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Thursday, July 11, 2002

Get Out There

by: Tony Pennino

No one questions it: these are difficult times for the mutual fund industry. Accounting scandals are multiplying, the bears are rampaging on Wall Street, and investors are, frankly, scared. But fund companies should not bury their heads in the sand, at least according to Dan Sondhelm, vice president of SunStar, a media relations company for the financial services sector.

"Right now, it seems to investors that mutual fund executives are hiding. This is not an appropriate strategy at all. They should be out there getting their message across," Sondhelm contented.

And what should that message be?

"They should say, 'We are still hard at work. We are not hiding. We have a lot of experience and have seen down markets before. They tend to bounce back. The market is very emotional right now, but there are opportunities. You should think in terms of long-term and diversification'," he replied.

"Investors are in a great deal of pain. Firms should be doing everything that can be done to keep them confident. Look, doctors do business when patients are in pain. The same is true for fund firms. Your clients are in pain. This is the time to be doing brisk business. Work to boost your clients' confidence," the executive opined.

And, unusually, the media consultant recommended that mutual fund companies increase their advertising spending. "Start your adgines," he joked.

"Advertising with the right message could be used to keep investors calm. It is a vicious cycle, right now. Ad spending just isn't there. That affects articles. When ad sales are down, there is less editorial content. Therefore, there is less information getting out to the individual investor. That leaves investors confused, so they are going to leave mutual funds," Sondhelm added.

"They should also be exploring PR. Portfolio managers need to be out there talking about what is going right and wrong. I was watching TV the other day. And there was a large cap growth manager on. And the reporter was attacking the fund manager asking, 'Why should investors trust you?' That showed a lack of understanding how a fund works. A fund is usually style pure and will be buying large cap growth in a bull and a bear market. So when the market is down, the fund is down. But the manager has to be out there to explain that. There is a great deal of emotional frenzy going on. There is a need for a calming influence," he stressed. "The executives from Firsthand Funds are still out there talking. They are a tech shop, and they've had losses recently. But they are letting their investors know they are hard at work."

"At the end of the day, yes there are losses right now. But the firms need to be stressing long-term investing and, as always, diversification," he concluded. 

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