Blame the bloke in the street, funds managers say

By Chris Hutching

Thursday 20th April 2000

The international hype over dot.com shares has been driven mainly by individual investors rather than institutions, according to John Storkerson, the senior vice-president of the fourth-largest US funds manager, Putnam Investments.

He said funds managers were generally seeking value in the wealth-generating parts of the so-called new economy involving technology "engine stocks" rather than dot.com speculative ventures.

"It's a bit like when you look back on the gold mining booms of the late 19th century. The people who really made the wealth were those who made jeans, picks and shovels, railroads and the like. Only a tiny minority of miners struck it rich."

Mr Storkerson was visiting New Zealand with members of Sydney-based Rothschild Australia Asset Management to promote a new relationship to financial advisers here. Rothschild has an agent in Auckland and the funds management team makes regular trips to this country to meet and talk with financial planners and advisers.

Mr Storkerson outlined how Putnam, with $415 billion of funds under management, would be managing international share investments for Rothschild's clients from now on. Rothschild would continue to use its own managers for Australian and New Zealand equities, bonds and fixed interest investments.

The technology companies that funds managers like Putnam were evaluating were those that provided business-to-business services such as internet connectors, web page makers and PC manufacturers rather than retailers or companies promoting intellectual property at inflated values, he said.

"We're concentrating on companies with tangible assets and values. In these volatile times investors often sell good firms along with the bad and that can provide us with good buying opportunities.

"We haven't had a real correction since 1987 so I think this will open up new opportunities for long-term investors. It's a time to be patient and be rational."

Mr Storkerson said the perceived overvaluation of the US market should also be viewed in the context of a low inflationary environment and earnings growth of 20% each year over the past two years.

While the Nasdaq index of technology stocks was a barometer that global investors were focusing on it was important to remember the US economy was much more than just the Nasdaq. During volatile times it was important to diversify as much as possible and the new relationship between Rothschild and Putnam would provide investors with greater diversification, he said.

Funds managers were looking to Europe for new investment opportunities as traditional companies transformed themselves with the help of technology. Pricing barriers were falling under the EU regime.

"How long can you have a situation where the same pair of jeans costs $50 in Paris and $35 in Milan. Not long, I suggest."

Big companies like Philips and Mannesmann had taken the leap by investing in technology, often establishing bases offshore to reduce costs.

The Rothschild roadshow team unveiled the new Rothschild Discovery Funds - a suite of international multi-style retail and wholesale investment products which Putnam will manage.

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