"They Couldn't Get Clients to Quit Complaining"

Stupid clients, they tend to complain when you lose 86% of their money in three years:

During the dot.com bubble Munder drew in money form eager investors like no one else, primarily into their NetNet fund. Eventually they managed $54 billion for investors.

"When Munder Capital Management's new marketing director met with the sales force for the first time two years ago, they all had the same beef -- they couldn't get clients to quit complaining about Munder NetNet Fund.

After the Internet-stock bubble burst in the late 1990s, the mutual fund -- heavy with dot-com shares -- had emerged as a symbol of all that was wrong with technology investing. Its triple-digit gains and subsequent steep losses put Munder on the map, but not in a good way."

"As tech shares slid in 2000, the flagship fund dove 54%, followed by a 48% loss in 2001 and a 45% decline in 2002."

So after destroying the savings of greedy new economy investors (along with Police pension funds that invested in NetNet), Munder came up with a new idea to sell, closet indexing.

"Mr. Adams, who bears no known lineage to the U.S. president but goes by the nickname "Quince," helped lead a series of conversations with fund managers to figure out how to set up "risk controls" -- a seemingly obvious set of guidelines to limit managers' bets. They eventually agreed on things like sticking closely to benchmark weightings in different industries and measuring how much funds deviate from the indexes. The firm upped its use of pricey analytical software from what is now investment researcher MSCI Barra and hired a former MSCI Barra employee to run a new quantitative group. As for the old NetNet fund, its returns improved."

Timothy Burger
timothyb(at)timothyburger.com