Forex Media News Station

2011/08/11

Philip Carret, A Pioneer Of Fund Gains

By JAMES DETAR, INVESTOR'S BUSINESS DAILY
Posted 02:01 PM ET
http://www.investors.com/NewsAndAnalysis/Article/580997/201108101401/Philip-Carret-A-Pioneer-Of-Fund-Gains.aspx

It's probably not easy to impress the megawealthy Warren Buffett.

Philip Carret was an exception.

Buffett looked to Carret as a role model, comparing his fellow investor and longtime friend to one of baseball's all-time greats.

He called him "the Lou Gehrig of investing" and said Carret had the "best long-term investment record of anyone I know."

Carret created the Pioneer Fund, one of the first stock mutual funds, in 1928 with $25,000 from friends and family. Today the global firm, called Pioneer Investments, manages a number of funds that total $250 billion in assets.

The Pioneer Fund, itself with $6 billion in assets, recently reached a rich milestone. It's had a cumulative return of 1,000,000% from its founding through Dec. 31. A dollar invested in 1928 would be worth more than $1 million today.

Carret (1896-1998) was born in Lynn, Mass., and was the only child of a lawyer father and social-worker mother. Although his Harvard-trained dad had a good income, Carret recalled his parents weren't very adept at managing money.

In "A Money Mind at 90"— a book he wrote at 90 years old — he said when he was 16 he saw that "If I were ever to gain wealth, it would have to be by my own efforts."

Head Game

Carret believed that a person could learn to manage money well while developing a "money mind."

Although his parents didn't seem to possess much of this quality, he saw it in his grandfather Joseph, who Carret jokingly said found his fortune in "the thriving little metropolis of New York City."

Twenty years after Joseph began working, he had put aside enough capital to buy a sugar plantation in Cuba. He spent the rest of his life there. In good years, Carret wrote, the plantation yielded $25,000, "a princely sum at the time."

Carret thought science might be his path to wealth. So, he took the entrance exam to Harvard, was admitted at 16 and earned a bachelor's degree in chemistry.

An avid reader, he excelled at Harvard. He was socially shy, but he made some good friends while there. As for social clubs, he turned one down when it asked him to do something he found anathema — "that I ditch my Jewish roommate. To reach a decision took no time at all. Until we graduated, David and I roomed together in harmony and friendship."

After college he joined the Army Signal Corps — a forerunner to the Air Force — and learned to fly a Sopwith Camel.

With World War I raging in Europe, the Army sent him to France; the war ended in 1918 before he saw combat.

Leaving the service, he got a job as a reporter for Barron's weekly business newspaper. And in 1924 he began investing money for family and friends who saw that he had a knack for finding winning stocks.

He learned how to pick and hold stocks by reading about and studying the market, says Pioneer Fund manager John Carey, who took the reins from Carret 25 years ago.

"Phil read a great deal. He read history and political works and economic works. He kept up with the news," Carey told IBD. "If you went to his office, you would see piles of reading material."

One thing Carret learned early in his reading was how to advance by doing the straightforward.

"He read a book called 'Obvious Adams,' about an advertising agent who made his living advertising the obvious," said Carey. "For example, the agent was hired by a brown sugar company to promote its product. He went to stores and found brown sugar didn't come in a brown box. He told the company to switch to brown boxes, and their sales doubled in a year and then tripled the next year."

Bliss

Carret wrote that a cornerstone of his success was his lifelong partnership with his wife, Betty: "In the most important aspect of my life — marriage and family — I was exceptionally fortunate. Almost from the day I met Betty — in November 1920 — until the day of her death 65 years later, we enjoyed a supremely happy relationship."

He also drew strength from his friendship with the Rev. Norman Vincent Peale, author of "The Power of Positive Thinking."

That best-seller "encapsulates Phil Carret's approach to investing," Carey said. "He was always open and looking for opportunity.

"Phil once said, 'There's never been a great fortune built in the U.S. by a bet on catastrophe.' He was thinking about Thomas Edison and J.D. Rockefeller and people who built enterprises and employed people, making goods that were useful to people."

Carret himself inspired many other people. Among them was Jack Kenney, former CEO of Western Reserve Life Assurance, now part of Aegon.

Kenney worked alongside Carret in the 1960s and '70s. They paired stock funds and insurance policies to create hybrid investments.

"He had what I would call the greatest integrity of any person I've met," Kenney said. "He inspired me. I started my own mutual fund in '85 and tried to emulate the way he managed money."

Carret's investing strategy involved buying high-quality, underpriced stocks and holding them for the long term.

Carret's love of learning helped him acquire a deep understanding of markets, said Kenney: "He was an amazing individual. Often we at Western Life would look at a stock and we didn't think much of it, but he did. In most cases it turned out to be a winner."

In 1963, Carret sold Pioneer and founded Carret & Co. (now Brean Murray, Carret & Co.), an investment portfolio manager. In 1988, he sold his stake in Carret & Co., but continued to work there three days a week without salary. He also remained on Pioneer's board until his 100th birthday in 1996. In the preface to "Money Mind" he said, "If I've contributed even an infinitesimal bit to the welfare of society, my life has not been in vain."

Carret began celebrating his 100th birthday when he was 90. By the time he reached the century mark, he'd had several birthday parties to mark the occasion.

For his 100th, he appeared on TV's "Today" show.

According to Kenney, Carret told the show's host: "I attribute my longevity to three things. No. 1, I eat my meat very rare. Two, I drink my bourbon very strong. Three, if I get the urge to exercise, I lie down."

Carret died two years later, soon before his 102nd birthday.

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