Courtesy of the
Des Monies
Register,
copyright 2003
Muscatine company
manages fund of funds
With only six employees,
it must balance a personal touch with low expenses
By S.P. DINNEN
Register Business Writer
Far, far away from the
money centers of New York or Boston, a Muscatine-based mutual fund
company is trying to make money investing in, well, the people who work
in New York and Boston.
Pearl Mutual Funds has
been quietly investing money for charities since 1972. In 2001 it
decided to open its doors to the public and doubled—from one to two—the
number of mutual funds it offered. With just $64 million in total
assets, Pearl remains a speck in the mammoth mutual fund industry. But
it's not for a lack of recent performance,
Though mutual funds in
general had a nice run-up in the second quarter of 2003, Pearl did even
better. Through Tuesday, its Total Return Fund has risen in value 17.5
percent year to date, while its Aggressive Growth Fund is up an
impressive 30.8 percent. By comparison, the Standard & Poors 500 index
was up 11.6 percent, and the Nasdaq composite index was up 31.9 percent
for the same period.
"We feel like, in the fund
of funds world, we're doing pretty well," said Robert Solt, Pearl's
executive vice president.
Pearl is not a typical
fund company, where portfolio managers inspect stocks or bonds and then
buy them. It is a “fund of funds," meaning that it buys other mutual
funds.
Most fund of funds "are
designed to be one-stop shops." said Emily Hall, an analyst at
Chicago-based mutual fund performance tracker Morningstar.
Rather than try to pick an
individual company that it hopes will turn a profit, Solt said. Pearl
looks for fund managers who already have accomplished that task. And
then it puts money into their funds.
"We're trying to find the
best investment managers out there." said Solt.
The Total Return was
started in 1972 by Muscatine-based political and tax activist David
Stanley. A lawyer who also has been involved with religious and
charitable organizations. Stanley saw the fund as a way for nonprofit
groups to invest excess cash.
Creating
a fund of funds, said Solt, allowed nonprofits to avoid the headaches of
creating and running an investment committee.
Constantly asked whether the fund was available to individuals,
directors of Pearl pressed for it to open to public investors. It did so
in 2001, and at the same time began Aggressive Growth for investors who
were willing to shoulder a little more risk.
"Some
people like a conservative style" of investment, said Solt. "Some people
like an aggressive style."
Despite
its public persona, Pearl's marketing efforts are pretty low-key,
relying largely on word-of-mouth endorsements from satisfied investors.
Pearl is
run from offices in Muscatine by just six people, who want the business
to stay small enough that they can know their investors. Therein lies a
potential problem. Grow too big, and Pearl begins to lose that personal
touch; stay too small and expenses are high relative to other funds.
Morningstar's Hall said Pearl's annual expenses charge, of .97 percent
to .98 percent of an investor's money, is high for funds of funds.
"With a fund of funds, you
really want to be paying very little" overhead because the funds also
are paying expense fees on the underlying investments, Hall said.
Solt said expense charges
for funds of funds are skewed by giant operators such as Fidelity, which
can add such a fund to its huge stable for practically nothing.
Among
independent funds of funds, he said, Pearl's expense ratio is
competitive.
Pearl
would like to grow to at least $75 million in assets, an increase of 17
percent from the current base, Solt said. Eventually it could hit the
$200 million mark, though at that level Solt said managers would have to
start thinking about whether they're losing their personal touch.
"We're
still small enough that we can know your name," said Solt. "That's what
we've really sold ourselves on."
Reporter
S.P. Dinnen can be reached at (515)284-8543 or
sdinnen@dmreg.com
More
information related to the newspaper article above
Pearl Mutual Funds are described in a Prospectus
which contains more complete information, including fees and expenses.
Any investor should read the Prospectus carefully before investing or
sending money. Anyone can request a Prospectus by calling toll-free
866-747-9030, or can read and download it on the Prospectus page of this
Website. Any reprint of the article above is not authorized for
distribution unless preceded or accompanied by a current Prospectus.
Shares of both Pearl Funds are available to
persons residing in 15 states (including Iowa and Illinois) and the
District of Columbia. The article above (and anything on this Website)
is not an offer of or a solicitation of an offer to buy either Fund, nor
shall either Fund be offered or sold to any person, in any jurisdiction
in which the offer, solicitation, purchase, or sale would be unlawful
under its securities law. The Funds are offered only to residents of
the United States.
Pearl Mutual Funds and Pearl Management Company,
the Funds’ Manager, cannot guarantee the accuracy or completeness of any
statement or numerical data in the article above. Any discussion of
investment strategy, shareholder services, and other items noted in the
article represents the views of Management at the time of this article
and are subject
to change without notice.
Pearl Total Return Fund seeks long-term total
return for its investors. Pearl Aggressive Growth Fund seeks long-term
aggressive growth of capital. Each is a fund of funds that invests in
shares of other registered investment companies.
Both Pearl Funds are no-load. This means an
investor does not pay a commission, sales charge, or redemption fee.
Both Pearl Funds do not impose any 12b-1 fee.
However, some of the mutual funds in which the Funds may invest may
impose a 12b-1 fee.
Limits on expenses. Pearl Management
Company, the Funds’ Manager, has contractually agreed to reimburse each
Pearl Fund for all ordinary operating expenses (including management and
administrative fees) exceeding these expense ratios: 0.98% of a Fund's
average net assets up to $100 million and 0.78% in excess of $100
million. The Manager’s reimbursement of expenses that exceed the
expense limit lowers the expense ratio and increases the overall return
to investors.
Management of Pearl Mutual Funds and Pearl
Management Company includes David M. Stanley, President; Robert H. Solt,
Executive Vice President; Kevin J. Burns, Vice President of Investment
Management; and Christopher A. Hoffman, Vice President.
Pearl Total Return Fund’s average annual
total returns for years ended Sept. 30, 2003 were:
1 year 29.35%, 5 years 9.32%, and 10 years 9.09%.
Pearl Aggressive Growth Fund’s average annual
total returns for years ended September 30, 2003 were: 1 year 41.44%,
and 2 years 12.64%.
Total return means total growth of the investment,
with all dividends and distributions (including capital gains)
reinvested.
Performance data represent past performance and do
not guarantee future results. Investment return and principal value of
an investment in each Pearl Fund will fluctuate, so that an investor’s
shares in the Fund, when redeemed, may be worth more or less than their
original cost. Performance changes over time and may be materially
different by the time the above information is read. For recent
performance information, go to the Performance pages on this Website or
call toll-free 866-747-9030.
All investments involve risk. Even though Pearl
Total Return Fund and Pearl Aggressive Growth Fund each invest in many
mutual funds, that investment strategy cannot eliminate risk.
From July 1, 1972 through July 1, 2001, Pearl Total
Return Fund’s shares were not registered under the Securities Act of
1933 and only private sales were made. The Fund began offering its
shares to the public pursuant to an effective registration statement on
July 2, 2001.
Description of Indexes: The Wilshire 5000
Index is an unmanaged index that is market-capitalization weighted,
includes all publicly-traded U.S. common stocks with readily available
price data, and is generally representative of the performance of the
average dollar invested in U.S. common stocks. The MSCI World Index is
an unmanaged index that is market-capitalization weighted and is
generally representative of the performance of the global (including
U.S. and international) market for common stocks. The Value Line
(Geometric) Index is an unmanaged index that equally weights a broad
range of publicly-traded U.S. common stocks included in The Value Line
Investment Survey and is generally representative of the performance of
the average U.S. common stock. The Standard & Poor’s (S&P) 500 Index is
an unmanaged index of 500 stocks that is market-capitalization weighted
and is generally representative of the performance of larger companies
in the U.S. The All Equity Funds Average (Lipper) is an unmanaged and
unweighted average of the total return performance of all
equity-oriented mutual funds as classified and calculated by Lipper
Inc. The All Long-Term Taxable Funds Average (Lipper) is an unmanaged
and unweighted average of the total return performance of all long-term
taxable mutual funds as classified and calculated by Lipper Inc.
You cannot invest directly in an index.
The Standard & Poor’s (S&P) 500 Index is an unmanaged index of 500
stocks that is market-capitalization weighted and is generally
representative of the performance of larger companies in the U.S. You
cannot invest directly in an index.
