BELLEVUE, Wash. - Theodore J. Tyson, American Century Investments' former international equity chief, and four others have formed Mastholm Asset Management L.L.P.
Salomon Brothers Asset Management, New York, made a "significant, direct equity investment" in Mastholm that gives it an ownership interest, Mr. Tyson said. He declined to elaborate. He did say, however, that Mastholm will subadvise an international equity fund Salomon will launch this fall.
Mastholm - Mr. Tyson found the word, for a rare type of oak tree, while reading a book about the ancient mythologies of Europe - will specialize in bottom-up, all-capitalization growth international equity investing.
Mr. Tyson said only about 30% of international equity managers are bottom-up; of those, he estimated, about 70% are value-oriented.
He noted the firm won't follow the weightings of the Morgan Stanley Capital International European Australasia Far East Index.
In fact, about 50% of the stocks Mastholm will own will be too small to be in the EAFE index, although the companies will be in EAFE countries.
Mastholm's investment process will begin with a "quant (quantitative) slice," then will move into fundamental analysis, he said.
The first screen looks at acceleration, a change in the rate of earnings and revenue growth. "There are probably 1,200 to 1,500 stocks that on a quant basis, look like something is going on in terms of acceleration," Mr. Tyson said.
Next, he looks at whether these companies can sustain that acceleration, as well as whether they have demonstrated positive changes in financial ratios and are fairly valued.
Those screens narrow the candidates to 200 to 300 companies, which will be analyzed in-depth, he said. Ultimately, there will be 80 to 100 stocks in the portfolio, "with 50 to 60 names added during the course of the year and the same number subtracted," Mr. Tyson said.
He noted he used the same approach at American Century. One difference: "We (Mastholm) are more concerned about what we paid for the security than American Century would be," he said.
Mr. Tyson said his departure from American Century was "amiable." He is starting his own firm, he said, so he can concentrate on portfolio management.
Much of his time at American Century was spent on administrative duties, which is neither his strength nor area of interest.
"I'm not even sure someone would hire me to manage a 7-Eleven," Mr. Tyson quipped.
Other principals are Joseph P. Jordan, director and portfolio manager, who worked for Mr. Tyson at American Century; Arthur M. Tyson II, Ted Tyson's brother, director-research; Thomas M. Garr, managing director-administration, a former vice president of Salomon Brothers; and Robert L. Gernstetter, director-marketing and client services, formerly manager of the portfolio liaison team at American Century.
Still to be hired is an investment analyst; applications are welcome.
The firm was launched with no assets under management except a partners' fund. Mr. Gernstetter, however, said he expects to have several hundred million dollars under management by the end of 1998, a combination of separate accounts and the Salomon fund.
The minimum investment is $10 million. Mr. Gernstetter is targeting institutional investors with international exposure that seek additional managers to diversify their international portfolios.
