MutualFundWire.com: Firms Try to Find the Best Bang for Their Buck

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Thursday, January 13, 2005

Firms Try to Find the Best Bang for Their Buck

As your marketing department considers whether to shell out for prized Superbowl advertising slots, it may be useful to review what some firms did in 2004, and whether it worked. The MFWire tries to find an answer to "Who got the most bang for their buck in 2004?"

According to data from Riverwoods, Illinois-based business research firm Schonfeld & Associates, of publicly-held fund firms, Janus spent the most in 2004, pouring $191.9 million in 2004, an increase of approximately seven percent from $180.0 million in 2003.

Second-biggest spender San Mateo, California-based Franklin Resources spent $96.3 million in 2004, nearly unchanged from 2003. Amvescap actually decreased its spending from $82.3 million in 2003 to $78.2 million in 2004, despite the scandals tainting its Invesco funds group.

The Buck Stops, But Where?
Publicly Held Fund Firms	Y-Y % Change
Janus Capital	7%
Gabelli Asset Management	-6%
Affiliated Managers Group	13%
BlackRock	14%
Eaton Vance	6%
T. Rowe Price	-14%
Amvescap	-5%
Franklin Resources	2%
Source: Schonfeld Associates Advertising Ratios Report

Both Affiliated Managers Group and BlackRock upped spending from 2003 levels, increasing their advertising budgets by approximately 13 and 14 percent, respectively. Eaton Vance's advertising spending increased a modest five percent from 2003 levels.

Gabelli Asset Management and T. Rowe Price both shrank their 2004 budgets, probably benefiting from investor stampedes out of the slew of regulator-plagued firms. T. Rowe spent a whopping 14 percent less in 2004, while Gabelli (which actually disclosed that it had been subpoenaed by regulators in October), dropped spending by nearly six percent, from $35.1 million in 2003 to $33.1 million in 2004.

Of the four public fund firms, Federated Investors got the most bang for its buck: the firm scored an ad effectiveness ratio of 2.04 and an relative ad profit ratio of 1.39.

The effectiveness ratio is itself a ratio of the industry's ad to sales ratio over the same ratio for the company only; a 1.0 indicates comparability with the industry. Likewise, the profit ratio is a ratio of the company's net sales (minus costs of goods and advertising costs) to the comparable net sales number for the entire industry, multiplied by ad spending for the industry over ad spending for the company.

Ad Spending, Back on the Up and Up
All Public Investment Advice Firms	Advertising as % of sales	Advertising as % of margin	Annual ad growth %
2004	1.7	3.1	1.4
2003	1.9	3.6	-7.8
2002	1.5	2.5	0.6
Source: Schonfeld & Associates

Nuveen Investments, Franklin Resources and T. Rowe Price's ads resulted in below industry average 0.13, 0.10 and 0.06 ad effectiveness ratios, and 0.12, 0.04 and 0.04 in ad profit ratios.

Data for the investment advice industry as a whole, which also includes non-mutual fund firms such as SEI Investments and Value Line, points to a return to positive spending levels after a dip in 2003. Investment advice firms increased spending by 1.4 percent in 2004, compared to a decrease of -7.8 percent in 2003 and 0.6 in 2002.

Advertising dollars as a percent of net sales was 1.7 percent in 2004, 1.9 in 2003 and 1.5 in 2002.

Printed from: MFWire.com/story.asp?s=8812

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