Portfolio manager as superstar: What if the cast changes?

Who's investing your money? If you don't want to look for investments yourself and you have enough money (like a few hundred thousand dollars), you can hire your own money manager.

But if you're of more ordinary means, you are more likely to find a mutual fund where a single professional, or a team of investment managers, looks for the best investments.

Sometimes the funds do so well that the managers themselves become well known, at least within the investment community. A few, like Peter Lynch, who runs Fidelity's multibillion-dollar Magellan Fund, become even better known. Their pictures appear on the covers of business magazines and they are frequently interviewed or invited to speak before groups of investors.

But what happens if one of these managers suddenly resigns, retires, or dies? How can investors learn if there has been a change? If a change has occurred, how can investors find out the background of the new managers? And finally, does it really matter?

Investors in the Putnam International Equities Fund are about to find out. Late last month, Walter Oechsle, president of the highly rated $350 million international fund owned by Putnam, an old-line Boston investment company, suddenly resigned. Taking 10 other members of the international department with him, including senior managers in London and Tokyo, Mr. Oechsle set up shop as Oechsle International Advisors a few doors from Putnam's downtown headquarters.

Within a few days the new firm, which was identified by a piece of paper taped to the door, was taking in money from investors who wanted to continue benefiting from the skill of Oechsle and his team.

Then last week, Putnam filed a $20 million lawsuit against the group, charging it had contacted Putnam clients before leaving the firm and acted as a conspiracy in doing so. Oechsle then countersued, charging Putnam was trying to drive away competition.

While this management change is probably larger and messier than most, it has benefited investors in the Putnam fund in at least one way: With the publicity, at least some of them know about the change. More often, when a change like this takes place very few investors know about it. Meanwhile, some less-experienced people may be managing the fund.

``It leaves investors high and dry,'' says Perrin Long of Lipper Analytical Services, which closely follows the mutual fund industry. ``There will be the question of whether Putnam can get a new team to manage the international fund as efficiently as before.''

``You could ask me to go out and manage a US stock fund and I think I could do it,'' said Glen King Parker, of the Mutual Fund Forecaster, a Fort Lauderdale, Fla., newsletter. ``But if you told me to take this money and go out and find the best stocks in Singapore, Japan, or Korea, I wouldn't know where to begin.''

News of the Oechsle defection was not kept secret, notes Andrew Baer, spokesman for Marsh & McLennan Inc., of which Putnam is a division. Reports were carried in the New York Times, the Wall Street Journal, Investment Dealers Digest, and other publications, Mr. Baer said.

Still, neither Mr. Long nor Mr. Parker had heard of it before they were contacted for this column. There aren't many fund managers whose departure would generate enough publicity to reach investors, they agreed.

``If Peter Lynch left Fidelity, you know it would be on the front pages of all the papers,'' Parker said. ``But that's about it.'' In most cases, investors -- many of whom may have sent in their money specifically because of the reputation of a particular manager -- may not know about a change for months, if ever.

If you invested in a fund because of the manager (maybe you read an interview or saw a feature story on the fund and agreed with its strategy), how do you know that manager is still working for you later on?

First, watch the fund closely. A sudden change in the fund's performance, absent such a change in similar funds or in the overall market, may be one clue.

But this might not be accurate; sometimes one or two stocks in a fund's portfolio will take a dive, at least temporarily pulling down the fund's net asset value, or share price. No change in managers here, just a short-term blip in performance.

You should also carefully read the fund's semiannual and annual reports, Long advises. These may discuss any management changes, and they may list new officers.

``But some annual reports only list the executive officers of the management company as managers of all the funds,'' notes Parker. ``You know that isn't true.''

At some other funds, the money isn't handled by an in-house portfolio manager, but by an outside management company. While a fund prospectus must mention the company, it doesn't have to talk about any individuals in that company, or discuss their qualifications to invest your money.

If you are at all concerned about a possible change of portfolio managers at your fund and you're not getting the information you want from annual reports or the prospectus, Long says, a letter might help.

``People could write the fund every six months or so and ask who's managing the fund and what's their background,'' he advises. ``Then they should save the letters and compare the answers they get.'' But even this may not always be terribly informative, as a fund can simply point to a team of managers or a management company.

Frankly, Parker concludes, it is possible -- though fairly rare -- for a fund to have a complete change of portfolio managers and investment strategy without individual investors knowing about it for several months.

``I think it's something the SEC [Securities and Exchange Commission] should look into,'' he said. ``They should see how we can get more disclosure about who is running a fund.''

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