February 15, 1999
Monica Who?
Bill's top 1998 regret? Maybe that he wasn't invested with Essex Management
By Bill Alpert
Some investors feel smart to say they own Internet stocks, others feel smarter to say they don't. Joseph C. McNay, of Essex Investment Management, can boast of owning lots of Internet shares last year -- and lots less now. More bullish on the 'Net than most polite buyside society, Essex had mind-blowing returns in 1998. "It was probably a vintage year," says the 65-year-old McNay, with the wistful air of a season's champion who knows the pages of history are always turning. McNay and his partners turned one of those pages themselves early last year -- selling a controlling piece of the 22-year-old Boston firm to Affiliated Managers Group, a New York Stock Exchange-listed holding company.
One consequence of that sale was that Essex had to withdraw from oversight of the blind-trust account of a small investor named William Jefferson Clinton. So there's another thing for the President to regret about 1998: He got traded on the eve of the Essex team's hot streak. AMG's directors had Clinton connections obliging the new Essex owners to recuse the firm from running the President's trust.
If Clinton missed out on Essex's Internet home runs, plenty of others were there to score. Most of the $7 billion that Essex runs is in private accounts, whose results the Boston firm can't advertise. But three Essex hedge funds that are open only to foreign investors may publish results. The $40 million Permal Media & Communications fund gained 72% last year, net of management fees, while the $50 million Essex High Technology fund rose over 120%. Winchester Frontier fund, with $66 million, gained about 65%.
Those gains put the Essex funds at the head of their categories for 1998. (See related story on the performance of hedge funds.) Lacking the spice that leverage and short sales gave to their hedge funds last year, the performance of Essex's remaining $6 billion was less magnificent, but still doubled the S&P 500's 27% gain. (Barron's saw the actual numbers, but only on condition that they wouldn't be published here.)
McNay's Picks
"We had an all right year," chuckles Joe McNay, whose wry dignity is reminiscent of Spencer Tracy's. The seasoned money manager puts on no airs, preferring instead to put on gray Polarfleece sweaters. Like many self-made men, McNay has wads stuffed in his pockets -- not wads of cash, but rather information on his stocks.
Since founding Essex in 1976, McNay has tried to "isolate" growth stocks through intense original research. He now has the help of eight in-house analysts and five portfolio managers, including Pamela Cutrell, well-known on Wall Street for claiming that Internet stocks really do have fundamentals, and Dave McDonald, an accomplished telecom investor. Joining Essex five years ago was Joe's now 39-year-old son Colin, whose search for favorable and unfavorable industry trends has enhanced the firm's short-selling. |
