The slide by bank stocks is turning managers of funds that invest in them into preachers of prudence and patience.
The customarily upbeat managers now find themselves counseling investors to maintain a long-term approach to holdings that have turned erratic after several years of steady gains.
"There's an awful lot of hand-holding going on," said John W. Zimmerman, senior vice president at Conning Asset Management Co., which invests in bank stocks on behalf of large purchasers. "It's not something we've really seen before."
Indeed, the need to justify bank stocks as prudent investments is a new development and shows just how tarnished the sector has become over the summer, observers said.
"I'm not surprised this kind of communication is going on at this point," said Gary Gordon, an equities analyst at PaineWebber Inc.
Letters to shareholders that once heralded stellar returns are now filled with lengthy explanations about performance shortfalls and appeals to investors to stay the course.
It is not unusual for mainstream fund managers to try to calm investors after a general market slide. But money managers who focus on banks have not had to because their portfolios have generally ridden out recent market upheavals and even produced gains in hard times.
How do money managers feel about taking the protective and proactive approach?
"This is new to me," said David P. Rochester, chairman of Aldie Partners, which holds thrift and bank equities. "It's tough because what you really want to do is repeat the numbers" the fund has posted in the past.
Indeed, Aldie Partners, like most other bank-heavy portfolios, performed better than many equity funds last year but now lags many general funds. The drop has come while some bank stocks have slid as much as 30% from highs earlier this year.
Securities regulators do not require fund managers to contact investors when large drops occur, beyond reporting quarterly performance.
"It's more a reflection of the company's style and business approach" when a routine shareholder letter takes on more substance, said John Collins, a spokesman for the Investment Company Institute.
The messages can serve a purpose, Mr. Collins said. "There is a growing perception among money and fund managers that access to more information is better."
The style of this summer's messages runs the gamut from technical to folksy.
A letter from Aldie Partners reminded that it can be beneficial "to forfeit short-term gains and occasionally show short-term capital losses for long-term capital gains potential."
Bruce W. Woods, chairman of Sife Trust Funds, is sending a letter to investors this week with a more down-home feel. "As my father always maintains, no matter what the evening news reports, some universal truths remain," he wrote. The market is like "an old-fashioned well pump ... the ups and downs create buying and selling opportunities."
In some cases, fund managers urged investors to appreciate the good times, but recognize they may not last. "We believe it would be wise to set more realistic expectations," said Edward J. Boufreau, chairman of John Hancock Advisers, which manages several funds that focus on banks and thrifts.
Investors might want to adopt "a more conservative approach," he said in a note last month.
The letters generally accompany second-quarter or first-half performance reports, which showed returns slowing for bank stock funds. But they are intended to allay concerns that have worsened in July and August, as the market, and bank stocks in particular, fell sharply lower.
In recent days, bank stocks have been especially volatile as investors reacted to conflicting economic and political news.
In trading Tuesday, the Standard & Poor's bank index dipped 0.28%, and the Dow Jones industrial average was up 0.42%. The Nasdaq bank index shed 0.60%, and the S&P 500 rose 0.43%.
Investors were responding to encouraging news that Russia may work out its financial woes more quickly than expected and that domestic third- quarter earnings won't be as hard hit by problems in Asia.
Citicorp gained $2.6875, to $136.125; First Chicago NBD Corp. dropped $2, to $71.874; J.P. Morgan added $1.625, to $120.875; and Wells Fargo & Co. lost $5.75, to $312.25.