SEATTLE - Rainier Investment Management is hardly a household name, yet the firm is one of only two money managers out of 300 in the Frank Russell Broad Based Equity Universe to have beaten the Standard & Poor's 500 Stock Index every year since 1987.
The firm's winning core approach has a median market capitalization of $18 billion, which includes 25% stocks with market caps of $20 billion or more; 18% stocks with market caps of $6 billion to $20 billion; and the rest in small- to midcap stocks.
The strategy is available to both institutional investors (with minimum separate accounts of $10 million for West Coast clients and $25 million elsewhere) and retail investors through mutual funds. The funds - core equity; balanced; intermediate fixed income and small-/midcap - launched May 11, 1994, have minimums of $250,000 unless shares are purchased through discount brokers like Schwab, Jack White and Fidelity Funds Network, where the minimums are $1,000 to $2,500.
James Margard, the portfolio manager for the Rainier Funds and head of equities at Rainier Investment Management, credits his trading prowess for much of the strategy's success. The portfolio's 150% turnover last year was "mainly a function of our discipline. We set specific price targets for buys and sells. In 1995 there was a lot of volatility in individual sectors and stocks," said Mr. Margard, who does the trading himself.
Rainier controls risk by buying liquid names and diverging little from sector weights of the S&P 500. In 1995, the fund had only 13% to 17% in technology - the hot sector last year - yet its core approach returned 47.5%.
He describes his style as growth at a reasonable price. The firm is owned by its five partners, who each have a 20% stake, and have worked together since the mid-1980s when they were at Rainier Bank.
In May, Rainier will celebrate its fifth anniversary as an independent firm.
The firm's assets grew more than $1 billion in 1995, ending the year with $2.2 billion. Mutual funds account for only $195 million. The rest is from pension fund clients.
Mr. Margard's least favorite sectors now are retail, autos and regional Bell operating companies.
On the Bells, he said: "Long-distance companies will chew them up. Regionals are still pretty fat and happy. They're not as powerful marketing institutions as they think they are."
"These stocks have really gotten ahead of themselves," because they're viewed as stable by retail investors, he said.
Among his favorite stock names: Sotheby's Holdings, the antique dealer, and AGCO Corp., the farm equipment company.