PRINCETON, N.J. - Jim Mehling is a high-flying money manager. Literally.
The $418 million Mainstay Institutional Multi-Asset Fund, which Mr. Mehling manages as the president and chief investment officer of Monitor Capital Advisors, logged an annualized return of 22.5% for the three years ended Sept. 30, compared with 18.6% for the benchmark Lipper Flexible Portfolio Average. And for the first nine months of 1997, the fund reported returns of 24.5% vs. 17.8% for the Lipper average.
Princeton, N.J.-based Monitor is a subsidiary of the New York Life Insurance Co.
And when he's not watching his funds soar, this aeronautical engineer reaches for the skies. He flies a single-engine, four-seater airplane, the Cirrus VK 30, that he built from a kit with his father, a retired airline pilot.
The plane, which took more than three years and $60,000 to build, is constructed entirely from composite materials such as fiberglass, kevlar and graphite, and is one of only two of its kind in the world, he says.
Building an airplane is akin to investment management, he says, because: "You can usually take a big problem in the investment business, and break it down into small pieces. I take a three-year or four-year project and break it down into pieces, and when I'm done, I have a plane."
He is as disciplined in building planes (this is his third) as he is in managing the Mainstay Multi-Asset Fund, designed for 401(k) plan participants looking for a conservatively managed asset allocation fund.
The fund is passively managed and buys all the stocks in the Standard & Poor's 500 Stock Index. In the case of bonds, the fund buys a representative sample of the benchmark; for foreign stocks, it gets its exposure through futures contracts, not by buying the stocks directly.
"The discipline of following the designer's instructions is the key to success. Its very tempting to make changes," but tinkering around with the blueprint can lead to crashes, he notes.
"Airplanes don't crash because something goes wrong. They crash because a lot of things go wrong all at once."
The Mainstay Multi-Asset Fund follows a strict model that limits the fund's exposure to four asset classes - domestic and international stocks, domstic bonds - with limits on how much can be in each of the classes, as well as at least 10% of assets in money market funds at all times. The fund resets its exposure to the asset classes each month.
The fund's benchmark for domestic stocks is the S&P 500; for domestic bonds, the Salomon Brothers Broad Investment Grade Index; and country indexes for stocks invested in nine, liquid foreign markets.
The key to the fund's success? "We don't tinker with our model," Mr. Mehling said.