(April 12) – “Frank P. Slattery V, who had a phenomenal first year as a manager of the PBHG New Opportunities Fund but then stumbled over the last month amid market turbulence, resigned yesterday and said he would pursue other opportunities,” writes Floyd Norris in today’s New York Times.
“Mr. Slattery, who goes by the nickname Quint, joined Pilgrim Baxter & Associates, which manages the PBHG funds, in 1998 after two years at Merrill Lynch, where he went to work after graduating from Princeton. He began running the New Opportunities Fund in February 1999. Mr. Slattery, 27, did not return a telephone call seeking comment on his departure, which was announced by the company.
“For the 12 months ended March 31, the New Opportunities Fund had a total return of 533 percent, more than twice the return of any other mutual fund with assets of at least $30 million, according to Morningstar Inc. But while the fund had been very volatile for its entire life, that volatility had increased in March as the fast-growing technology stocks that Mr. Slattery specialized in came under selling pressure.
“During its first year, the worst period for the fund came last summer, when it lost 15 percent of its value in slightly less than a month. But since the fund peaked on March 9, it has had drastic swings and is now down 42 percent from the high, although it is still up 14 percent since the end of 1999. Mr. Slattery’s strategy called for putting about 80 percent of the fund’s money into the 30 fastest-growing companies and holding them no matter how much their price rose. The remaining 20 percent of the fund was used for quick investments, often trying to anticipate what stocks would get hot and then selling them after they had gained a dollar or two.
“In an interview last week, Mr. Slattery said that in the first year of the fund’s existence, it had shown gains of at least 1,000 percent on the stock of three companies: MicroStrategy, SDL and InfoSpace.com. Each peaked in March and has fallen substantially since then. Through yesterday, they were down 38 percent, 55 percent and 85 percent, respectively.
“In November, after the New Opportunities Fund exceeded $100 million in assets, PBHG closed that fund to most new investors, although existing investors were free to invest more money. It also announced that Mr. Slattery would manage the PBHG Select Equity Fund.
“Money soon began to pour into the Select Equity Fund, which increased its assets from $250 million to a peak of $2.1 billion last month. It also rose rapidly, gaining 78 percent from the end of 1999 through March 10, before it too began to fall back. Through yesterday it was down 37 percent from its peak, although it was still up 12 percent since the end of 1999.