Fund Track: For Gains, Forget ‘Terminator,’ Think ‘Revenge of the Nerds’
Mutual-fund management is a business where the ideal personality isn’t Attila the Hun.
``Bring me the nerds,″ says Michael Stolper, a San Diego investment adviser. If a mutual-fund manager ``looks like a movie star, I’m terrified. The perfect guy is like five-four″ with a pale complexion and thick glasses.
And a burning desire to show `em.
Making money ``is a compensatory behavior,″ Mr. Stolper theorizes. Scratch a group of winning fund managers and you’ll typically find that their ``entire adolescence was one of chronic rejection at every level _ then they found an arena where they could be a player.″
Which brings us to George Vanderheiden, and his towering performance as a Fidelity Investments stock-fund manager. He is one of the country’s savviest, but least appreciated, stock pickers.
From the day Fidelity first turned him down for a job, Mr. Vanderheiden has been out to prove himself. The best managers have ``inferiority complexes,″ the soft-spoken fund manager says. ``They have to keep proving their worth to themselves every day.″
He didn’t grow up as your hearty, athletic type. He attended Colby College in Maine, near hiking and skiing, but says he ``didn’t do any of that outdoor stuff.″ Moreover, ``Colby was my third choice″ for college, says the shortish 49-year-old (″about five-seven or five-eight,″ he offers), who wears heavy glasses. ``It bummed me out that one of my friends in high school, who was a jock who didn’t have grades as good as mine, got into Amherst and I didn’t.″
After graduating, Mr. Vanderheiden applied to three Boston money-management firms _ and was turned down by all. An executive at FMR’s Fidelity Investments wrote, ``I cannot offer you much promise of a possibility at this time.″
Today, Mr. Vanderheiden has that letter framed on the wall of his corner office in Boston. Success is sweet revenge: Since he took the helm of Fidelity Destiny I in late 1980, the $4 billion stock fund has racked up the third-best performance among all U.S. mutual funds, behind only Fidelity Magellan and CGM Capital Development, according to Lipper Analytical Services Inc. in Summit, N.J. The fund’s 19 percent annualized total return through August handily beat the 14 percent gain of the Standard & Poor’s 500-stock Index, including reinvested dividends.
Mr. Vanderheiden’s performance remains top-tier: Destiny I was among the top 8 percent of all stock funds in 1994, and in the top third in the first eight months of 1995, according to Morningstar Inc., in Chicago. He manages about $15 billion, mostly in stock mutual funds. He oversees Fidelity’s $123 billion growth-fund group, which includes managers such as Jeffrey Vinik, manager of Magellan.
And Mr. Vanderheiden now wields influence beyond Fidelity. He won’t discuss his current Chrysler holdings, but according to filings made in the spring, three stock funds he runs held 7.6 million shares of Chrysler, which is braced for a possible proxy war with Kirk Kerkorian.
On a recent Monday in the reception area on Mr. Vanderheiden’s floor, a standing-room-only crowd of 18 nervous corporate executives waited cheek-to-jowl to be grilled by the adrenaline-pumped, money-driven crowd Fidelity hires as analysts and portfolio managers. In this young Fidelity colony, Mr. Vanderheiden is the patient uncle, counseling young fund managers when they hit a tough patch. Despite his authority, he still labors under the whip of insecurity. ``If you have $20 million or $30 million, why keep trying?″ he muses. ``Why drive yourself, why put in 13 hours a day when you can leave? There’s still that little voice inside you that says, `How good are you _ really?‴
``He is the competitor that I most respect,″ says Frederick Kobrick, a fund manager at Metropolitan Life Insurance’s State Street Research & Management, who admires ``his ability to perform without excessive risk.″
Mr. Vanderheiden curbs risks by diversifying. He keeps a core of his funds invested 30 percent to 60 percent in big companies that seem able to expand profits in good times and bad, such as Federal National Mortgage Association. Philip Morris, Intel and Microsoft are part of the group, too.
The rest of the portfolio goes into an eclectic, ever-shifting group of stocks. ``George always has part of his portfolio that’s on offense, and another part where he’s working on new ideas,″ says former Magellan skipper Peter Lynch. Those new ideas may be in utilities, bonds, beaten-down ``value″ stocks, commodity producers, you name it.