Pioneer Capital Growth
manager Warren Isabelle has landed at
as their new chief investment officer.
Isabelle stunned insiders at Pioneer Group last Thursday when he up and quit on the spot, just before the Boston fund company was preparing to host a gathering of its wholesalers.
Isabelle said in an interview he had talked on and off with Keystone owner
First Union Corp.
for several years before deciding to leave Pioneer and his $2.2 billion fund behind.
The reason behind his departure: disagreement over how to handle the flow of cash streaming into Capital Growth (PCGRX). Isabelle said he asked Pioneer more than a year ago to close the fund because it was hard to put so much money to work in smaller stocks. Pioneer executives declined, he said, but shortly after they offered him a chance to start an entirely new small company fund. That fund, which quickly piled up $500 million in assets, has since been closed off to new investors.
Previous talks between Isabelle and Charlotte-based First Union had stalled in the past, in part because he did not want to move. "They didn't know what to do with me, quite honestly,'' he said. Then First Union's acquisition of Boston-based Keystone last year created a new opportunity.
Isabelle's move is a coup for for Keystone, a fund family whose performance has been lackluster at best over the last several years. (Keystone's sale to First Union was discussed in a November 11
Isabelle has had other suitors closer to home in the past and he chose to stay at Pioneer. Probably the best lead came two years ago from
, two blocks away from Pioneer's headquarters.
Putnam needed to find a successor for its best-known fund manager, Matt Weatherbie, who left to start his own small shop in Boston,
M.A. Weatherbie & Co.
It had talked to several people, including
Beth Terrana, and eventually hired Keystone's Roland Gillis. But Isabelle was a viable choice and Pioneer went to lengths to keep him from walking out the door.
Around that time, Isabelle began taking on broader investment management duties and later became director of research. That was one job Isabelle handed back to Pioneer's top investment executive, David Tripple, last fall.
Isabelle also had given up management of the new small company fund, launched in November 1995, several weeks ago.
There was a good reason why Pioneer wanted to keep Isabelle in the fold and leave Capital Growth open to new customers. He was the company's only five-star stock picker and managed one of Pioneer's few products that could stand out in a market obsessed with growth funds. (the larger Pioneer and Pioneer II funds, both value funds, still have more assets and make much more money for the company.)
Pioneer makes a point of being a value-oriented investment shop and even came up with the somewhat tortured phrase "aggressive value'' to describe Isabelle's style. But Capital Growth is always stacked up against other growth funds.
Isabelle bought transition companies, pummeled cylicals and startups. If he was working at his desk instead of cleaning it out last Friday, Isabelle would have been one of the few "growth" mutual fund managers in America uninjured by the
He was big on retailers, keeping
K mart, Woolworth, Toys R Us and Fingerhut
among his top 10 holdings. He also took sizable positions in insurance businesses like
20th Century Industries
But he also got hammered last summer with all the momentum growth funds, despite the different portfolio, and suffered through Capital Growth's first disappointing year since its inception in 1990. The fund, which still ranks 17th in a 254-fund field over five years, is lugging around bottom-decile one-year performance numbers, according to
Lipper Analytical Services
Isabelle's assistant, Rod Wright, took over Capital Growth this week. Wright has been working on the fund for a year and came to Pioneer three years ago from
Wright said Capital Growth shareholders aren't going to see any style changes. Ask Wright for a few of his stock calls that ended up in the Capital Growth portfolio and he points to specialty retailer
Cole National Corp.
and a beaten-up computer
"I'm not a Warren clone but we do think similarly,'' said Wright.
Steven Syre and Steve Bailey write a financial column for
The Boston Globe.
This column is exclusive to
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