Since Max Katcher took over as manager of the Steadman funds and renamed them the Ameritor funds, he's done phenomenally well. But it's not yet clear whether he can save the funds, which were run into the ground by his predecessor.
Until his death in 1997 at age 83, Charles Steadman burned through investors' assets. The Steadman funds were often dubbed the worst of all mutual funds.Steadman's last years running the inaptly named Steadman Technology & Growth are illustrative: returns of minus-5 percent in 1992, minus-8 percent in 1993, minus-37 percent in 1994, minus-28 percent in 1995, minus-30 percent in 1996 and minus-28 percent in 1997.
Just one of the four funds had a positive long-term record -- and only by a hair. Katcher says: "Our long-term performance was abysmal. We were ridiculed."
The funds have been closed to new investors for years. Expense ratios as high as 6 percent or 7 percent and rapid-fire portfolio turnover crippled performance.
"The transaction costs just ate us alive," says Katcher, who is not as reticent as his boss of 26 years. "He picked some good stocks, but he wouldn't hold on to them."
Katcher, 69, who holds a Ph.D. in finance from George Washington University but never managed money before 1998, was vice-president of the funds' management company for more than a quarter-century. His wife wanted to move back to their hometown of Boston and urged Katcher to "go into teaching."
But Katcher hung on.
"I felt some obligation to the people here. If I left, the company would surely have failed because Mr. Steadman couldn't run it. And I thought I would get the opportunity that I have now. Unfortunately, he lived longer than I had planned -- not that I wanted him dead."
Katcher remembers Steadman as bright and articulate, "very forceful and charming. But he was a demanding person and insisted on getting his own way."
Since Steadman's death, Katcher has piloted two of the three remaining funds to gains of 55 percent and 45 percent over the past 12 months, mainly by focusing on stocks of large technology companies.
One fund, Ameritor Security Trust, plans to reopen to new investors. But with annual expense ratios of 7 percent to 29 percent -- and not enough money in the management company's till to absorb them -- Katcher's goal of saving Steadman's funds may be out of reach.