Meet the Family
Dresdner RCM Global Funds
Assets Under Management: $51 billion
Percentile Rank of Average Fund Over Three Years: Top 22.5%
Family's Top Three Stock Holdings: Cisco , General Electric , Pfizer
Meet the Family Q&A: Dresdner RCM Biotechnology and Dresdner RCM Global Healthcare skipper Faraz Naqvi
Web site: www.dresdnerrcm.com
Phone: 1-800-726- 7240
Source: Dresdner, bigdough.com
If you were ever the new kid in school, you probably remember trying to fit yourself into the place as soon as you could, so you'd no longer be just an anonymous face in the crowd. That holds true for fund families, as well.
So it is with
, which, after less than two years on the mutual fund scene, claims one of the year's best performers as its own. Its white-hot
Biotechnology fund rode the strength of the sector for a 111.6% year-to-date return (see
interview with portfolio manager
Faraz Naqvi). The fund is on track to repeat last year's triple-digit performance, which would put it in the
Century Club for the second year in a row.
A related offering with the same manager,
Global Health Care is no slouch either, with year-to-date gains of 79.2%.
The stellar performance of the two sector funds has been a boon for the funds' San Francisco-based parent, which is trying to make its mark as a newcomer to retail mutual funds. Dresdner RCM took in $1.3 billion in net flows through September, according to
Financial Research Corp.
The big question for the fund firm is: Now that the firm's on the map, will the market conditions that benefited Dresdner's approach for high-octane growth and rapid turnover continue?
Dresdner RCM was founded in 1970 as
Rosenberg Capital Management
, which was acquired by Germany's
several years ago. For most of its history, the firm has catered to institutional investors. It introduced its first institutional fund back in 1979; it wasn't until 1995 that it made a fund (
Global Technology) available on the retail side. Finally, in 1999, Dresdner RCM opened up eight funds to retail investors.
"We were admittedly late to the mutual fund business," senior managing director Joseph Rusbarsky said.
While retail funds account for only about $3 billion of the company's estimated $51 billion under management in the U.S., they've contributed about half of revenue growth so far in 2000.
Though Dresdner's biotech and health care funds have grabbed the lion's share of attention, it's
debatable whether they can keep up their turbo-charged returns after biotech's wild run. In any case, Dresdner has a handful of other funds that are worth checking out.
The pick of the bunch is
Global Technology. The retail version of the fund has ranked second in its category over the past year, and the institutional version -- which has a longer track record -- ranked second over the past three years. This year, Global Tech was up 14.4% through the end of October, a return 23.3% higher than the average tech fund. Portfolio manager Walter Price attributed those gains to diversification: In the first quarter, the fund benefited from Internet picks; in the second quarter, from semiconductors; and in the third, from communications stocks.
MidCap fund, which opens up to retail investors Dec. 31, can also claim a rock-solid performance this year. It gained 21.4% through October, 14.7% over its average peer. The fund was helped along by a decision to cut back on TMT (technology, media and telecommunications) holdings early in the year. Throughout the second and third quarters, it got a boost from selective picks in software (
), semiconductors (
) and pharmaceuticals and biotech (
Global Small Cap, though it's slightly in the red for the year to date, ranked third and second in its category over one- and three-year periods.
Dresdner also has its laggards, though.
International Growth, ranked in the bottom 96th percentile among its peers for the year to date, was hurt early on when it didn't shift out of Internet and telecom stocks. Its long-term record looks better. The institutional version of the fund -- old enough to have a three-year track record -- ranked in the top third among its peers for that period.
Dresdner's three other overseas funds are also all in the red. This year through October, most have kept pace within a few points of their peers, performing neither much worse nor much better. But it's worth noting that a couple have better long-term records, including Global Small Cap, mentioned above, and
Europe, which ranks in the 5th percentile for its three-year performance.
Emerging Markets isn't old enough to have a three-year record.
Dresdner's 10 retail funds are no-load. They generally have reasonable operating expenses, with an average of 1.34 compared with the 1.38 average for all funds. (A
analysis knocked Global Technology for charging 1.75% in operating expenses, but that's only slightly above the average tech fund's expenses of 1.68%).
For beginning investors, Dresdner funds' minimum investment of $5,000 may be a sticking point. Many fund families require minimum investments of only $2,500.
On the plus side, most of the funds have relatively small asset bases -- the biggest is the MidCap fund, with assets of $1.4 billion -- so they have a lot of flexibility to move in and out of positions.
A few of the funds also boast former industry players as managers, which may interest those who subscribe to
school of stock-picking -- that people who know the industry from the inside can do a better job figuring out which companies are for real. In biotech, Faraz Naqvi and co-manager Camilo Martinez have medical degrees, as does Michael Dauchot, co-manager of Global Health Care. Global Technology co-manager Huachen Chen was once an engineer at
Analysts work within global sectors. According to senior managing director Joseph Rusbarsky, they seek out high-quality companies (those that will hold up in a downturn and have good management) with strong growth characteristics. Valuation is part of the equation, but not a big concern. As a division of Germany's
, Dresdner RCM also draws on research from more than 50 analysts stationed overseas.
In a slightly unorthodox twist, Dresdner sometimes calls on
independent reporters who do research to order. For example, the International Growth fund asked on-the-ground reporters to research the supply-chain systems for food and household goods in Europe. It turned out that all 35 of those surveyed were trying to improve their warehousing and delivery systems, which offered supporting evidence for the fund's consumer-staples investment theme.
But this year, at least, those kinds of research capabilities haven't much helped either International Growth or Dresdner's other international offerings. For the near-term, it's the fund family's sector funds that are likely to stay in the spotlight. And keep an eye on Global Tech.