As tech mimics Titanic, Alberto tangos on deck

Don’t cry for me, Amerindo.

Tech was supposed to have been immortal.

It wasn’t.

Yet Alberto Vilar and his team of diehards at Amerindo Investment Advisors Inc. are still true believers.

In the tech wreck last year, the billionaire tech investor did worse than most. But the New York money manager’s clients are still among the faithful – ever patient, ever hopeful.

Though assets have fallen dramatically, few have defected; most of the decline is the result of the market plunge.

And Mr. Vilar and his team still firmly believe in tech and the Internet revolution.

Going forward, Amerindo is committed to investing in what it sees as the three legs of the Internet.

They include business-to-business e-commerce, infrastructure and application software, and fiber-optic-based switching software.

In those categories, his favorites are i2 Technologies Inc. (ITWO), Siebel Systems Inc. (SEBL), Akamai Technologies Inc. (AKAM) and Sycamore Networks Inc. (SCMR).

They’re bullish on network-based data storage companies such as Network Appliances Inc. (NTAP); and business-to-consumer names such as eBay Inc. (EBAY) and Homestore.com Inc. (HOMS).

In biotechnology, which would make up 15% to 20% of a client’s portfolio, Amerindo is hot on Genzyme Transgenics Corp. (GZTC).

Wild performance swings are expected at Mr. Vilar’s firm, whose flagship fund, Internet-focused Amerindo Technology, has been dubbed by an analyst at Chicago fund tracker Morningstar Inc. as “arguably the riskiest domestic stock fund around.”

But disastrous performance, plummeting assets and a two-star Morningstar rating for the tech fund haven’t shaken Amerindo’s commitment to emerging technology and the battered Internet sector – an opportunity Mr. Vilar has called bigger than the Industrial Revolution.

In business for 20 years, Amerindo has seen troubled times for tech before – though never to this extreme. In 1997, for example, the Tech Fund was down 27%. Still, as early investors in some bellwether companies – Microsoft, Cisco, Oracle, eBay and America Online – Amerindo’s principals have become very, very rich. So the privately held company of 75 employees can afford to be a tech maverick.

“We are not changing the names of our funds. We are not changing our style … We are sticking to our guns,” says Keith Brown, vice president of Amerindo Funds. “We operate in one area only, and we will always be there, which is emerging technology. It’s not always fun to be here. You get rough periods. But that’s perhaps why we are notable.”

Emerging technology

Fun times, it’s not. The Amerindo Technology Fund, co-managed by Mr. Vilar and partner Gary Tanaka, was down 30.48% year-to-date as of Thursday, following a 64.80% drop in 2000. The fund was up 249.90% in 1999. The average Internet fund year-to-date was down 23.36% as of the end of May and down 49.28% in 2000, according to Morningstar.

“It’s not any big secret that they are just about the riskiest funds out there,” says Morningstar mutual fund consultant Scott Cooley. “Sector funds are risky, and Amerindo adds another layer of risk by investing in a subsector of tech. They add another layer of risk by investing in young companies in that sector, and they add another layer of risk by keeping the portfolio concentrated,” with 67% of funds invested in the top 10 holdings.

“They are pretty upfront about it,” he adds. “Alberto Vilar has called a 50% drop a normal correction.”

In a March 13, 2000, press conference, Mr. Vilar (who was not available to comment for this article) predicted just that – emerging tech stocks would correct 50%. But even he did not predict the “worst sell-off in almost 30 years in the technology sector,” he writes in a first-quarter report. On the day of his prediction, his tech fund’s shares were priced at $39.88. It bottomed out on April 4 at $4.40, according to Yahoo! Finance.

Despite the collapse, institutions and mutual funds, on the whole, have stuck with Amerindo.

The company’s total assets dropped to $2.2 billion as of May 31, from $5.78 billion in 1999, with mutual funds assets falling to $175 million, from $603 million, in the same period. But that was largely due to performance, Amerindo says. The firm has still seen modest net inflows on the institutional side and in its three-fund complex.

holding course

“So the point is, we are hanging in there fairly well in a brutal environment,” says Mr. Brown. “We are not the 27-year-old guys that started an Internet fund a year ago. This team all has gray hair. They really have a deep level of experience operating in this arena and tough environments, and I think our shareholder base came here fundamentally for that reason. And a bad market doesn’t change that.”

Even if shareholders aren’t moving their money, it doesn’t mean there’s not some disappointment.

Seeking exposure in emerging tech companies, the $1.4 billion Oklahoma Firefighters’ Pension and Retirement System in Oklahoma City gave Amerindo $54 million in February 2000.

“Quite frankly, we’ve had our heads handed to us,” says Robert Jones, the plan’s executive director, pointing to a 60% reduction in value. “We haven’t lost confidence in the company. We criticize ourselves for when we placed the money.

“On the other hand, we weren’t pressuring them to go immediately into equity. They could have maintained a cash position, and we wouldn’t have objected,” says Mr. Jones, who plans to give Amerindo at least three years.

Michael Sandifer, a member of Amerindo’s five-person investment committee, says it may take three years for latecomers like the Oklahoma Firefighters’ fund to get their principal back.

“They have to be patient,” says Mr. Sandifer. “To a degree, how quickly they become whole is also dependent on their willingness to add a little funds. That is the way some of our long-term clients have particularly done well.

“They’ve taken money away in good times, and when I show up and have a long face and we have not done well, they remember back and say, `Gee, Mike, the last time you looked this glum was near a low. Here, invest some more money.”‘