Franklin Resources Inc, the fifth-biggest US mutual fund company, said Michael Price will step down as chairman and director of Franklin Mutual Advisers LLC, the group he sold to Franklin five years ago.
Three other investment professionals are also leaving: Robert Friedman, who was the chief investment officer; Raymond Garea, portfolio manager of the financial services fund and Jeffrey Altman, an analyst involved in distressed and bankrupt companies.
Garea and Altman are both starting hedge funds and Friedman has not yet disclosed what he is doing, said Franklin executives.
When Price, 49, sold Heine Securities Corp to Franklin in November 1996 for about US$616 million -- plus almost US$200 million more if the group met certain revenue targets -- he agreed to be involved in managing money for at least two years and to remain part of the company for five years. He also signed a non-compete agreement that keeps him out of the mutual fund business for 15 years. Garea, Altman and Friedman all signed five-year employment contracts that end in September.
"Their contracts are up so they are doing what they intended to do, which is to enjoy their wealth," said Geoff Bobroff, a money management industry consultant based in East Greenwich, Rhode Island. "The good news for investors is that it is happening at a time when the market is behind them."
Price is a well-known value investor, looking for stocks that are inexpensive relative to the market and their earnings. For the latter half of the 1990s, these shares lagged the benchmark indexes, as investors piled into computer and other high-technology companies, many of which were expensive given that the businesses weren't profitable.
The flagship Mutual Shares Fund, with US$8.3 billion in assets, lagged the Standard & Poor's 500 Index from 1995 through 1999. Last year, however, it returned 13.8 percent, compared with a loss of 9 percent for the S&P 500. So far this year, the fund, has climbed 11.9 percent, compared with a drop of 8 percent in the S&P. The Mutual Beacon and Mutual Qualified funds, each with about US$4 billion in assets, posted similar returns.
In the decade before Price sold to Franklin, his four Mutual Series funds ranked in the top 10 percent of all stock funds. The group now runs six funds.
Price, who is worth an estimated US$880 million according to Forbes magazine, has been managing his own money under the name MFP Investors LLC since he stepped down from day-to-day management in 1998. He plays polo and is a philanthropist -- his most publicized gift was an US$18 million donation to the University of Oklahoma's business school in 1997.
At the end of the first quarter, MFP Investors owned US$275 million worth of stock in 65 companies, including publisher Harcourt General Inc and automotive parts retailer AutoZone Inc, according to Securities and Exchange Commission filings.
Franklin's funds are sold through intermediaries, and financial advisers said they will be talking with the fund company about the changes to ensure they can continue to recommend the funds to their clients.
"The departures deserve our attention and we'll be talking with them to ensure the depth of management is in place," said Tim Medley, president of Medley & Brown, a financial advisory firm based in Jackson, Mississippi, who said he already has a chat planned with Franklin executives next week.
RSS