Spreading The No-load Word

August 22, 1994|By Patricia Horn | Patricia Horn,Sun Staff Writer

You could call M. Barry Strudwick and Christopher E. Grant preachers -- preachers of the no-load gospel.

They preach over the radio waves, through the newspaper, in their newsletter and to callers on their 800 telephone line. They spread the gospel of the goodness of no-load mutual funds, commission-free insurance and fee-based investment advice; they proclaim the evil of unobjective commission-based brokers.

"Barry is your constant marketing maven. I'll call him and ask how do you always wind up in Barron's or Warfield's or the Daily Record? You name it, he has his hands in every little place. But he won't give up his secrets. He's the consummate marketer," said broker John F. Graham Jr. of Legg Mason GWS Group in Towson and a long-time friend of Mr. Strudwick.

Neither Mr. Strudwick nor Mr. Grant, say friends, is what you would call shy or laconic.

The two Baltimore money managers' pulpit is 12 Eager St. and the Eager Street Asset Management Co. -- soon to be renamed Grant Strudwick -- which Mr. Strudwick founded in 1988 after he closed his family's group insurance company.

In 1991, when Mr. Grant joined the firm, they shifted its focus from managing stocks and bonds for a commission to managing no-load mutual funds as a fee-for-advice service. Instead of taking a commission on products, Eager Street charges a 1 1/2 percent fee on accounts up to $500,000, 1 percent for larger accounts, and a bank custodial fee of $250 a year. Its clients include individuals, pension and 401(k) funds, taxable and IRA accounts and nonprofit endowments.

"Barry's idea of using no-load mutual funds and charging a relatively modest fee for his service fills a niche in terms of cost and quality," said Robert D. McDorman, principal of Investment Counselors of Maryland, which, he said, manages over $3 billion in investments.

In three years, Eager Street's business has grown to 200 clients and assets under management of $45 million, Mr. Strudwick and Mr. Grant said. The pair has started a monthly newsletter, a weekly personal finance column in the Daily Record and Warfield's and a weekly radio show.

Eager Street's niche is individuals with $50,000 to $2 million to invest, accounts too small for some money managers but larger than many individuals feel comfortable handling on their own, the two men said. Its average client, they estimate, has $350,000 to invest and a net worth of about $1.5 million.

Eager Street's business is one of many boutique investment shops -- often founded by former brokers who leave firms and take their clients with them -- that offer lower cost advice for a fee, said Robert F. Mewshaw of Van Sant and Mewshaw, a Baltimore competitor whose firm also specializes in fee-for-advice, no-load mutual fund investing.

Money managers follow a variety of investment approaches -- some pick individuals stocks, some try to predict popular industry sectors, others try to time a market's ups and downs or find undervalued stocks.

Asset allocation

Mr. Strudwick and Mr. Grant have opted to follow an asset allocation approach to customizing their clients' portfolios solely through mutual funds. The theory of asset allocation -- an approach that most money managers pursue in one form or another -- says that various asset classes, such as stocks, bonds and cash, each have historical rates of return and predictable levels of risk.

Eager Street pursues this investment approach through no-load mutual funds, because, the two men said, the world already has enough stock pickers.

"We see lots of clients that suffer from the Money magazine syndrome," said Mr. Grant. "They pick what is hot that month or what returned well last year, without regard to the fact that that asset class that got great performance last year may be already headed for a major downturn."

Mr. Grant and Mr. Strudwick estimate that their 1993 overall return on investment was nearly 16 percent, with their clients' investments falling 50 percent into what they classify as a conservative portfolio, 35 percent into moderate risk and 15 percent into aggressive risk. By comparison, the Lipper Balanced Fund Index -- the index the two men say comes closest to their mix of assets -- returned 11.68 percent in 1993. The index is 60 percent stocks and 40 percent bonds.

Eager Street's performance is hard to assess because its portfolios have varying investment goals, which are not precisely comparable to any one asset category, said Edwin R. Boyer, principal in Asset Strategy Inc. and president of Portfolio Consultants, Inc., a firm that evaluates money managers.

'They are generalists'

"They are generalists and that can be a hard role to fill," he added. "I think that when you ask a money manager to do all those things, they must keep turning their hats on their heads to figure out what position you are filling for clients."

Before choosing any money manager, he says, an investor should interview three or more to find the right fit.

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