LIPPER SENIOR RESEARCH ANALYST DON CASSIDY ON KTLK AM-760
Thursday, Nov. 29
Also look for Don Cassidy's newest book out this month, "Trading on Volume," published by McGraw-Hill.Q. Well, Don, normally here late in the month we'd be talking about moneyflows into national and local funds, but we understand there is big newsfrom one of the Denver managers?
A. Right. INVESCO has announced a major move in the way it will sell itsfunds in the future.
Q. And what is that?
A. Effective March first, 2002, new investors -- people who do not alreadyown its funds on a no-load basis -- will need to go through brokers orfinancial planners and pay loads.
Q. Wow! What happens to their existing fund shareholders, then?
A. Invesco has been very careful to make it clear that existing holders ofany of its funds -- those on the books before March first -- will continueto be allowed to buy ANY AND ALL now-existing Invesco funds on a no-loadbasis. This is a somewhat more inclusive approach than Dreyfus/Founderstook a couple of years back, which was particular-fund specific only.
Q. So if I understand you right, the ability to stay no-load is by theCUSTOMER, not the fund itself or the account?
A. Exactly right. If you own even just ONE no-load Invesco fund beforeMarch 1, you will be able to buy any other fund on a no-load basis, or evenopen other accounts in the same SSAN. So if you have an IRA with them, youcould open a personal account too -- or vice versa.
Q. What about custodian accounts for minors?
A. I phoned them about that -- and they say it will be controlled by theSSAN, so you'd need to open a gift to minors or Education IRA accountbefore March 1.
Q. If people have questions....?
A. They have a website, invescofunds.com, and an 800 number.
Q. I guess the BIG QUESTION IS, why have they made this decision?
A. I believe it comes down to these things: "the blues" of a bear markethangover, and investor inertia since September 11, PLUS retention ofassets.
Q. Let's go over those one at a time...
A. Sure. At Lipper, as we have looked at money flows patterns (purchasesand redemptions) we have seen quite a bit of decrease in both buying andselling. This had started as the 18-month bear market got longer, but ithas become more notable since Sept 11. People are hunkered down, not doingmuch of anything except parking cash in money market funds. No-loadinvestors make their own decisions, not prompted by the fund company or abroker/advisor. They are sort-of shut down or tuned out. Invesco has seenmodest outflows the past few months.
Q. And the part about retention of assets?
A. Well, it really is both GATHERING assets by using brokers and financialplanners more extensively -- an extension of sales channels -- AND the factthat those kind of dollars tend to stick better rather than run off.
Q. Stick better -- Why is that?
A. All of our data show that people who invest in funds using adviserstend to have a buffer -- someone to talk with -- before they might panicand sell in a down market. Assets under the "control" of such advisorstend to stay in more, rather than jump out in tough times. And we haveeven noticed that in LOAD funds, if you face paying a back-end load you areless likely to sell out than if you already paid a load up front. Andadvisers like to sell the back-end load class since it seems less painfulto the buyer.
Q. Anything else?
A. Well, in a general sense, you could say that this Invesco decisionreflects a broad pattern of a somewhat more mature industry where marketshare is a challenge. Many fund companies are moving away from pure noload, to use all available marketing channels. Invesco started that a yearor so back, but this move is doing it in a much bigger way.
