OC Bond Managers Beat Stock Counterparts Again
By RAJIV VYAS
For the second year in a row, Orange County bond managers did better than their counterparts who invested in stocks in 2001, according to local money managers.
Newport Beach-based Pacific Investment Management Co., the nation’s largest bond fund manager, saw most of its funds report gains last year. PIMCO’s Emerging Mar-ket Bond fund saw a 27.84% return last year,the best of any bond fund, according to Mohamed El-Erian, PIMCO’s managing director and fund manager.
PIMCO’s Total Return Bond Fund, managed by William Gross and the firm’s largest with more than $40 billion under management, was up by 9.22% for the year.
Huntington Beach-based Allegiance Capital Inc.’s portfolio of investment grade bonds was up 7.86% during the year, according to Robert Southard, managing di-rector.
“For us it was extremely good year,” he said.
For stock investors, 2001 wasn’t so memorable.
Roger Palley, portfolio manager and national director of value strategies at Wells Fargo & Co.’s private asset management arm in Newport Beach, said his investments were down 2% to 4.5% last year.
The S & P; Barra Value Index, a benchmark that Palley and other value managers follow, was down 13.22% for the year.
Palley chalked up his relatively better performance to having fewer telecommunications and technology stocks. Some of the stocks that did well for Palley were IBM Corp. and Lowes Cos., he said.
“We had our share of bad stocks,” Palley said. “But, overall, we did pretty well.”
Irvine-based Affinity Investment Ad-visors Inc., a money manager that invests in both growth and value stocks, said it saw a 5.5% decline in its investments last year. The firm still managed to best the S & P; 500 by around 6.5 percentage points.
Newport Beach’s First Capital Management Inc., part of Santa Ana-based First American Corp., saw an 11.1% drop in its large-cap portfolios, about a percentage point better than the S & P; 500.
Robert Venable, chief investment officer at First American said the firm’s portfolios were helped by financial sector investments, including Bank of America Corp.
First American also benefited from holdings in First Data Corp., Microsoft Corp. and IBM Corp., but suffered because of telecom investments, he said. First American’s large-cap portfolios mainly invest in companies with a market value of more than $5 billion.
Knightsbridge Asset Management LLC, also of Newport Beach, had an 8.1% decline, or around four points less than the S & P; 500’s drop.
Palley-Needelman Asset Management Inc., another value investment firm based in Newport Beach, saw a 3.7% decline in its portfolios.
The firm’s balanced portfolio eked out a 0.85% return. It “was up partially because of bonds and few stocks,” said Chet Needelman, chief executive.
While local stock fund managers had a bad year, most outdid the major indexes. The Dow Jones Industrial Average was off by 5.4% last year, while the Nasdaq fell even more sharply, by almost 21%.
Wells Fargo International Equity, a mutual fund that invests in Europe and Japan and is managed from Newport Beach, saw a decline of 18.37% last year. Managing director Cynthia Tusan said she still managed to beat her benchmark, the Morgan Stanley EAFE index, which declined by more than 21%.
Global markets were weak in 2001, Tusan said, one of the main reasons why her fund suffered.
“The markets were a challenge for everyone,” she said.
Returns from funds such as PIMCO’s Total Return, Emerging Market Bond Fund and Wells Fargo International Equity take into account management fees. They do not include the one-time sales charges that investors have to pay to buy the mutual funds. Sales charge typically could vary anywhere from 3% to as high as 7%.
