Name has a familiar ring, but junk’s not his thing

The collapse of junk bond king Drexel Burnham Lambert a decade ago left many on Wall Street scrambling for cover. Among them was Jon Burnham.

Today, he is chairman and chief executive officer of Burnham Asset Management Corp. in New York, a company launched by his father, I.W. “Tubby” Burnham, one of the founders of Drexel Burnham Lambert.

The wounds inflicted by the collapse of the high-flying firm were salted anew recently by the heated debate over Drexel junk maven Michael Milken’s unsuccessful efforts to win a pardon from Bill Clinton.

The debate fueled a where-are-they-now kind of curiosity about Mr. Milken’s former partners. These days, Mr. Burnham is firmly focused on his fund business, which he took over from his father in 1995.

But he’s no less opinionated about Mr. Milken.

“He’s still the same old egotistical Mike Milken,” says Mr. Burnham, 65. “I don’t see why he should be pardoned as if nothing had ever happened, because … 10,000 people lost jobs, [and] shareholders lost money.”

Facing forward

Whether the fund family’s famous name will help or hurt is an open question. Most experts, however, believe it gives the company a leg up on the competition.

Mr. Burnham hopes that assets in his flagship Burnham Fund will eventually top $1 billion, but he is the first to acknowledge that much of his vision depends on market conditions.

“There’s no time frame,” Mr. Burnham says. “We don’t have any control over what’s going on in the market. But we do have control over the performance of [our flagship fund], and that fund is looked upon much better than it was before.”

Fund experts say it’s possible for the fund to reach $1 billion in assets, but the odds are against it.

It faces the same obstacles other small fund companies face, such as stringing together good to excellent yearly returns and spending the money needed to market the funds.

“The name recognition gives them the opportunity to tell a story,” says Norm Lubin, chief executive of FMS Group Inc., a mutual fund consultant in suburban Philadelphia.

“Sometimes that recognition needs a freshening up, but that gives them the opportunity to tell investors where they are today and what they propose to do,” he says.

At first glance, it would appear that Burnham has gotten off to a less-than-stellar start. Founded in 1989 out of the ashes of Drexel Burnham Lambert, the company has been managing funds for more than 10 years, with little distinction until recently.

Assets in the Burnham Fund never really grew beyond $200 million, and performance was spotty.

In 1991 it returned 17.98%, handily bettering its large-blend category average, which was down 3.33%, according to Value Line Inc. in New York. But the following year it returned just 7.7% compared with 32.04% for the category.

The company’s four other funds were launched in the summer of 1999. In their short life, only one, the $7 million Burnham Financial Services Fund, has distinguished itself.

I.W. Burnham, now 92 years old, managed the Burnham Fund during the early days of Burnham Asset Management. He handed over the reins to another manager but took them back because that manager wasn’t generating sufficient returns.

The elder Burnham, however, started the company with the idea that his son, then a senior vice president with Smith Barney Asset Management in New York, would even-

tually take over.

Over the past two years the fund’s returns placed it in the top 12% of its category. It returned 2.1% last year and 32.7% in 1999.

“In the last several years, we’ve really hit it right,” Jon Burnham says. “I hope we continue to do that, but the market makes idiots of everybody sooner or later.”

Many reasons are cited for the fund’s improvement. Stock selection is of course a major factor. Mr. Burnham says he looks for companies that are increasing revenues and earning at 15% to 25% a year.

That strategy prevented him from investing in pure Internet companies, most of which led the technology downturn, but allowed him to buy companies such as Siebel Systems Inc. in San Mateo, Calif.

A provider of electronic business applications, Siebel is Mr. Burnham’s largest holding and his biggest winner. He is still optimistic about it, although like all technology companies it has suffered recently.

Stock selection, however, is only part of the story. Mr. Burnham says he cut a 6% dividend the fund was paying, and he increased the percentage of assets in equities to at least 90%, from about 70%. Those moves guaranteed that the fund would be more competitive.

Resources and will

Once Mr. Burnham got the Burnham Fund on the right track, the company was ready to launch the other offerings.

They include the Burnham Dow 30 Focused Fund, the Burnham Money Market Fund and the Burnham U.S. Treasury Money Market Fund. The Dow 30, however, is a disappointment and may be closed, Mr. Burnham says.

Only the Burnham Financial Services Fund has been impressive. Managed by Anton Schutz, president of Mendon Capital Advisors in New York, the fund returned 33.9% last year, placing it among the top 2% of its sector, according to Morningstar Inc. in Chicago.

Such performance is a good start, but Michael Lipper, president of Lipper Advisory Services Inc. in Summit, N.J., says he’s unsure whether Burnham Asset Management has the resources or the will to put together the kind of marketing effort that is essential to build assets.

“I think it’s a function of whether Jon really wants to spend the money,” Mr. Lipper says. “He is now putting out some [public relations], but I don’t know if he’ll be able to put enough resources out there.”