Defending the Family Name With Strong Returns
Sunday, June 17, 2007
NEW YORK -- As a child, Craig Hodges watched his father work and delighted in how easy it seemed to be a professional money manager.
"As a 10-year-old, I can remember telling my mom, 'Dad didn't work -- he talked on the phone all the day,' " Hodges said, recalling one of his first trips to his father's office. "I thought work was actually having to do manual labor."
Having now toiled alongside his father, Don, for 21 years, in part as co-portfolio manager of the Hodges Fund, Craig isn't so quick to dismiss the heavy lifting it takes to run a mutual fund and oversee other investment portfolios.
"I've come to realize he's an amazing stock picker," Craig, 43, said of his father.
Parent-and-child investment teams might appear to be quaint throwbacks to a time when taking over the family business was expected, but those who make a family business of managing money can often point to the numbers to quiet doubters.
The Hodges fund, for example, is up 12.37 percent this year and has a 24.08 percent three-year and a 23.66 percent five-year annualized return.
Jeff Tjornehoj, an analyst at fund-tracker Lipper, noted that family members who run mutual funds can share a desire to guard their name with good performance.
"When the child grows up and learns at their parent's feet, they definitely feel a sense of responsibility to maintain the quality and consistency of returns. There's a bit more pressure out there," he said.
That pressure is probably enormous for some well-known family names.
Fidelity Investments, the nation's largest fund manager, is controlled by the Johnson family. Edward C. "Ned" Johnson III took over for his father in 1972 and has spent decades of his 50 years at the company as chief executive and chairman. His daughter, Abigail, who also works at the company, is often mentioned in discussions about succession.
Years of nose-pressed-to-the-window experience observing their parents and dinnertime discussions about investments can persuade children of mutual fund managers to follow their parents into the business.
Craig Hodges was hooked early. His father had given him and his brother and sister stocks in companies whose businesses often intersect with childhood -- in their cases, McDonald's and Dr Pepper.