Funds managed by committee need good teamwork Some companies see method as way to cut risk

October 08, 1995|By BLOOMBERG BUSINESS NEWS

CHICAGO -- Managing anything by committee is never easy. It's even harder when you're talking about managing money by committee.

"Committees don't make decisions as fast as an individual and often you find that funds managed by individuals generate higher returns than those managed by a group," said A. Michael Lipper, president of Lipper Analytical Services Inc., a research // firm that tracks mutual fund performance.

Still, there are no firm rules to investing, Mr. Lipper said. "All the investor cares about is that he or she is making money," Mr. Lipper said.

Managing by committee is a popular investment approach in the $2.6 trillion fund industry because investment companies think it's a way to reduce risk. To use an old cliche, some fund companies believe eight, 20 or 40 heads are better than one.

One of the first fund groups to adopt the multiple-manager investment approach was Los Angeles-based Capital Research and Management Co.

"We started the multiple manager concept in 1958," said James B. Lovelace, one of eight managers who helps run CRM's $22 billion Investment Company of America Fund. "The strength of this system is that by putting together a bunch of managers you're able to reduce a fund's volatility."

Each manager in the investment group makes his own decisions but "between us we're able to pick out what we think are the best stocks," Mr. Lovelace said.

Other firms that manage funds by committee are Twentieth Century Mutual Funds of Kansas City, Mo., and Massachusetts Financial Services of Boston. Putnam Investments Inc. may soon launch a group-managed fund.

Putnam is making its own employees guinea pigs, offering them what it's tentatively calling the Putnam Research Fund. The fund is managed by analysts in the firm's research department.

"We want to make sure the fund is working well before we offer it to the public," said Nancy Fisher, Putnam's spokeswoman.

The Putnam fund will be managed much like Massachusetts Financial's popular MFS Research Fund.

The MFS Research Fund is managed by a group of 20 equity analysts that range in age from 28 to 35 years old. Each analyst has about five years experience and expertise in two or three industries.

"I am the coach," said Kevin R. Parke, Massachusetts Financial's research director. "My job is to motivate, train, give assignments and make sure all the bases are covered."

MFS Research Fund was started about nine years ago when a group of analysts asked management for a chance to run money. MFS agreed and gave the analysts several million dollars to manage.

Today, the MFS Research Fund has attracted about $700 million from individual investors and an additional $600 million from annuity and institutional accounts.

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