The Forbidden Dictionary of Fund Managers

by Dan Sondhelm

Do you remember comedian George Carlin's infamous list of words that couldn't be uttered on TV?

Well, FundFactor asked a sampling of mutual fund public relations and marketing professionals to tell us what words or phrases they absolutely dread hearing a portfolio manager utter. Then we asked them to tell us why they strike fear in their hearts each time they hear them. We are sharing their input and comments anonymously so as to protect the guilty.

"Basis Points" -- Like it or not, most people are clueless when it comes to defining what a basis point is, or what fund managers are talking about when they refer to several basis points as bips. But they are quick to understand equivalent "percentages" so stick with these instead.

"Expense Ratios" -- Most people understand that mutual funds come equipped with various fees that investors are charged. But their eyes glaze over when casual references to expense ratios are tossed about.

"Portfolio managers assume everyone has a Harvard MBA. But we try to have our folks talk about the funds in a customer-centric way," said one fund PR officer. "When you get bogged down in jargon, it hampers effective communications."

(A Tie!!) Other jargony phrases such as: "Earnings Acceleration"; "Inverted Rate Curves"; and "P/E" -- Most jargon-loaded words or phrases, even "P/E" (yet another ratio folks love to hate) can cripple even the most thoughtful investor.

"Only one bad word thrown in can screw up a good quote," said a veteran fund PR executive.

"Guaranteed" -- This word wins top (dis)honors among fund company compliance officers. Tread very carefully unless referring to death or taxes (and with gene therapy on the horizon and "creative accounting" on the rise, we're finding ways to avoid these, too.)

"This is the biggest regulatory no-no you can have," noted one fund corporate communications vice president.

"Always" or "Never" -- Both words are just too absolute and can become the unwelcome can openers for those proverbial cans of worms.

"No Comment" -- Two simple words that can speak volumes. "It just implies that you're hiding something," said one professional of an independent public relations agency.

If it's in response to a topic you literally cannot or are forbidden to comment on, then find a way around it. You can always say, "I'll have to get back to you on that," or "I can't discuss that issue at this time."

"Bet" -- As used in the also disquieting phrase, "We're placing our bet on..." When referring to a stock or sector or industry a fund may be currently investing in don't use "bet."

"It sounds imprecise; like you're gambling and not relying on your professional judgment. It just makes money management sound less serious," said a savvy media relations director.

Use substitute phrases such as: "We are allocating..." or "We've built a position in..."

"Product" -- A well-meaning fund manager may unconsciously utter this generic description when referring to a fund. But it's probably only a "product" in the eyes of that manager and a team of behind-the-scenes marketing people who tackle funds, variable annuities, separate accounts, defined contribution plans, etc.

To an investor, a fund is not just a "product" - it's a mutual fund. Furthermore, to most investors, it's not just a "fund" but their fund (and don't you forget it!).