fund returned 22.6% in 1999, the expense ratio shaved off 1.26%, leaving you with a 20.8% return. Assuming you only put in $500 at the beginning of 1999, that sum grew to $604 in a year.
Sanders adds that the firm had initially considered charging a $100,000 minimum initial investment for purchasing the funds since they were institutional portfolios, but he and Lay realized that would hinder their goal of garnering as many customers as possible, whether or not they were African American. So MDL set the minimum at $500 and decided to eat such costs as marketing and fund administration.
MANAGING THE MONEY
All fund managers hew to an investment style when it comes to handling your assets. For both the equity and fixed-income portfolios, MDL starts with a “top-down” approach. It analyzes the economy and other factors driving market trends, such as the rate of inflation, the pace of economic growth and fiscal policy, and identifies how that data impacts its stock picks.
The equity fund has more than 60 stocks in its portfolio, with other companies MDL wants to purchase on a “buy list.” This part of the selection process uses a “bottom-up” approach, which entails sifting through a potential universe of 1,000 stocks and finding those with accelerating price momentum of 10% to 15% and positive earnings surprises, for example.
The Large-Cap Growth fund’s investment philosophy is growth at a reasonable price (GARP). That means buying stocks with earnings growing faster than 5% a year when they’re cheap in an attempt to outperform the S&P 500-the benchmark the fund is measured against-over a three- to five-year time frame. It also entails over- or underweighting stocks in the
S&P 500 (see table with top 25 holdings).
Occupying the third floor in a small, six-story brownstone in downtown Pittsburgh, MDL is run by Lay and a core group. Lay is a Wall Street veteran who has worked for such firms as Dean Witter Reynolds (now Morgan Stanley Dean Witter) and Citicorp Investment Bank (now Citigroup), mainly in fixed income.
The firm’s operations remain split between Pittsburgh and Philadelphia. There are 14 employees, eight of whom are in Pittsburgh. Lay says the advantage to this arrangement is that with Pittsburgh being more Midwestern in character and culture, he can concentrate on clients in Ohio and western Pennsylvania. On the other hand, Philadelphia is geographically and culturally closer to the Northeast, enabling Sanders and his staff to keep close ties with their New York clients, for example.
Ed Adatepe, chief investment officer, is MDL’s quantitative analyst. He screens current stock and bond holdings, searching for new investment opportunities. Tracey Gist, vice president of operations, and Adatepe work with Lay in Pittsburgh. Sanders and Joe Watkins, chief operating officer and director of marketing, work out of the firm’s Philadelphia office.
In addition, MDL has three analysts. Linda Brimage concentrates on equities but also researches general long-term economic trends affecting fixed-income investments. Antoine Smalls fine-tunes the asset allocation models for both funds. He researches such details as the change in value