Is Ryan Jacob Good or Just Lucky? We Run the Numbers

Wall Street has never had a reputation for embracing upstarts. And for Ryan Jacob, the 29-year-old former manager of the (WWWFX)Internet fund, success has been bittersweet.

Not only did his fund's soaring performance inadvertently sour a deal to sell the fund's adviser, Kinetics Asset Management, to Lepercq de Neuflize, but his relative inexperience and oversize returns have drawn the scorn of some industry watchers.

More than a few have chalked up Jacob's success to dumb luck, pointing to the unprecedented gains in Internet stocks in 1998 and during the first four months of this year.

As Boston Globe mutual fund columnist Charles Jaffe put it, "Any fund whose mandate was Internet stocks would have done pretty well over the last 18 months, whether run by Jacob or a trained seal."

Arf, arf. Interesting point. But is it true?

TheStreet.com, with the assistance of Morningstar and Baseline, examined the portfolio Jacob inherited when he started at the fund in December 1997. (For a list of the stocks in that portfolio, click here.) We then calculated its hypothetical returns for the 18-month period ended June 30, assuming the portfolio remained unchanged. Those results were compared with the actual Internet fund returns Jacob generated during the same period.

The result: Jacob 1, Trained Seal 0.

Yes, the Internet fund would have done just fine without Jacob. If he hadn't touched the portfolio, the fund would have returned 422% for the 18 months ended June 30. But the Internet fund's actual returns were 530% with Jacob at its helm. If a trained seal could produce those 100-plus percentage points of additional return, someone should hire it.

Kinetics is challenging -- at least to the press -- Jacob's use of his Internet fund record in filings for his soon-to-be-launched venture, the Jacob Internet fund.

"This was not a one-man show," Steven Samson, who left Chase Manhattan's (CMB) asset-management arm to become Kinetic's president and chief executive, told TheStreet.com in late July. "There was a lot of teamwork that went into the fund."

Despite an Internet fund securities filing that stated Jacob was "primarily responsible for the day-to-day management of the fund's assets and securities" since December 1997, Samson said Jacob was something less than fully in charge during that period.

"He never had a full [calendar] year where he had discretion over the fund," Samson said. "He did not have discretion until March of 1998. And [he was] taken off the fund no later than June 24" of this year.

Jacob concedes that he didn't have much influence over the fund during the closing days of 1997. "How much can you really do between then and the end of the year?" he asks. And he admits the Dec. 31, 1997, portfolio was not built by him. (He credits Frank Alexander, his predecessor as portfolio manager.)

But he said Wednesday that when he was at the fund, he ran its money.

"I had full discretion. As a matter of fact, I was the only one there," says Jacob. "So unless the team was hiding under the desk, I wasn't aware of it."

Such disputes are not new in the mutual fund industry. While fund managers are allowed to tout their resumes and past records in securities filings, the National Association of Securities Dealers prohibits them from doing so in advertisements.

As of Wednesday, Jacob said he hadn't been contacted by Kinetics or the Securities and Exchange Commission regarding Kinetics' threatened challenge to the use of his Internet fund record in promoting his new fund.

"Everything's moved along very smoothly," he said Wednesday. His new fund is expected to be launched around Labor Day.

Samson did not return a phone call Wednesday inquiring about the challenge. But he has another kind of record to worry about now: the Internet fund's performance since Jacob left.

From June 30, around the time Jacob left, until last Thursday the Internet fund showed a negative 20.5% return. That's the worst record of the four established Internet funds tracked by Lipper during that period.

Without a Net How Internet mutual funds fared in percentage terms during the recent selloff
Fund	June 30-Aug. 5 Return
(WWIFX)WWW Internet	-12.2
(MFITX)Monument Internet	-15.86
(MNNAX)Munder NetNet	-15.87
(WWWFX)Internet fund	-20.5
TheStreet.com Internet Sector index	-16.7
Source: Lipper

The Internet fund's last-place performance during the recent selloff is in contrast to its leading position among Internet funds during the third-quarter selloff in 1998. And it was the second best-performing Internet-focused fund during the six weeks after Internet stocks started selling off in April.

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