Some Fund Managers Even Have Fan Clubs
November 1, 1999
There may never again be anything quite like George Nichols' Internet Fund Fan Club website.
The site (www.netconductor.com/internet) displays a full-color photo of Ryan Jacob, numerous articles from financial publications about the Internet Fund, and a graph showing its performance.
Nichols also periodically has posted editorials in which he has discussed issues regarding the fund and the site. In his most recent editorial, Nichols announced he was cashing out of the Internet Fund and that the web site might be shut down.
But, the Internet is bound to be used in the future to raise the profile of and create excitement about prominent mutual fund managers, industry observers say.
Nichols, 24, said he was never really a fan of Jacob, the former Internet Fund portfolio manager. In fact, Jacob never returned his calls and Nichols never spoke with the fund manager on the phone. Nichols founded the site in January, and it has attracted over 26,000 visitors. Over time, he added information on other Internet funds to the articles and data on the site.
But after Jacob left to start his own fund (MFMN 8/30/99), Nichols cashed out of the Internet Fund - which gained 196 percent last year - citing a slip in performance since Jacob's departure.
"The returns of the Internet Fund under Jacob's tenure were largely determined by restricting the focus only to net pure-plays," said Nichols, who had been a fund shareholder since July 1998. "I think Jacob really added something. He was able to avoid some of the mistakes his peers made at other Internet funds."
Nichols' story is illustrative of the strong following portfolio managers can gain among investors. These managers can even take assets with them when they pull up stakes and move on, industry observers said. None of these industry observers knew of another fan club that dealt with an individual fund, however.
There are several examples of portfolio managers who have attained star status and brought assets with them when they changed families or opened their own firms, said Burton Greenwald, president of BJ Greeenwald Associates of Philadelphia, a mutual fund consulting firm.
"Look at when [Tom] Marsico left Janus and look at when [Garrett] Van Wagoner got started on his own," Greenwald said. "Whether Jacob has that kind of pull remains to be seen. This has become a superstar-led industry. The big names attract funds and their egos get oversized so that they think they are the ones that account for all the success at a fund. But a lot of them will get their come-uppance."
Van Wagoner started out well "but went down in flames" afterward, Greenwald said. In 1997, four of Van Wagoner Capital Management's five funds lost money after the three original funds returned over 20 percent in their first year. Garrett Van Wagoner started the fund group in 1995.
Tom Marsico has done well on his own, attracting a couple of billion dollars, but "Janus has done even better in his absence," said Greenwald. In 1997, when Marsico left the Janus Twenty Fund, after managing it for nine years, it had $6.05 billion in assets under management. But in the next two years, the fund grew to $27.02 billion, dwarfing what had been seen as Marsico's impressive accomplishments with the fund.
Fidelity's Magellan Fund, which propelled Peter Lynch to star status, has tended to elevate its other portfolio managers to high-profile statuses as well, Greenwald said. The current manager, Bob Stansky, has a great deal of name recognition, as does Jeff Vinik, Stansky's predecessor, who attracted a lot of money when he left to form a hedge fund, Greenwald said.
"These are all people who to some degree have a following in the industry. They're like rock stars - when they move everyone knows about it," Greenwald said.
"One could argue that Marsico had a fan club because not long after he started on his own he had about $8 billion in assets," said Geoff Bobroff, of Bobroff Associates, a mutual fund consulting firm in E. Greenwich, R.I .
Ryan Jacob differs from managers like Marsico in that he did not start the Internet Fund, nor was he the first person to manage it, Bobroff said. It remains to be seen whether Jacob will be able to duplicate his success with his new fund, he said.
Not many people will achieve the name recognition that Peter Lynch has but that does not mean that there will be no more stars, said Andrew Guillette, an analyst at Cerulli Associates of Boston, a mutual fund research and consulting firm.