It was deja vu for top-performing equity managers in Pensions & Investments' Performance Evaluation Report.
For the second consecutive quarter, large-capitalization growth stocks with a technology bent had the best returns, even though the overall stock market slowed from its torrid fourth-quarter pace.
The laggards for the quarter were small-capitalization portfolios, in both the value and growth areas.
Still, there were a couple of surprises in the equity managed accounts, as a small-cap and midcap growth manager and a value stock manager made it into the top 10 performance rankings.
The only equity portfolios to outperform the Standard & Poor's 500 index for the quarter and the year ended March 31 were the median large-capitalization growth ones in both the PIPER managed and commingled account universes.
In the managed accounts, the median large-cap growth portfolio had a 5.6% return for the quarter vs. a 5% return for the S&P 500, and a 22.4% return for the year, vs. a 18.5% return for the S&P 500.
In the commingled accounts, the large-cap growth fund had a 5.6% return for the quarter. For the year, the fund had a return of 21.3%.
The median PIPER equity managed account had a 0.5% return for the quarter and a 3.3% return for the year.
Amerindo Investment Advisors Inc., San Francisco, led the pack for the second quarter in a row in PIPER's equity managed accounts, with a 58.69% return for the quarter in an emerging growth strategy and a 122.08% return for the year ended March 31.
"We're 100% dedicated to emerging technology companies and think Internet companies are the best," said Alberto Vilar, president. "We think the rise of the Internet will be the seminal event in the 10-year period (up to 2000) and has the ability to transform the U.S. and global economies and form a new world order."
Among the companies Amerindo's fund owns are Dell Computer Corp., Cisco Systems Inc., Yahoo! Inc., America Online Inc., eBay Inc. and AtHome Corp.
There were two surprises in the quarter's results. Driehaus Capital Management Inc.'s midcap growth equity portfolio came in second among managed equity portfolios, with a return of 32.71%, while its small-cap growth equity strategy came in fourth, with a return of 31.82% for the quarter. Neither showed up on the full-year or three-year top performance lists.
And Arnhold & S. Bleichroeder Inc.'s U.S. value fund came in sixth for the quarter, with a 28.58% return, and 10th for the one-year and three-year periods, with returns of 60.61% and 42.15%, respectively.
Said John Arnhold, president: "Over the last several years the concept of growth and value has become blurry. We still use value but some of our large positions would not be called value stocks."
"We try to invest in companies going through major changes, such as a merger," he said. "We try to find companies (where the event) causes a major change in the franchise value of the company."
Among the companies in Arnhold's portfolio are MCI/WorldCom Inc. (which shows up in the funds of many large-cap growth funds); Time Warner Inc.; Liberty Media Inc.; Seagram Co. Ltd.; and Tyco International Ltd., which just completed the acquisition of AMP Inc.
At Driehaus, CIO Richard Driehaus said, "Since the Oct. 8 bottom, the market took off for our style. It had been lagging dramatically." He predicts there will now be good times for "real growth investors."
Among the companies in the midcap fund are VISX Inc., which manufactures lasers used in eye surgery; CNET Inc., which runs a network of Internet sites; and Knight/Trimark Group Inc., which is a market maker in Nasdaq securities.
Stocks in the small-cap fund include RF Micro Devices Inc., a manufacturer of integrated circuits; Viatel Inc., a telecommunications company; and SDL Inc., a manufacturer of fiber-optic related products.
Campbell Cowperthwait & Co., New York, once again was a top performer in managed PIPER for the quarter.
Its large-cap growth equity strategy came in third with a return of 31.86%. For the full year the fund came in second with a return of 112.76%; for three years, it was third with an average annualized return of 58.25%.
"Our investment philosophy has been in place for a number of years and its foundation is that over a long period of time earnings growth drives stock market prices," said Michael Shields, president.
"We don't try to predict where the growth is going to be -- we go where the growth is."
The fund is also heavy in technology, including Cisco Systems, Microsoft Corp., Dell, AOL and Intel Corp. It also owns Quintiles Transnational Corp., a fast-growing health-care company that conducts clinical drug trials for pharmaceutical companies. Mr. Shields admits that it's "small by our average market cap."
Mt. Auburn Management, Boston, was again in the top 10, coming in fifth for the quarter with a 30.36% return in its concentrated large-cap growth strategy, third for the year with a return of 110.98% and first for the three-year period, with an average annualized return of 69.74%.
Specialty, not core
The fund "still has only nine positions," according to Alan J. Dworsky, principal. The fund's holdings changed very little from the previous quarter, he said.
"I'm not a core manager. I'm a specialty manager," he said. "By design I set out to only manage a portion of an institutional portfolio."
His fund's holdings, which are also technology heavy, include AOL, EMC Corp., MCI/WorldCom and Tellabs Inc.
Straddling the world of managed and commingled accounts, Marvin & Palmer Associates' U.S. equities account came in 12th among managed funds for the quarter, with a return of 23.73% and fifth for the year with a return of 75.78%. In commingled accounts, the fund's 23.73% and 75.78% returns were good enough for first place for the quarter and year, respectively.
It came in second in commingled accounts for the three-year period with an annualized return of 42.47%.
Most of the firm's holdings are the same as the previous quarter. The portfolio includes Cisco Systems, Microsoft, Comcast Corp., Time Warner, IBM Corp., AOL, AtHome, MCI/WorldCom, Gap Inc., Home Depot Inc. and Wal-Mart Stores Inc.
Some Internet selling
The EB growth equity fund of the Second National Bank of Warren, Ohio, came in second among commingled funds for the quarter with a 15.3% return, and second for the year with a 41.37% return.
Michael Hephner, portfolio manager, said, "One of the main things we look at is high earnings growth rate."
Stocks in its portfolio include Best Buy Co., The Charles Schwab Co., Vitesse Semiconductor Corp., Cisco Systems, EMC, Amazon.com Inc. and Yahoo!
Transamerica Investment Services equity fund came in third for the quarter among commingled funds with a 13.71% return and fourth for the year with a return of 38.01%.
Its holdings include Charles Schwab, EMC, Dell Computer and First Data Corp.