(October 16) – “Since it was created by the merger of well-known mutual-fund brands in 1997, Scudder Kemper Investments has operated two very different business models: The Kemper fund group was sold to investors through brokers charging fees, or loads, as it has been for decades. Meanwhile, the Scudder family continued to be sold directly to customers as no-load funds,” writes Aaron Lucchetti in today’s Wall Street Journal.

“Those parallel universes, however, could soon become one. Scudder Kemper is considering a major overhaul of its mutual-fund business that would convert Scudder funds sold directly to investors into broker-sold funds, according to people familiar with the matter.”

“If the plan is completed, the decision by the huge money-management unit of Switzerland’s Zurich Financial Services Group would be one of the boldest by a mutual-fund company seeking to boost its assets. Smaller firms, including Chicago’s Wanger Asset Management, Founders Asset Management and the manager of the Mutual Series funds have made similar transformations, but not as big as the expected move at Scudder. The combined Scudder Kemper manages about $300 billion in assets, including about $100 billion in mutual funds. Scudder has run no-load funds for more than half a century.”

“But money is flowing out of both Scudder and Kemper funds as hot portfolios with eye-popping returns capture the lion’s share of investors’ cash.”

“The growth of the Internet as an investment-monitoring tool, combined with powerful fund supermarkets such as those run by Charles Schwab Corp. and Fidelity Investments, make it more difficult for groups such as Scudder Kemper to compete in the direct-sold world.”

“Lesser-known funds reporting good but not spectacular results have found better success attracting assets when they are sold by brokers.”

“Scudder’s returns have been mixed, and while a handful of its stock funds are among the top performers, the group has failed to attract enough attention to keep assets flowing in, despite numerous overhauls during the past three years.”

“Under the current plan being discussed by Scudder Kemper management, all 36 Scudder stock and bond funds not currently sold through financial intermediaries would start being sold that way.”

“Scudder already has taken steps in that direction, opening six of its direct-sold funds to brokers in recent years. With the new conversions, current Scudder no-load investors would be allowed to continue investing the way they do now, without a sales charge, a person familiar with the plans said.”