MutualFundWire.com: Never Bet Against a Good Fund Manager

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Thursday, July 5, 2001

Never Bet Against a Good Fund Manager

Did Bank of America overpay for Marsico Capital Management? That is the insinuation made in today's Wall Street Journal. The paper's fund column lauds the market-timing skill of Tom Marsico, who managed to sell half of his eponymous firm to the bank for $950 million. Bank of America had purchased half of the firm for $150 million at its founding in 1997.

Marsico opened talks with Bank of America executives to sell his remaining stake in the firm in February 2000, reports the paper. That happens to be the same time that the Nasdaq was peaking. The deal was not closed until last June, well after the index peaked, but before many investors lost their confidence that the market would rebound.

At the time, the seemingly outrageous price of the deal -- 12.6 percent of assets -- caused tongues to wag throughout the fund industry. The bad news for Bank of America is that the deal looks even more expensive a year later.

Marsico commanded the premium price since it was one of the hottest firms in the industry, and had gathered its $15 billion in assets faster than any firm in history. Tom Marsico was also riding his reputation as the hot stock picker behind the success of Janus Funds. Now it looks like Marsico made a good call.

The firms $15 billion in assets a year ago have shrunk to $14 billion. At its peak it had $17 billion in assets The firm's lead fund is down 23 percent in the year after the deal, after gaining more than 50 percent each of the prior two years.

Altogether, Marsico either manages or subadvises on 19 funds.

Tom Marsico told the paper that at the time he approached the bank, he was considering buying back the half the firm he did not own. One problem is that the bank was failing to deliver high-net-worth clients for the firms managed accounts.

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