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Mutual Fund Mavens, Part I

Mutual Fund Mavens, Part I

While most investors have heard of the largest mutual fund companies such as Vanguard, T. Rowe Price, Franklin Templeton, etc, few know the story behind each institution. Many of the men who started these now famous and well-known companies were typically introducing an idea which at that time changed the way the mutual fund industry operated and essentially created the vast investment services industry we enjoy today.

Thomas Rowe Price, Jr – T. Rowe Price Investment Services

Apparently, Thomas Rowe Price, Jr. originally intended on being a chemist—he obtained his degree in Chemistry in 1919 before deciding to switch gears and enter the financial services industry. Price was born in 1898 and endured the Great Depression as a grown man, which left a lasting impact on his investment philosophy. While the stock market in the pre-Great Depression days was typically seen as a machine for speculation, Price conceived his notion of disciplined, long-term, individual stock-picking based on fundamental analysis and went on to launch his own investment firm in 1937 in Baltimore, Maryland. His firm, T. Rowe Price Associates, was ahead of its time in charging clients a fee based on assets under management rather than trading commissions. Price was a pioneer of growth stock investing and analysis, including launching his first mutual fund, the T. Rowe Price Growth Stock Fund, in 1950. Price stayed active in managing his firm, remaining as the company’s CEO through most of the 1960s, until selling the firm in the early 70s. The company, now a $15 billion publicly traded firm, has over $500 billion under management and is a lasting legacy to T. Rowe Price’s vision of long-term, research based investing.

Quote: “No one can see ahead three years, let alone five or ten. Competition, new inventions – all kinds of things – can change the situation in twelve months.”

Sir John Templeton – Franklin Templeton

Coincidentally, Sir John Templeton began his career on Wall Street in the same year Price started his new firm. Templeton had taken a slightly different route; born in Tennessee in 1912, he attended Yale University and obtained his degree in economics while graduating as the top student in his class. He became a Rhodes Scholar and graduated with a Master’s degree in Law from Oxford University in 1936. Upon returning to the US, he worked for a short time at a predecessor firm to Merrill Lynch. Even at a young age, Templeton also knew a good bargain when he saw one— as war began in Europe in 1939, Templeton purchased shares of 104 companies whose stocks were each trading for less than one dollar and within four years allegedly turned a profit of approximately 300%! Templeton entered the mutual fund industry by launching the Templeton Growth Fund in 1954. He sold his stake in his original firm in 1962, but continued to launch some of the most successful and largest mutual funds in the world over the ensuing decades. While born in the United States, Templeton became a naturalized British citizen and lived in the Bahamas; due to his philanthropic efforts, Queen Elizabeth II bestowed upon him the rank of Knight Bachelor. Templeton eventually sold his Templeton funds to the Franklin Group in 1992, thus creating one of the largest mutual fund companies in the world.

Quote: “If you want to have a better performance than the crowd, you must do things differently from the crowd.”

Both of these men changed the way investing was done at the time and have influenced the mutual fund industry for the better. Check out Part II of this series to learn how John Bogle turned the investing world upside-down.

 

 

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