John Neff was born and educated in Ohio. His first venture into investing was as an analyst at a bank in Cleveland. This basic training, and I assume some success in stock selection, gave him the desire to apply those skills with a bit more freedom than allowed under the prudent man rules of a bank trust department. It just so happened that a little mutual fund company was in need of an individual to revive a fund with a not so great record of performance. That little company was the Wellington Management Company. The year was 1964, and the fund was the Windsor Fund, with total assets of $75 million. When Neff retired 31 years later, the fund had total assets of $13.7 billion, one of the largest in the country.
Over those 31 years, the Windsor fund outperformed the S&P 500 for 23 of the years. The average rate of return was 13.7% versus the 10.6% average for the index. If one had invested $10,000 in the Windsor Fund under Mr. Neff’s management and held onto it for those 31 years, he or she would have turned that investment into $537,271. The same investment in the index would have grown to $227,200. Those results place Neff into the legend category of money managers.
Good performance created the legend, but his common sense and sincere approach to managing a portfolio for individual investors is what drew him into my circle of influencers. In an interview conducted by Bill Griffeth on June 15th, 1994, reprinted in Mr. Griffeths’ book, The Mutual Fund Masters, Mr. Neff was asked if he changed his style of management when the Windsor fund switched from load to no-load status. Here is his reply:
No. No, we’ve always managed the fund for shareholders, and I don’t mean to say that other people don’t. We’ve always felt we represented a shareholder who obviously wanted to make a nickel, but he also didn’t want to lose his tail or expose himself inordinately. We try to manage for somebody who wants to stick his neck out a bit and take a risk and kind of grind it out the hard way. But he also doesn’t want to get killed by an unfortunate turn of events.
In the same interview a discussion came up about how he managed his own funds. This may not be important to everyone, but if you are turning your funds over to someone to make the day to day decisions on your savings, knowing the answer to this question doesn’t hurt. Here are a few words from Mr. Neff on the subject:
Also, I don’t own anything that’s not owned by the funds. You might say that sounds kind of crazy, but the thought there is that essentially my time belongs to the fund. And you know that as cheap as I am I wouldn’t buy anything myself unless I spent some time on it. And that time belongs to the fund.
John Neff retired from the day to day management of the Windsor in 1995. A few years later his book, John Neff on Investing, was published. From the book:
Windsor was never fancy, fad-driven, or resigned to market performance. We followed one durable investment style whether the market was up, down, or indifferent. These were its principal elements:
-Low price-earnings (p/e) ratio.
-Fundamental growth in excess of 7 percent.
-Yield protection (and enhancement, in most cases).
-Superior relationship of total return to p/e paid.
-No cyclical exposure without compensating p/e multiple.
-Solid companies in growing fields.
-Strong fundamental case.
Until next time,