When Liberty Financial Cos. agreed in August to shell out $216 million for Societe Generale's U.S. investment unit, it did so largely because the business is run by prominent fund manager Jean-Marie Eveillard.
The deal underlines the fact that, while many investment companies tout teamwork over individual exploits, marquee names remain a big draw for such firms and for the investors who entrust money to them.
And despite recent events that spotlight the dangers of the star system, experts say it will probably endure.
"There is always that fascination with the extraordinary individual who has extraordinary abilities," said Stephen Gibson, president and chief executive officer of Colonial Group Inc., a unit of Liberty that will distribute the SoGen Funds.
The fascination can be costly, as was demonstrated in last week's near collapse of Long-Term Capital Management LP, the investment partnership run by John Meriwether.
Several banks and brokerages have announced that they have lost hundreds of millions of dollars invested with the firm run by Mr. Meriwether, a legendary figure on Wall Street who lost big on hedge fund bets despite surrounding himself with Nobel laureates.
But the downside of the star system is also apparent at the Franklin Templeton Group's Mutual Series funds. Redemption levels have been running high in part because star manager Michael Price has announced he will step aside from day-to-day money management at the end of the year.
Though the performance of Mr. Price's funds had dipped recently, the outflows also suggest loyalty to Mr. Price himself, industry watchers said.
And while linking a company's image with an individual within the firm can build assets quickly, it can backfire if that manager's performance dips, said A. Stewart Rose, a former marketing executive with Fidelity and Citicorp who now runs the consulting firm KFS Financial.
"The plus is that it builds a position and it builds an identity quickly for a fund in a world where identity is harder and harder to come by," he said. "The minus is that the managers get in trouble."
When star portfolio manager Jeffrey Vinik steered Fidelity Investments' huge Magellan Fund off course in 1996, the result was colossal outflows, including a record $1 billion in May of that year.
Along with the redemptions, Fidelity lost the money and effort it had invested in promoting Mr. Vinik, who eventually left the company to start his own investment firm.
"The amount of money that can be destroyed overnight is huge," said Mr. Rose, speaking of both fund outflows and wasted promotion dollars.
In the SoGen Funds, Liberty has acquired a complex whose performance has been hurt in recent months by turbulent overseas markets. But the acquisition makes sense because Mr. Eveillard is highly esteemed precisely because of his funds' strong overall track record spanning two decades, Mr. Gibson said.
Among the companies that have been careful to avoid the star system of late is OppenheimerFunds, which scrambled three years ago to keep investors from bailing out after John Wallace, manager of the firm's Main Street Income and Growth Fund, left to work for Robertson Stephens & Co.
Fidelity has downplayed individual managers as well. But the company seems to have found a safe way to use star power: Peter Lynch, the esteemed stock picker who managed the Magellan Fund to phenomenal success in the 1970s and 1980s but no longer manages money for the firm, is the point man in a splashy marketing campaign.
More firms may choose to avoid linking their images to hot portfolio managers in the wake of the Long-Term Capital debacle, Mr. Rose said.
Certainly, many fund companies have long taken that approach. Putnam Investments, for instance, is well known for touting its team-based approach to investment.
But the long bull market and resulting gaudy performance of many a mutual fund made it awfully tempting to play up individual money managers- even if those managers owed their success to the surging stock market as much as their own skill.
"You had a long, hot market," Mr. Rose said. "How could any advertising executive resist when they had a name to work with?"