Fund industry keeps quiet despite rising media storm

NEW YORK: As the $7 trillion mutual-fund industry faces its largest reputation crisis to date, media relations and PR executives at fund companies remained almost completely quiet last week as their industry, several fund families, and fund-investor confidence continued to take a beating.

NEW YORK: As the $7 trillion mutual-fund industry faces its largest reputation crisis to date, media relations and PR executives at fund companies remained almost completely quiet last week as their industry, several fund families, and fund-investor confidence continued to take a beating.

While nearly all of the fund companies that have been scrutinized have released letters to investors and statements on their websites, few spokespeople have commented to individual reporters. For now, direct customer outreach appears to be trumping any response to the torrent of negative media stories.

For instance, an e-mail from Stephanie Truog, a spokesperson for a fund family at the center of the controversy, Strong Financial, which saw its CEO resign last week, said, "Information for our clients and the media is available on our website. This information has been supplemented with written communications sent to clients. Our associates have been meeting with clients personally in our Investor Centers, and we are, as always, available with licensed representatives 24 hours a day, seven days a week to speak with our clients over the phone."

According to some observers, it is unclear how long an unresponsive approach to the press can remain a tenable strategy for an industry so deeply immersed in crisis.

"Their media policy has been inhibited," said Alan Towers, president of The Towers Group, a corporate reputation consultancy that represents several mutual funds and a leading industry group. Prepared statements will not be sufficient as a communications strategy for the long term, he added. "To keep constituents happy is to correct what caused the problem," said Towers, who suggested that fund families' media strategy continues to be driven by legal considerations.

In an investigation led primarily by New York State Attorney General Eliot Spitzer, the industry, which manages assets for about half of all Americans, is accused of using illegal and deceptive practices that essentially shortchange smaller individual investors to the benefit of the fund companies and some of their largest investors.

Another firm at the center of the controversy, Putnam Investments, which also saw its CEO ousted last week, has been working closely with at least one noted corporate reputation expert behind closed doors, according to a source close to the situation. Putnam has been among the hardest hit by the scandal, as the company has lost some of its largest clients, including several state pension funds.

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