Top Managers "Moderately Aggressive"
Top Managers "Moderately Aggressive"
Top
managers of mutual fund groups are moderately aggressive, as they look out
for the next 12 months, according to a straw poll of six well-known companies
in the fund industry. Mutual Fund News Service asked them just one question:
"If you had to put your own money in one of your company's funds for
1999, which would it be?"
The
specific selections varied quite widely: each of the six chose a different
category of fund from any of the others. At a time when there is no consensus
about which way any of the financial markets is likely to go that was to
be expected. All but one, however, picked a fund invested wholly or largely
in equitiesthe exception was a bond fund specialistand all stressed they
made their selection largely for the opportunity to add to assets rather
than to defend those already acquired. Some were confident enough about
global outlook to choose funds investing overseas. None of them, however,
was markedly aggressive: none of the six picked small companies, emerging
markets or high yield bonds.
Clearly
this is not a scientific poll and all the participants emphasized that no
one should invest in equities for just one year ahead. Everyone, they added,
should also have a balanced portfolio, not just one fund. These are, nevertheless,
the best guesses of veteran professionals who have lived through markets
of all kinds, and whose jobs require them to oversee every type of mutual
fund on the market.
Edward
Boudreau, chairman and CEO of John Hancock Funds, was one of three who saw
opportunities abroad. He chose John Hancock Global Health Sciences
Fund, though not only for the coming year. "New products and strong
demand from the U.S. and Europe should give health care companies, pharmaceuticals
in particular, strong fundamentals and profitability in 1999. Beyond that,
an aging world population, lengthening life spans and technological advances
will continue to drive much of health care sector for the long term."
Victor
Ugolyn, chairman and CEO of the Enterprise Group of Funds, picked Enterprise
Global Financial Services Fund, a new fund and one of only two in Morningstar's
financial category that invests globally. The fund normally has 70 percent
in domestic stocks and 30 percent in developed markets. "Numerous financial
firms are merging or acquiring competitors, often across national borders,"
Ugolyn points out. "Their goal is to increase market share and revenue,
cut costs by economies of scale and invest excess funds." Enterprise
Capital Management, a member of the MONY Group, is one of only a handful
of fund groups which does not employ investment managers of its own, appointing
outside specialists instead who can be replaced if performance suffers.
Global Financial is managed by Sanford C. Bernstein and Co., which Ugolyn
describes as "renowned for its global research capabilities."
Thomas
Lucey, a Putnam senior managing director, made two choices, one of them
Putnam International Growth Fund, which targets growing companies
it believes are selling for bargain prices. "The fund uses a blend
of growth and value styles, offering investors access to a broad range of
investment opportunities." he says. His other choice, Putnam Investors
Fund, is a blue-chip growth fund and one of the oldest funds in the
U.S. "It has had an outstanding record in recent years, ranking near
the top of a strong large-cap field," he comments.
Thomas
Butch, president of Stein Roe Funds, also looks for bargains, but currently
he expects to find them mainly among mid-cap growth stocks. "They have
underperformed large caps for more than two years and are at historically
attractive valuations," he says. His choice is Stein Roe Capital
Opportunities Fund.
The
only flexible portfolio fund to be chosen was State Street Research
Managed Assets. "I strongly believe in broad diversification,"
the company's president, Ralph Verni, says. But he emphasizes that the fund
has an equity bias. "I don't try the impossible task of predicting
which asset class will do best in any period or of trying to `time' the
market," he adds. "This fund, however, covers virtually all publicly-traded
stock and bond classes. Each of the subportfolios is run by our professional
investment teams who are managing individual funds and institutional products."
Randy
Merk, managing director of fixed income for American Century, confined himself
to the area of his expertise but his choice there was clear: the Benham
Corporate Bond Fund, whose major holdings include companies such as
General Electric, General Motors and IBM. "High quality corporate bonds
are being priced as though we were already in a recession," he says.
"They are yielding more relative to Treasuries than at any time since
1990 when we were in a recession." If interest rates decline because
the economy slows the fund should appreciate, he points out. If interest
rates rise, because the economy is strong, the bond market as a whole would
be under pressure, but the companies the fund holds should be stronger too.
"With a yield of 5.8 percent, we think that's a good two-way bet,"
Merk Comments.
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