While some fund marketers may turn white at Bill Gross' comments about what he sees as the riskiness of the current stock market, Pimco's own wholesalers must be even more distressed by his tepid support of the bond market. But at least one consultant believes that forthrightness of the Pimco portfolio manager can be an example for firms seeking to sheen their long-term reputation in the industry.

Indeed, some fund firm's may want to stop and think about the risks of over promoting bond funds at what may be the top of the market.

"Remember that the Securities and Exchange Commissioned cautioned fund firms that they were flaunting their century fund performance a couple years ago," said Geoff Bobroff, the East Greenwhich, Rhode Island-based industry consultant. "I wonder what they would be saying now about some of the advertisements for bond funds."

Bobroff adds that Gross is not alone in cautioning investors. Indeed, he believes that Vanguard is doing even better with some of its education efforts. But he also sees sales efforts that may come back to haunt the industry.

Two areas of concern are closed-end muni-bond funds and principal-protection funds. Both funds, of course, are moving well, especially with brokers. But Bobroff is concerned that fund investors may not be full aware of what they are buying. If interest rates do turn, they may also be less-than-happy campers. That is not stopping some marketers from making hay as the sun shines, though.

"We saw small cap funds put the stop sign up last year when they were hot," said Bobroff, "I don't think the rest of the industry [after Vanguard and Pimco] is clamoring to put the stop sign up.

Of course, the tension between marketing what is hot and trying to protect the investor is one the industry has battled through all cycles. But, even with the lesson of the dotcom debacle (remember Internet funds?) it may not be one that it has solved.

The concern for the industry should be over whether investors will have a longer term memory and remember who sold them that muni-fund if the bond market is the next to topple.  

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