EMERGING MARKET FUND’S CALL STARTS MORE FEARS THAN IT STOPS: NERVOUS REP PHONES ADVISER TO CALM FEARS THAT HE DIDN’T HAVE

Curt Weil’s hand didn’t need to be held. But the telephone representative for Montgomery Emerging Markets Fund seemed to insist on clutching.

The rep called the Palo Alto, Calif., financial adviser last month to ask him if he was happy with the fund.

“They assumed that since I’m a registered investment adviser that I was unhappy or in need of reassurance,” figures Mr. Weil, whose firm, Weil Capital Management Inc., supervises $42 million in assets.

Little wonder: The emerging markets fund was down 3.14% for 1997 and another 2.63% as of March 31, according to Morningstar Inc. And one adviser had pulled $5 million in the last few months.

The Montgomery rep was “surprised and grateful” to learn he was staying the course with the fund, Mr. Weil says.

But he – and others – are wondering: Is this evidence of lobbying campaigns by emerging markets funds that are hoping to save their products from adviser panic?

Will other advisers be quizzed by fund companies about their plans to sell out when other sectors inevitably suffer plummeting values and screaming headlines?

Hard to say. Both advisers and fund executives, however, agree that such a call is unusual.

“It could be great – seven years ago, they wouldn’t talk to us.” says Deena Katz, president of Coral Gables, Fla.-based Evensky Brown Katz & Levitt, which supervises $350 million in assets.

Let me explain. . .

Chip Ridley, San Francisco-based Montgomery Asset Management’s vice president of institutional advisory services, says adviser division employees wouldn’t typically call advisers to gauge their reaction to a fund. Mr. Weil’s caller probably wanted to explain what led to the fund’s underperformance, Mr. Ridley says.

“It’s never fair to say that underperformance creates attractiveness,” he adds.

Mr. Ridley concedes that some advisers had pulled assets in the months after foreign markets tanked. The biggest adviser-run account the fund lost totaled $5 million, he says, declining to name the adviser involved.

The adviser division usually would contact such a large customer who was leaving a fund, he adds.

Still, the third-largest emerging market fund has added another $80 million in assets since the beginning of the year, bringing its total to $1 billion, according to figures compiled by Boston-based Financial Research Corp. Much of that money came from retail investors and brokers.

The call made to Mr. Weil was “odd,” says Michael Turgeon, vice president and director of Kansas City, Mo.-based American Century Investment Services Inc., which runs a $23 million emerging markets fund. “I could see that an adviser would be surprised about that.”

Mr. Turgeon agrees that “explanatory” calls about a fund’s performance are more typical.

Most of the fund calls fielded by Roseville, Minn., adviser Bill Bergstrom are just that – informational.

Considering the inherent riskiness of emerging markets, it would surprise him if Montgomery reps were calling to allay the fears that come when clients see how volatile such funds can be.

talk eases

“When there’s a lack of communication, people get scared,” says Mr. Bergstrom. He’s chief executive of Focus Financial Inc., which supervises $500 million.

What surprises Mr. Bergstrom most about the Montgomery call is the message the rep delivered: Advisers are leaving the emerging markets funds.

“There are good values out there,” Mr. Bergstrom says. “Maybe we won’t see (these values) again in our lifetime.”

That doesn’t shock Mr. Weil, who says financial advisers can fall prey to the same market jitters as their clients. After all, the media images of the Asian contagion – and last year’s crashing returns -aren’t easy ones to shake, even for those who’ve sworn allegiance to the gospel of asset allocation.

“When humans process information,” Mr. Weil observes, “they give greater value to recent experiences. “