The $13 billion Vanguard Windsor fund gets a new captain when John Neff, manager since 1964, retires at the end of December.
But the fund's 400,000 shareholders shouldn't worry too much. Under Neff's value-oriented, contrarian style of management, Windsor has returned an annualized 13.2 percent for the past 30 years - 11th among 134 diversified funds with track records that long.But Charles Freeman, who takes the helm Jan. 1, is no newcomer. He has worked with Neff since 1969 and has generally kept track of 25 percent to 30 percent of Windsor's holdings.
"My stamp's already on the portfolio," says Freeman, 52. "We have a way of doing things that I would say is institutionalized."
The Neff-Freeman approach starts with cheap stocks, generally those whose price-earnings ratios (share price divided by earnings per share) are two-thirds or less than that of the overall market, which recently stood at 17.
"We're drawn to situations where expectations are low and we can make a case that things are going to work out better than the market anticipates," says Freeman.
He and four other team members are buyers when stocks meeting their criteria fall within their "buy" range, and sellers when those shares appreciate to a predetermined level.
Behind each investment is intensive, kick-the-tires research. Freeman has two Rolodexes filled with contacts at Chrysler, Windsor's largest holding, and visits Chrysler headquarters twice a year.
Another hallmark of the Neff-Freeman style is a willingness to make big bets. Recently, the 10 largest holdings (out of 71 stocks) represented 39 percent of assets.
"When you see those concentrations, there's a big piece of work behind them that represents our convictions," says Freeman.
Windsor is closed to new investors. But investors attracted to the fund's approach might consider the Neff-Freeman team's Gemini Capital II (symbol GMI) instead. A closed-end fund, it recently traded on the New York Stock Exchange at a discount of about 7 percent.
Gemini is due to close down in January 1997. At that time, investors will most likely be given shares in Windsor.