Call them the heroes of Black Monday.
Gutsy, lucky or smart, these institutional investors who stepped in to buy stocks following the 22.6% drop in stock prices on Oct. 19, 1987, came out of it looking pretty good.
In hindsight, it was a smart move. But some who helped make the decision to buy when most were selling said it was more a result of process than prescience.
On the day of the crash, investment professionals at the New Jersey Division of Investment, Trenton, which oversees the state's public pension funds, huddled over a plan to buy into the market.
"We're a pretty small shop. Three or four of us got together and decided to put some money" - at least $70 million - in the stock market, recalled Steven Kornrumpf, then portfolio manager and now deputy director.
Fund officials never considered the option of selling stocks. "What would have been the point?" given the market's revaluation to more reasonable levels, he said.
As a long-term investor, the New Jersey fund can step back to view the markets from a broader perspective, Mr. Kornrumpf said.
He said New Jersey officials decided that if the fund couldn't buy stocks after a 23% one-day drop, when could it?
The notion of a long-term outlook is oft-repeated by these heroes.
"A lot of people without (a) long-term investment perspective panicked," said O. Thomas Barry, senior executive vice president and director of investments for George D. Bjurman and Associates, Los Angeles.
"Our posture was that the crash led to a tremendous buying opportunity," Mr. Barry said.
"It turns out there was no doubt about that," he said.
While some Bjurman staffers wanted to sell stocks and raise cash, Bjurman instead put all the cash it could into the market during the next two weeks, keeping portfolios fully invested, he said.
Staff members at the California Public Employees' Retirement System, Sacramento, were merely following their rebalancing procedures when they put $3 billion into the market during the month after the crash, said Greta Marshall, who was then the investment manager for CalPERS and now is a principal for money manager The Marshall Plan, Boston.
The market run-up in the months prior to the crash put CalPERS in an overweighted position, leading it to sell stocks, creating the $3 billion pool of assets, she said.
After the crash, CalPERS' asset allocation was underweighted to equities, and so it had the money to invest, she said.
And if the market had fallen another 500 points, CalPERS would have bought more stocks, Ms. Marshall said.
"Pension funds are stabilizers in (the stock) market," she said.
Nonetheless, given the market conditions, it wasn't an easy decision to move cash into equities.
"There were grave concerns," Ms. Marshall said.
IDS Financial Services, now American Express Financial Advisors, Minneapolis, also was buying stocks following the crash.
"We had been very cautious about the market," and had raised cash to 17% to 18% of portfolios, said Peter Anderson, senior vice president and chief investment strategist.
With the market down so much, IDS put several billion dollars to work within three weeks after the crash, Mr. Anderson said.
"In retrospect, we may have been over-confident," given that many investors thought the market would fall even further, Mr. Anderson said.
A minority of people at IDS advocated selling rather than buying, he said.
Because there were so many eager sellers, Mr. Anderson said IDS didn't have any problems getting its money invested.
Officials for New Jersey and CalPERS, though, were concerned about the quality of the pricing they were receiving.
"It was hard to tell where the bid-and-ask really was" when looking at stocks for possible purchase, he said.
At one point, the bid-ask spread on General Motors stock was quoted to New Jersey at five to six points, he said. (Spreads at the time typically were closer to 1/8 of a point).
"It was awful trying to figure out if you were getting beat up by the specialists," said Mr. Kornrumpf, who sat at the trading desk, trying to help with trade execution.
Exchange trades were at least possible, he said. "You couldn't do anything in the over-the-counter market because (market makers) weren't picking up their phones," he said.
Although CalPERS officials didn't have a strong feel for where bid and ask quote were, the fund used its size and buying position to its advantage, Ms. Marshall said.
"I think we got some good execution," even though "quotes were all over the place," Ms. Marshall said.
Although now the decision to buy stocks can be viewed as a layup, 10 years ago plan participants, interested politicians and clients were not so sure.
In addition to having to deal with the markets, New Jersey was inundated with calls from participants and government officials, Mr. Kornrumpf said. He said Roland Machold, director of the fund, had to field a call from New Jersey's governor, in addition to other state officials.
In California, a CalPERS benefits hearing was quickly changed to a crash hearing, Ms. Marshall said.
While widely publicized, no substantive changes came out of the hearing, she said.
Mr. Barry of George D. Bjurman said he tried to reassure clients that the crash represented a buying opportunity.
One, the pension fund of Kansas City Power and Light Co., Kansas City, Mo., had just signed on in September 1987 for an aggressive growth mandate, he said.
Kansas City Power & Light's portfolio was down 25% in its first quarter with Bjurman. But KCP&L stuck it out, and it has paid off for the fund since then, he said.