Challenging stock market leads to advertising shift in mutual fund industry

NEW YORK -- A year ago, personal finance magazines were filled with advertisements touting larger-than-life mutual fund returns with hints of even stronger profits to come.

That exuberance has been toned down as the stock market has fallen. Although rates of return still appear in ads, fund companies are more likely to talk about their investment philosophy, stress their management experience or highlight how they outperform rivals.

Industry observers say the shift reflects the bear market and the mutual fund industry's efforts to attract money during a time when many investors aren't rushing into the market.

In the April issue of Smart Money magazine, for example, Charles Schwab uses ads to tout its fund selection tools and the value they represent to investors. A few pages later, an ad for Marsico Funds highlights the five-star rating one of its funds received from Morningstar, the mutual fund consulting and rating firm.

The focus makes sense given how negative and tumultuous the stock market has been. The downturn in stock prices has also hurt fund returns, making performance numbers weaker selling points.

"They're stressing long-term discipline without making allusions to last year's returns and this year's returns," said Ramy Shaalan, senior mutual fund analyst for Wiesenberger, Thomson Financial. "They're asking investors to stay the course and continue to have that long-term investment horizon."

There's also some penny pinching going on. The amount of money spent advertising investment products on TV and in print fell to about $304 million in January and February, down 7 percent from $326 million the same period a year ago, according to Competitrack, an advertising research firm.

"Obviously, people are pulling back from their advertising budgets and we expect to see that continue," said John Jelilian, a senior vice president at Competitrack, noting that the data suggest the same trend applies to mutual funds.

"There are also a lot more comfort messages out there than there were a few years ago," he said.