More companies are starting mutual funds

June 06, 1993|By Media General News Service

The airline business hasn't been too hot lately, so America Airlines is launching a family of mutual funds. Virginia Power Co. is advertising a utility mutual fund with its bills. And banks are hawking funds to keep depositors frustrated with low yields on certificates of deposit.

With mutual fund sales setting record highs and profit margins for fund companies growing, everybody wants a piece of the action.

But financial advisers say investors should be wary of these new fund marketers. Many have no track record at running mutual funds. And as the number of funds grows, the pool of proven managers remains relatively static.

Gerald Perritt, a Chicago money manager, says that people who know little about funds are the most likely to end up buying one from a bank or other new fund purveyor. "Most of these people won't know what risks they're taking and what risks they can expect," he said.

Mutual funds are not insured by the Federal Deposit Insurance Corp., even when bought from a bank.

Morningstar, a fund rating service, says most funds being sold by banks and other new marketers do about as well as the average mutual fund -- at least before subtracting sales commissions or loads.

fTC Some bank funds are first-rate. Vista Capital Growth and Vista Growth & Income, (1-800-348-4782), marketed by Chase Manhattan Bank, have outstanding records.The funds have loads of 4.5 percent and 4.75 percent respectively.

Mr. Perritt recommends sticking to no-load fund mutual fund companies. T. Rowe Price, Vanguard, Fidelity and others "are the experts on mutual funds," he added.

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