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October 01, 2002 at 04:00 AM
Prescott B. Crocker manages Evergreen High-Yield Bond and is a senior vice president with Evergreen Keystone Funds, his employer since 1997. Prior to Keystone, he was director of fixed-income investments with Boston Security Counsellors. Previously, he spent 18 years with Colonial Management Associates, where he served as a vice president. He also spent five years as an investment banker at Advest Co. and two years in international banking at the Bank of New England. Crocker earned his Chartered Financial Analyst designation in 1982.
A veteran junk bond manager, Crocker’s forward-looking investment style has delivered consistent above-par returns. His reflections on a life lived in the junkyard are worth considering as well. In the last great crisis for junk bonds, Crocker played an unusual role on the Milken stage as the government’s primary witness for the state against the king of junk’s mountain. His numbers tell the tale of his abilities, but you have to go to Crocker to get his story right.
What attracted you to the money management business and the high-yield market, and kept you there all this time? You’re talking with the oldest living high-yield manager in America. Actually there probably is one older, longer-reigning fellow, but his son is really running Northeast Investors Trust for him. I got into money management in 1975. I had previously been an investor banker with Advest. Prior to that I was working as a banker with Bank of New England, which is the predecessor bank to Fleet.
A bank that succumbed to its own junk? Yes. It was 1975, tough times in the stock market, and I saw this mutual fund company called Colonial Group Inc., which I subsequently became an LBO investor in. It was a very timely decision. They were in a state of crisis because Con Edison, a major holding in their big bond fund, had crashed by missing its dividend. They discovered they never understood how to read balance sheets.
But that was ’75, way back before people read anything other than Moody’s and Standard & Poor’s. I showed up as an analyst with a long record of lending money to companies or putting together private placements to long-term lenders in the insurance area, for companies. So voil?, they had, as I used to say, someone to fire the next time they had a bankruptcy.
I started out at the bottom at a fairly ripe age. I think I was 35. They had at the time a big fund for them; a $300 million mutual fund. That was the Colonial Income Fund. A fellow and I, who was really I guess my boss, convinced the company that high yield should be a good place to go. So we converted an existing $42 million convertible fund into a high-yield fund in 1980. We raised it up to about $870 million when I left Colonial in 1997; by that time I had become the bond department at Colonial. I was a founder, and I started a lot of funds. One was the strategic income fund concept. And the other one was the government plus fund concept.
As in equities, so in bonds; managers make the difference-positively or negatively. Yes. I joined here February 1st of 1997; the Sentinel fund was created June 30, 1997. Evergreen was known as Keystone, and was acquired basically coincidentally with me coming on board. Anyway, they needed new breadth in high yield.
The Sentinel fund was basically a competition that they let out to myself and several others, including Eaton Vance. It was the only competition I’ve ever won where I didn’t apply to get into it; instead, they called me.
Tell us about your investment style. It’s an intensive team effort. I have a zest for investment, and these kids here are enlightened and excited that somebody can frequently prove to them that the game can be beaten. We’re interactive. I tell them their bonus ownership on a yearly basis of our potential is equal to three times the average investor’s position in our fund.
Whether they own them or not in their 401(k) program, they’re all aware that they really own the fund and it’s their money they’re dealing with.
