At Morningstar Conference, DeVaulx Lauds Japanese Opportunities

DeVaulx was only one member of a high-powered panel of money managers at the Friday, June 25, opening general session at the 22d annual Morningstar conference who had left large, high-profile asset management firms to start their own firms. Moderated by Karen Dolan, Morningstar’s director of mutual fund research, the select group included London-based Hassan Elmasry, formerly of Morgan Stanley and now at Independent Franchise Partners, and David Corkins, former manager of the Janus Fund who, with a dozen or so other ex-Janusites, founded Arrowpoint Partners.

The theme of the panel was “Old Wine in New Skins,” and focused on how these three money managers made the transition from large, multibillion-dollar mutual funds to boutique-like asset management firms, though the three men’s ability to raise large piles of assets for their new ventures puts the lie to that thesis.

The star was clearly DeVaulx to this audience of advisors, however, which was most evident when the first question from the audience was directed to DeVaulx from an advisor who politely demanded to know what the benefit was to shareholders when a high-profile manager leaves one fund for another (the benefits to the manager are rather clear) and might have to spend more time raising assets than investing.

DeVaulx answered by saying that he had wanted to close the First Eagle SoGen fund much earlier than it was. While he was spending “30% of my time on the road, which was no more time than I did in 2005 or ’06, when Jean-Marie said in 2001 that he would retire in ’04, I spent a lot of time reassuring you guys,” so DeVaulx was on the road for much of that time as well.

Then he asked rhetorically, “Why do you buy any fund? Was it the track record, was it because the fund was nimble, was it because you wanted a strategy that could be imitated by others? That’s why I have a co-manager who’s in the office while I’m on the road.”

Another advisor asked whether these value managers saw any specific technology companies with long-term potential for growth. Elmasry, who has only 30 stocks in his (non-mutual fund so far) portfolio and shies away from high turnover, answered that he had concerns about Microsoft over the next 10 years.

“Will you need desktop PCs then?” Elmasry wondered. “Will you be willing to pay more money for the applications that they try to force down your throat? I mean, how complex do you need your word processing software to be?” He concluded that in the short term MSFT would do well, “but we don’t think long-term that Microsoft’s a buy-and hold stock for us.”