Sometimes when you're investigating a fund, the portfolio managers can prove as interesting as the fund itself is.
Take the Alpha Analytics Digital Future Fund, (877-257-4240), for instance. This technology fund has only been around since December 22, 1999, but managed to beat its benchmark---the NASDAQ Composite--- in calendar year 2000, and, so far this year. Last year the fund was down nearly 14 percent, while the NASDAQ was off over 39 percent; this year the fund was up almost 20 percent and its benchmark ahead about 12 percent, as of Jan.19.
John Gipson and Michael Cohen co-manage the Digital Future Fund and each bring their own brand of expertise to it.
Before getting into the money managing business, Gipson was a scientist for NASA. "My claim to fame there was showing that the El Nino caused the Earth to slow down by a very small amount," says the 45-year old who earned his PhD from Yale in Theoretical Physics.
Gipson said that a number of scientists have made the move from science to investing as quantitative techniques have become more impoirtant in the investment arena. The firm he joined, Alpha Analytics Investment Group, is headed by his brother, Reg.
Gipson's role in the Digital Future Fund is to be its short-term tactical manager using a quantitative model to help determine which companies the fund ought to invest its assets into. The model looks at about 50 factors, some fundamental and some technical. Included in that list are value, growth, risk; management, liquidity and technology factors. And such things as short-term performance results and abnormal trading volumes.
Michael Cohen, on the other hand is the fund's long-term strategic manager. His job is to ferret out themes and trends within the technology industry. "I try to identify where the future of technology is going, " says the 30-something who began his investing career in the late 1990s.
Cohen earned his MBA from California State University, Northridge in 1997. Prior to joining the Los Angeles-based group in 1999, he'd made his living investing in technology stocks. It was his skill in managing his own money and picking winning technology stocks that won him his co-portfolio manager's position.
"Let me tell you an interesting story about Mike, " says Gipson. "When you have a company that manages money, lots of people come to you wanting to be money managers. If we are interested in them, we usually ask to see their brokerage statements to see if they really have done what they say they have. And what typically happens then is, many don't have the paperwork to back up all of their trades. When we came back to Mike to verify his trades, he brought in a box with five years' worth of records showing exactly what he'd done and documenting his whole track record."
Currently, the Digital Future Fund has about 32 stocks in its portfolio. Ideally, its managers would like to see that number stay in the 25 to 35 stock range. Here's more about how the fund is managed:
Q: What are the themes or trends that you like in technology these days?
Cohen: I like optics; I like storage; and I like third generation wireless. So we like companies such as JDS Uniphase, EMC, and Newport.
Q: Both of you have specific jobs to do within the fund but how does that really work?
Gipson: Mike looks at about 200 stocks and then passes a smaller list to me. My model looks at what kinds of companies have been rewarded (in the market) over the last nine months and from that we try to pick stocks that have similar characteristics. The idea is that the market is changing, but it doesn't change overnight. It changes slowly. So we try to capture what the market is valuing right now.
So, Mike picks companies that he likes long-term and the model picks companies that it likes in the short-term.
Q: Who makes the final stock picks? The model or Mike?
Gipson: We have had companies that Mike likes but haven't bought them because the model doesn't like them. And, we will have discussions about some companies. But at the end of the day, Mike's decisions carry more weight.
Cohen: We follow the model much stronger on the buy side then on the sell side. I like to have a fund with very low turnover, so there has been times on the sell side when I have vetoed the sale of some stocks.
Alpha Analytics Digital Future Fund
|SYMBOL||not yet available|
|TOP HOLDINGS||As of January 19, 2001, the top holdings included: Newport Corporation: Emulex; Applied Micro Circuits, SDL; and Qlogic.|
|PERFORMANCE||Year-to-date through Jan 19, up 19.28 percent. In 2000, the fund's total return was down 13.85 percent.|
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