Total Return

Consistent performance is crucial for money management firms seeking to attract and retain clients

competing with major asset management firms across the country. “It was another hard-fought battle. In three out of four of the searches we were involved in [last year], we were up against only majority firms,” he adds. “In the San Jose deal, we were clearly the underdog.”

In addition to winning new clients Paradigm also built up its in-house research efforts through what Francis refers to as “intelliservices.” He branded the firm’s research arm, and aggressively promoted its capabilities to existing and potential clients. The three-person division performs original research and studies for its clients, such as analyzing the long-term performance of large-cap stocks compared with small-cap stocks. In fact, a report the unit published on how valuation ratios help forecast long-term equity returns was chosen as, “The Paper of the Year” by the Journal of Portfolio Management, a top honor in the money management industry.

Later this year, Paradigm plans to offer two enhanced index funds, one based on the small-cap stock indices, the Russell 1000 and the Russell 2000. An enhanced index fund is a portfolio that seeks to achieve superior returns, but mirrors the risk profile of the average it’s based on.

With growth stocks-particularly hot technology names-grabbing all the attention in 1999, value stocks were definitely out of favor. For instance, the granddaddy of value-oriented asset management firms, 17-year-old Ariel Capital Management of Chicago (No. 4 on the be asset managers list), managed to gather more assets despite grumbling from some impatient investors about its patient approach. “In terms of gathering assets, it was a big year,” says Mellody Hobson, senior vice president with Ariel Capital. “We took in $1.3 billion in new assets, and most of that was from new, separate accounts.” Ariel had $3.7 billion in assets at the end of last year. Its client mix is 23% corporate, 52% public and 25% nonprofit organizations.

Hobson notes that Ariel is making “a major effort” to get Ariel’s mutual funds added to 401(k) and 457 plans across the nation. Already, a number of private companies and public entities offer Ariel’s portfolios to their employees, including Johnson Publishing, the National Basketball Association, the city of Riverside, California, and the state of Illinois. The firm’s long-term goal is to “get those big Fortune 500 companies” to add the Ariel mutual fund family to their defined contribution plans.

Randall Eley, president and CEO of the Edgar Lomax Co. (No. 10 on the be asset managers list), based in Springfield, Virginia, like other value managers, maintains that “1999 was a challenge for us.”

Eley dealt with challenges on two fronts. First, last year wasn’t a good one not only for value stocks-shares whose price-to-earnings ratios are cheaper than those of competing companies or a specific stock market index-in general but for specific large-cap value stocks as well. “As a result, it was a year in which you could have good positive performance but appear to have not done well,” he says, in comparison with sizzling technology stocks or even

Pages: 1 2 3 4 5