Burnham fund beats financial rivals

American Express Co -- forget it. Anton Schutz, who manages the US$32 million Burnham Financial Services Fund, isn't buying the stock. He's steering clear of credit card and consumer finance companies.

"We've seen a tremendous amount of layoffs," he said.

"What we haven't seen yet is a sharp rise in bankruptcies. I suspect that's the next shoe to drop." Schutz last year avoided syndicated bank lenders such as JP Morgan Chase & Co and Bank One Corp, which helped his fund outperform its benchmarks. In 2000, Burnham Financial Services returned 52.8 percent, surpassing the 17.7 percent return of the Nasdaq Bank Index and the 13.6 percent return from the NASDAQ 100 Financial Index.

The fund has gained 28.6 percent this year through Thursday, making it the top performer among 108 financial sector funds tra cked by Bloomberg. The 608-member NASDAQ Bank Index has returned 13.2 percent this year.

He started Mendor, a hedge fund company, after spending 10 years with Chase Manhattan Corp, working with customers to hedge their exposure to risk through derivatives, financial instruments whose values are determined by other assets. Chase merged with JP Morgan & Co in December to become JP Morgan Chase & Co.

Schutz focuses on companies with market values of less than US$8 billion. The fund owns lesser-known financial companies such as Finger Lakes Bancorp Inc, a Geneva, New York, bank with seven branches, Annaly Mortgage Management Inc., a real estate investment trust that buys mortgages, and Pamrapo Bancorp Inc, a Bayonne, New Jersey, bank with 11 branches. He has recently been buying shares of JP Morgan, Mellon Financial Corp, Bank of New York Co and PNC Financial Services Group. He even picked up some stock in Merrill Lynch & Co.

JP Morgan has fallen 4.8 percent this year, Mellon is off 21 percent and Bank of New York is down 18 percent. Merrill is down 17 percent. Schutz said financially sensitive stocks will be among the first to bounce back when the capital markets recover.