Consistency of investment style and stability of professionals are hallmarks of longevity for commingled money managers over the 20 years in the Pensions & Investments' Performance Evaluation Reports.
Only four money managers that placed in PIPER's top 10 in 1977 still are in the universe today.
Fifth Third Bank, Cincinnati, and Lincoln National Life Insurance Co., Fort Wayne, Ind., placed first and second respectively in fixed-income performance with one-year returns for 1976 of 23% and 21.9%.
Bankers Life Insurance Co., Des Moines, Iowa, now the Principal Financial Group, and First National Bank of Birmingham in Alabama, now AmSouth Bank, placed fourth and sixth respectively in equity performance with one-year returns for 1976 of 35.7% and 32%.
The other 15 commingled managers that placed in the top 10 in either fixed income or equity no longer report to PIPER. They either were acquired or merged with other institutions or no longer manage commingled funds that report to PIPER.
For example, First Variable Life Insurance Co., Little Rock, Ark., which ranked first in PIPER's one-year equity performance for 1976, was sold in the early 1980s and dropped out of the universe. Its founder, Lee Bodenhamer, in turn, founded Meridian Management Co., also in Little Rock, which today manages about $400 million, including some $350 million from tax-exempt clients.
Bank of Oklahoma, Tulsa, which ranked seventh in PIPER's one-year equity universe 20 years ago, dropped out of the data base in the early 1990s. The bank still continues as an investment manager under its BancOklahoma Trust Co. unit. It dropped out of PIPER, however, when it converted most of its commingled funds to mutual funds in 1992, according to Doug Scott, product manager for mutual funds.
The first PIPER in 1977 contained 146 bank trust commingled managers and 22 insurance company commingled managers.
Of those 168 managers, only 36 of those banks and 15 of those insurance companies continue today in PIPER, or only 30% in all still report to the performance universe.
The four surviving PIPER money managers from its 1977 Top 10 equity and fixed income rankings attribute their success to the seemingly mundane characteristics of a steady investment style and a group of investment personnel that in most cases works under a team approach rather than a star system.
Instead of chasing industry fashions like money management spinoffs, these organizations have continued in basically the same form they had when they entered PIPER upon its creation.
In the raucous investment markets when one day can seem like an eternity, lasting 20 years truly is a long time. Few money managers have such long-lasting success in the pension investment market.
AmSouth cast off the First National Bank of Birmingham name in the 1980s, but the money management continues to be run by the investment management group within the trust division.
John H. Goff Jr., senior vice president and senior trust investment officer, heads the AmSouth investment management group, as he has since 1971.
His term is only slightly shorter than the tenures of S. Ralph Kosmicke and David L. White, who started the Principal's equity management, under the Bankers Life name, 30 years ago and still oversee investments.
Mr. Goff attributes AmSouth's longevity in the pension management business to "adherence to an investment philosophy of long-standing. We have a value approach."
"I took Graham and Dodd in college," Mr. Goff said.
As an undergraduate he studied the famous investment treatise 'Security Analysis" by the renowned investment co-authors.
In fact, he studied under Sid Cottle, a professor at Emory University in Atlanta. Mr. Cottle later became a co-author of a subsequent edition of the Graham and Dodd book.
AmSouth uses a bottom-up, value style.
"It's an intellectually honest approach to investing," he said.
"It doesn't work every year," he quipped of AmSouth's investment approach. "It didn't work well last year. But over the long term it's been pretty good."
AmSouth's management "is a combination of both an individual and team approach. We function as a strategy group of four persons," Mr. Goff said.
The investment group, which runs $6.2 billion total, including $3.4 billion for tax-exempt clients, has roughly 50% of its assets in equities and the other half in fixed income.
Its balanced accounts now are weighted 45% stocks and 55% fixed income.
Mr. Goff gives the bank's management much of the credit for the investment management's enduring achievement for having confidence to back it with the resources to stay competitive.
"Our success goes back to the support of corporate management," Mr. Goff said. "Investment functions in banks often get short shrift; they don't get capital. But 10 years ago the bank made a large expenditure to technology" for the investment management division.
Fifth Third's money management unit, which has operated as the trust and investment division of the bank, recently changed its moniker. It is now Fifth Third Investment Advisors.
"It's a change in name, not in legal entity," said James D. Berghausen, senior vice president and chief investment officer.
Fifth Third now runs $10 billion, about $5 billion of which is from pension funds and other tax-exempt clients.
"Certainly more managers are larger," said Mr. Berghausen. "But in this region in southwestern Ohio, we're the biggest."
He attributes the bank's success to its culture, which encourages "hard work, teamwork, cost control and getting out to talk with clients."
He lists four attributes of the organization:
Talented people, who are energized and specialized.
Discipline: "We have well-defined time-tested investment disciplines," he said. "We tweak them a little bit from time to time."
Scale: "With $10 billion under management, that's to our advantage," he said. "You call a company (an investment or prospective investment) and they'll talk with you. You call Wall Street and they'll talk with you." In addition, he said the size affords it the capability of keeping up with technology to manage portfolios and client accounts.
Good cost control: "That's illustrated by our high stock price," he said. "If you saw our facilities, you would say they were functional, not plush. We want to spend our money where it will deliver tangible results for shareholders and clients."
Under its team approach, the research group creates a buy/sell list. "All portfolio managers must buy from the buy list," he said. "Other portfolio managers participate in strategy meetings and meeting with clients," he said. They represent client needs in investment models.
Mr. Berghausen describes Fifth Third's investment style as growth at a reasonable price. It consists of quality growth stocks that have steady growth in revenue and earnings and a conservative capital structure. "We like to buy at a market p/e," he said, referring to the stock-price-to-earnings-per-share ratio.
"We believe strongly in the attractiveness of equities," he said."For forever, we've been more heavily weighted to equities when it's left for us to decide in balanced accounts."
Its current balanced account allocation is 65% equities and 35% fixed income. Typically the equity allocation can range from 60% to 75% of a balanced portfolio.
"Over time that's worked very well for us," he added.
"While we're aggressive on the asset allocation side toward equities, the companies we buy are in the high quality growth spectrum, so that mitigates the risk," Mr. Berghausen said. "We don't have the volatility.
"Long-term investing is the issue," he said. "Our approach has worked very well over the long term. Over the short term, any philosophy will cycle in and out of favor. But in one, three and five years our style has performed well."
In the mid-1980s, Bankers Life changed its name to the Principal. While the Principal kept management of most of the fixed-income investments, it placed equity investment management and some special fixed-income management, such as mortgage-backed securities and convertible bonds, into a new unit, Invista Capital Management Inc.
Scott Opsal recently was named chief investment officer of the Invista unit. He replaced Mr. Kosmicke, who in 1967 founded the equity management group at Bankers Life now called Invista. Mr. Kosmicke will continue at Invista in investment management as a consulting economist and plans to retire in mid-1998. Mr. Opsal was a vice president managing international equities, a portfolio he will keep. Mr. White, executive vice president, also will be retiring in mid-1998 and will be replaced by Doug Herold, a vice president, as manager of the U.S. core equity group.
Mr. Opsal said for a firm to endure, it has to be successful across all market and economic environments.
"Firms in business a long time have a sound approach to investing," he said. "We look at what assets are worth in the long run, not at what it is doing in the market day to day."
People are the key to success, he said. "For a firm to last a long time, it has to have good people and have them stay a long time. A firm with high turnover of people will run into consistency problems."
Invista manages $20 billion, about $15 billion in equities. It manages several styles, including growth, value and international.
Some 10 years before PIPER's start, Lincoln National created a separate subsidiary for its money management operation, Lincoln Investment Management Inc., which is exclusively a fixed-income manager.
H. Thomas McMeekin, president and chief investment officer of Lincoln Investment, attributes its standing ability to "sticking to an investment style through thick and thin."
"We are long-term investors. We are sector rotators."
Lincoln Investment manages $40 billion, of which $2 billion is from pension clients, all in fixed income. Equities are managed through the parent Lincoln National Corp.'s other units, such as Lynch & Mayer Inc. and Vantage Global Advisors, both in New York, and Delaware Investment Advisors, Philadelphia.
"We are big believers in diversification," Mr. McMeekin said. "You never bet the whole store. That's how people got in problems over the years. They make large bets and things have to go a certain way for it to work out."
In diversifying, "you can make a number of marginal calls that add up to superior performance."
Today "the market is much more efficient than it was," Mr. McMeekin said. "There is that much more information at everyone's desk. It's that much harder to outperform."
The firm takes "very much a team approach," he said. "It reaches a consensus on general direction. But the actual implementation is done by an individual portfolio manager."
