Anyone want a job?
August 18, 2000
Online Firm to Give Jobs to Top Stock Pickers
By REUTERS
LONDON -- Frustrated fund managers, armchair stock pickers and aspiring Warren Buffetts rejoice. Thanks to the Internet you might get a chance to beat Wall Street pros at their own game.
Even better, you may get job.
At least that's the promise of a California company led by a man who knows what it's like to move from being an amateur investor to a pro managing millions.
The company is Marketocracy, led by fund manager Ken Kam. The firm has set up a web site (www.marketocracy.com) designed to let anyone set up a fictitious mutual fund starting with a million dollars.
Such contests are nothing new and have long been sponsored by newspapers. But with Marketocracy there is a crucial difference.
Kam plans to offer jobs to investors with the best performing portfolios over three years. It's part of his plan to build a multi-million dollar family of mutual funds managed entirely by people whose only qualification is their track record.
``When you think about the statistic that 80 percent of active managers don't beat the S&P, it becomes rather obvious that the current method that we use to recruit portfolio managers does not get us the best investors in the world,'' Kam told Reuters in a telephone interview.
``What the Internet does is enables a new way to select portfolio managers. We can now select them purely on the basis of performance, which is really what the mutual fund shareholders want anyway,'' he added.
The idea of recruiting fund managers through the Internet may seem logical in an era when online day traders and dot coms are reshaping the stock market. But among many industry veterans the idea has been greeted with mixture of amusement and skepticism.
``I wouldn't have anything to do with them,'' said Mike Balfour, chief investment officer with Britain's Edinburgh Fund Managers, which manages around eight billion pounds ($12.1 billion).
``It's just not that simple. The real world of managing billions of pounds is rather more different to having a punt (bet) for a couple of years.''
But Kam believes his own background is proof that the best investment minds are often found far from the world's financial capitals.
Firsthand Knowledge
While many fund managers get their jobs after a stint on Wall Street or time with a major investment bank, Kam started investing after having helped found a company that made medical equipment.
In 1994, Kam and Kevin Landis, and engineer working in the semiconductor industry, founded Firsthand Funds based on the idea that people with firsthand knowledge of an industry are best qualified to invest in it.
Firsthand quickly become one of the industry's top growth stories, turning out stellar returns and accruing more than $1 billion in assets before Kam left in 1999. He continues to manage the Medical Specialists Fund, which has about $50 million in assets. The fund had an average annualized return of 19.26 percent from inception to July 31, 2000, according to Lipper.
Kam credits much of his success to having worked in the industry he invests in before he moved into fund management. On this basis he said many so-called amateurs have the knowledge to outperform the pros.
``It gives them a perspective from which they could judge news as it comes out about each company that is just impossible to replicate when you're sitting on the 40th floor of a New York tower,'' he said.
Same Rules As Pros
The contest is open to anyone in the world with Internet access, though at this point they may only include U.S. equities in their portfolio.
After registering on the site, investors will have to follow many of the rules governing real fund managers. These include holding no more than 25 percent of assets in a single stock and deducting management fees from returns.
Kam said the site currently has about 5,000 portfolios registered and he hopes to double that figure by September 30. He said the site had the capacity to hold 100,000 portfolios.
There is no cost in joining and Kam said the firm will also offer feedback on how investors can improve performance. But to have a chance to win a job offer, investors will have to stick with the plan for years rather than months.
``I'm not trying to create something overnight. To really tell who the best investors in the world are, you need a three year track record, you can't do it over just one quarter,'' he said.
Kam's plan is to hire the top five investors in any given category, then offer them each 20 percent of a real mutual fund to manage. Using this method, Kam said he would like to build a family of as many as 10 funds.
The number of investors who will place their savings with a manager who has never used real money is uncertain. Many experienced fund managers said the job can not be entrusted to an amateur.
Balfour said that when recruiting fund managers his firm looks for a good fundamental grounding such as accounting or finance, combined with entrepreneurial flair.
Others in the industry were less skeptical, noting many talented fund managers had backgrounds in science or even the humanities.
``If this organization is looking for new recruits, then this as good a way as any to screen people out that you might then want to interview,'' said Jeff Currington, head of European equities with Morley Fund Management.
``It's quite an amusing idea. Lots of people are always moaning about fund managers and saying 'I could do better than that.' It will give them a chance to see whether they can and put their metaphorical money where their mouth is,'' he added. |
