run their course," says president and founder Tim Parrot.

Parrot has a background in investing (Lehman Brothers), not retail or e-commerce. The concept originated in the pre-Web days. The original plan called for customers to use a credit card and accumulate investing dollars like airline miles. But without the internet, it just wasn't cost-efficient.

Related Links
 Stockback.com
 StockGift.com
Parrot believes that the Web can make it happen. Here's how it works: Customers who purchase items from the site will receive a rebate ranging from 2.5% to 15%, as set by the merchant. They can take the rebate in cash, or the money will be in held in individual accounts, which will be custodied at the Bank of New York.

When a customer accumulates $10, s/he can buy a share of the Stockback.com mutual fund, a no-load, diversified, open-end fund which will invest 35% of its assets in Stockback.com merchants. Merrill Lynch Investment Management will sub-advise and handle all day-to-day transactions. The fund is currently in the final stages of receiving SEC approval.

The company chose not to use an existing fund because they wanted part of the money to stay with the merchants. "We really want to have a connection between purchase and investment," says Parrot. While the fund will hold stock in each company on the site, Parrot insists that the allocation will be prudent. "Some companies make good products but have lousy stock," he acknowledges. "They'll be weighted less."

The company was launched with substantial backing form Ernst and Young. A second round of financing netted $25 million, including investment from RRE Ventures, TH Lee Putnam Internet Partners and NeoCarta Ventures.

A second venture is StockGift.com, an online wedding registry. There are many competitors in that field, but StockGift.com thinks it has a distinguishing characteristic: instead of registering for china or a new blender, users can register for mutual funds.

The idea came to president and founder Gino Heilizer when he got married. He had been living with his fiancée for some time, and they had accumulated most of the silverware and appliances usually on a registry. "We needed financial help, but there was no way to ask for it without sounding gauche," he says, and Stockgift.com was born.

To date, approximately 400 couples have registered on the privately-funded site. Stockgift has a relationship with clearing house Miller, Johnson & Kuehn, which provides funds from Vanguard, T. Rowe Price and Janus

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