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Sometimes mutual funds are led through roads as convoluted as mountain passes. Take the via dolorosa of a small young fund that Migdal Capital Markets launched at the start of 2006.

It started as "Programa Strategies", run by one Yitzhak Lev of Programa Capital Markets. It was a conservative options fund that, as Migdal defined it, was designed to achieve higher returns than makams.

But Programa and Migdal saw their strategies collapse as share prices tanked and volatility soared in June 2006. After half a year investors were left with only 94% of their investment, and never mind outperforming makams.

At the end of that dreadful month, Migdal announced that it had terminated relations with the Programa fund managers.

All together now

As the world turns, new opportunity arises. The second Lebanon war inspired the Migdal Capital Markets people to take advantage of that cloying Israeli togetherness at times of travail.

Come August 2006, even before the fighting had ceased, as Israel's reservists trekked north into the cruel heights of southern Lebanon, Migdal was riding the wave of "lite patriotism" that marked the last summer.

It changed Programa Strategies's name to "Migdal Blue and White" and revealed a new investments strategy. From now on, it said, the fund would invest at least 70$% of its assets in Israeli concerns, and its component of shares would be no greater than 30%.

But the war ended on a sour note and Migdal's blue-and-white flag-waving evidently jarred, as the accusations and charges circulated. The fund failed to raise money and investment advisers just didn't take to it, Migdal reasoned.

And therefore, a  few days ago (surely not related to the upcoming Independence Day). Migdal decided to erase the national colors and paint its policy afresh.

New name gives warm fuzzy feeling

This time, the revamping of the fund involved a little trick, based on the fact that the Migdal people know a thing or two about the unholy mess in the mutual funds sector.

First of all, Migdla is not taking any more risks about the public's sentiments: it's pitching the fund using the latest buzzwords. From now on, call it "Migdal Rated Bonds Portfolio 10" (Yipes. That mouthful is supposed to make the client feel that Migdal at least knows what that means, and that it will strive sincerely to make you returns.)

Second off, the fund is more conservative than before: at least 75% of its assets will be invested in ranked corporate bonds (the previous policy had been to invest 70% in bonds, irrespective of whether analysts had rated them or not).

Thirdly, Migdal Rated Bonds Portfolio 10 will invest no more than 10% of its assets in shares, versus 30% beforehand.

Where's the trick and how did a fund nobody had heard of before raise NIS 35 million from the public inside a month?

Here you go: In the almost-three months since 2007 began, the fund generated a nice return of 5% (at a risk level of 30% in stocks and the rest in non-rated bonds). It is a major candidate to stand out in the list of rival funds (because both share prices and bond prices shot up). Now everybody thinks it's a solid fund that generated high returns, which is a great way for Migdal to raise money.

And thus a tiny, insignificant fund that had less than NIS 4 million in assets in January, which it managed based on a relatively high-risk strategy, is competing with truly solid funds by unfair means: it's being marketed based on its prior, irrelevant strategy.

Asa Sasson, manager of Migdal's mutual funds, says that when the fund was launched, it was a "guest" at Migdal, but after four months Migdal decided to get rid of its investment managers.

Regarding the latest change in strategy, officially the fund did change strategy, Sasson agrees: but in practice it never did invest 30% of its assets in shares: 15% at most, he says. Therefore, that was not the reason for its high returns this year.

"The fund was conservative  beforehand too, and is raising money because of its returns from the start of March, not the start of the year," Sasson says. "We are the first in the category from the start of the month and raise money based on monthly performance.

"We are among the companies that change our strategy the least," Sasson went on to say. "We realized that its name was no good, so we changed it."