The leaders of Omaha's 50-year-old, family-owned mutual fund say they are less bullish on U.S. stocks than they were a year ago.
“It would not surprise us if we had a mild correction,” said Ted Bridges, president of Bridges Investment Fund, formed by his father in 1963.
Returns at Bridges Investment Fund have about tracked the Standard & Poor's 500 Index in recent years. But Ted Bridges said the company's top holdings — Apple Inc. and MasterCard Inc. — have plenty of prospects for growth above and beyond that of the broader market.
Apple, Bridges said, is cheap at recent prices, and holds a mountain of cash. Shares of the computer and personal technology company make up 7 percent of the fund's holdings. MasterCard, he said, is positioned to grow with the acceleration in electronic payments; the company makes up 6 percent of holdings.
During the crash, the fund fell 41 percent from January 2007 through February 2009.
“The basic message was that this is no fun, but it is probably not permanent — our holdings are strong companies that should eventually recover and prosper,” Ted Bridges said.
Bridges is a small player in the large world of mutual funds, with $83 million of assets at the end of 2012. That is about $22 billion less than the largest ones with similar traits, such as the Fidelity Growth Company Fund, with a minimum investment of $2,500.
At Bridges, investors can still get in for $1,000.
“We wanted to have something for small investors,” said Edson Bridges, Ted's father.
Mutual funds are a form of passive investing, appealing to people who want to farm out stock selection and asset allocation to professionals, while still participating in the stock and bond markets.
Bridges has been on the Omaha investment scene since 1946. Edson Bridges' father, Marvin Bridges, started his investment business in Boston in 1945 after attending Harvard University's graduate business school. A lot of his clients were Omaha natives, and Bridges moved the company to Nebraska's largest city in 1946.
In 1959, Edson joined the company; he, too, had a master's degree in business administration from Harvard. Ted Bridges joined in the 1980s after graduating from Westside High, from Dartmouth College with an economics degree and from the University of Nebraska College of Law.
Returns over the years have been positive, with the attitude of avoiding shutouts, Ted Bridges said. Performance over the past one year, three years, five years and 10 years marginally trails the Standard & Poor's 500 Index in most of those periods.
From the end of 2006 through the end of 2012, the Bridges fund beat the S&P 500 in total return by 2 percentage points, 16 percent to 14 percent. Odd-year return comparisons, Bridges said, have mostly to do with snapshots in time; alter the return period and things can change dramatically.
“The fund over time has stretches when it outperforms the S&P and times when it lags,” Ted Bridges said. “Our investment philosophy emphasizes holding high-quality companies for the long run.”
Annual portfolio turnover, a major expense for any mutual fund, is about 17 percent at Bridges. Turnover of more than 30 percent is not uncommon for mutual funds with similar traits. The Fidelity Growth Company Fund was at 33 percent last year.
Bridges is not the only mutual fund in town, nor the only family-owned one. Weitz Investments is based in Omaha and owned by the Weitz family; its flagship mutual fund, the Value Fund, has about $900 million in assets.
Manarin Investments Counsel serves as portfolio manager for the Lifetime Achievement Fund, a mutual fund with $186 million in assets. Other entrants include mutual funds offered by First National Bank of Omaha. In Lincoln, Union Bank serves as portfolio manager to the Stratus Funds.
Bridges also operates a wealth management business, the far larger part of the family enterprise, with about $1.2 billion of client assets under management. Many clients started out as $1,000 mutual fund investors, Ted Bridges said.
Over the years, the Bridges fund has been a close-knit affair. About 100 people attended the 50th anniversary annual meeting last week at Happy Hollow Country Club. Most knew one another, and many had been investing for decades.
Retired civil engineer Don Lieberknecht said he has been an investor in the fund since 1963 or 1964 after taking an investing course taught by Marvin Bridges at then-Omaha University.
“As with any investment, there are years you are satisfied and years that you aren't,” Lieberknecht said. “The main reason I am with Bridges is the high level of integrity and the accessibility.”
Ted Bridges said the mutual fund business took off in the 1980s with the advent of the 401(k) retirement plan, which turned ordinary salary and wage earners into shareholders. By the 1990s, he said, most family-owned mutual funds had combined in one way or another with a major Wall Street house.
There have been occasional offers over the years for Bridges, he acknowledged, but he said the company has no plans for the immediate future other than business as usual.
“We have a lot of our own money in the fund,” Ted Bridges said. “Respect for shareholder capital is second nature here.”
Contact the writer: 402-444-3133, email@example.com