A locally managed mutual fund run by Columbus-based Kirr Marbach & Co. is making a splash in the investment world.
The $52 million-in-assets Kirr Marbach Partners Value Fund (symbol: KMVAX) turned in a 26.38 percent return in 2012 that outstripped the 16 percent total return shown by the Standard & Poor’s 500 stock index, a benchmark used by analysts to compare thousands of funds’ annual performances.
KMVAX has followed that up with a 3.2 percent gain for the first three weeks of trading (through Monday) this year.
The company’s fund ranked first for performance over the past three years among seven Indiana-based mutual funds, all of which compete for notice and a share of investors’ cash with roughly 7,600 others around the United States.
The Kirr Marbach fund also ranked in the top 1 percent of all mutual funds in its class nationally last year, investment data show.
“The thing we do differently from a lot of mutual funds is that we don’t allow ourselves to be pigeonholed. We seek out value wherever we can find it — from small-capitalization companies to large caps. We do all caps,” said Mark Foster, the company’s chief investment officer.
The Kirr Marbach Partners Value Fund has consistently attracted national press clippings, largely because it has managed to wring gains from its investments in 10 of the 14 years since the mutual fund debuted for individual investors in early 1999.
Investors can buy into the fund for as little as $1,000 to open an account.
The Kirr Marbach fund seeks out value companies with strong growth prospects, solid managers and relatively little debt among other attributes, Foster said. It invests for the long term, typically holding a stock four or five years before selling it.
Investors can expect about 18 percent of the KMVAX portfolio (it generally holds about 40 stocks) to turn over in any given year, Foster said.
Themes emerging for 2013 include a possible resurrection among stocks tied to Europe and China and potential gains among companies that benefit as consumer spending improves.
Among stocks added to the KMVAX portfolio in recent months were an initial public offering from Bloomin’ Brands (symbol: BLMN), a diversified restaurant company that owns Outback Steakhouse, Fleming’s Prime Steakhouse & Wine Bar, Carraba’s Italian Grill and Bonefish Grill.
Foster said Kirr Marbach was attracted to the stock because chains under the Bloomin’ umbrella look as if they’ll be able to grow sales within existing stores and expand to new locations in many cases.
Couple that with slow but steady growth in the U.S. economy, and a U.S. consumer who seems more willing to spend money, and the restaurant stock appears to have a chance for gains.
Since Bloomin’ Brands debuted on Wall Street in early August, its stock price has risen from $11.60 per share to $18.50 per share a week ago.
Meanwhile, China and Europe should see economic improvement this year, and “the U.S. economy will probably continue to grind along with growth in the range of 2 to 3 percent,” Foster said.
Foster said Kirr Marbach also plans to invest in its internal growth. The company hired an additional stock researcher last fall and within the next two months expects to add a new employee in marketing.
Sound Mind, solid returns
The only other mutual fund group that operates from offices in Columbus is Sound Mind Investing, a pair of financial vehicles whose 2012 results lagged the S&P 500 by several percentage points each. Four other mutual funds have offices and investment managers based in Indianapolis.
Fred Beerwart, who helps run the Sound Mind funds, said his group’s two offerings put investors’ money into a collection of at least 20 other mutual funds spread across five broad categories. The idea is to diversify participants among small- and large-cap value and growth companies, as well as international stock mutual funds.
The group’s first fund, Sound Mind Investing (symbol: SMIFX), puts money into stock mutual funds.
Separately, the Sound Mind Investing Balanced Fund (symbol: SMILX) mixes 60 percent stock and 40 percent bond funds. Columbus-based Reams Asset Management advises on the bond component, Beerwart said.
“We analyze the performance of every mutual fund daily, and a fund basically has to earn its way into our portfolio by ranking in the top four funds in its category over the last 12 months,” he said.
If a mutual fund purchased for the portfolio when it was a top performer later slips outside the top 25 percent of its class, Sound Mind sells and replaces it with another high-ranking fund.
Both of the Sound Mind funds — along with a third one that could debut before the end of the first quarter this year — are run by a joint venture called SMI Advisory Services. It’s a partnership between the owners of Omnium Capital, an investment firm in Columbus, and another company called Marathon Partners.
Marathon has ties to the Sound Mind Investing newsletter, a Christian-oriented financial newsletter founded in 1990 by businessman Austin Pryor, who still retains the title of publisher. Beerwart said Sound Mind’s goal always has been to encourage smart investing in order to help people earn more money so they can give more to their church.
The newsletter has a subscription base of more than 10,000 people today, Beerwart said. The loosely affiliated mutual funds market directly to those readers, using the same basic principle of diversification espoused by the newsletter.
Today, the mutual funds under the Sound Mind flag have a combined $300 million under management. The stock mutual fund debuted seven years ago and returned 10.51 percent last year. The stock-and-bond balanced fund, created two years ago, returned 9.05 percent in 2012.
The stock fund (it trades under the symbol SMIFX) analyzes performance within each of five categories: large-cap value funds, small-cap value, large-cap growth funds, small-cap growth and international mutual funds.
The percentage that goes into each niche varies from year to year, Beerwart said, although no single category is likely to get more than 24 percent of the whole.
For 2013, large-cap value and large-cap growth companies, plus international stock funds, will account for two-thirds of the portfolio, Beerwart said. Small-cap value funds will be held to 18 percent of the total, and small-cap growth will get 16 percent.
Basically, the Sound Mind group’s theory is that the best returns in 2013 will probably come from larger firms, not smaller ones or startups, Beerwart said.
Elsewhere in Indiana, The Archer Funds of Indianapolis offers three mutual funds to investors — the Archer Balanced Fund (symbol: ARCHX), the Archer Stock Fund (symbol: ARSKX) and the Archer Income Fund (symbol: ARINX).
Lately, the Archer Stock Fund has been the best performer of the three, rising 11.02 percent in 2012. It was up another 2.35 percent in trading for the first three weeks this year.
Also, the Auer Growth Fund (symbol: AUERX) of Indianapolis is off to a good start in 2013 after managing only a 2.25 percent gain all of last year. Through the first three weeks of trading this year, it had risen in value 3.28 percent as of Monday.
The Auer fund strives to find stocks with the potential for long-term gains among large, mid-cap, small and even micro-capitalization companies, according to a Morningstar analysis. Its worst year was 2008, when the fund declined by 53.25 percent amid the U.S. financial collapse. Its best year was 2009, when Auer gained 36.5 percent, industry data show.