A fund that's strong when stocks swoon Lutherville-based Greenspring looks where risks are few


The roaring bull market is stuffing many investors' wallets with money, but there are signs of trouble, worrisome enough to make even an optimist pause.

There is talk of rising interest rates and weakening corporate profits. There's the specter of a severe market drop -- it hasn't fallen by more than 10 percent since 1990. Even Federal Reserve Chairman Alan Greenspan has warned that investors may be too optimistic about rising stocks.

But nervous investors should take heart.

There are a number of "defensive" mutual funds designed to perform well in falling markets. One of them is the Greenspring Fund Inc. in Lutherville.

Managed by Charles vK. "Chip" Carlson, Greenspring is designed to be a rock of stability when the market is misbehaving. "We never promise anyone that we will out perform the market when it is surging, but we better out perform it when it is going down," said Carlson, the 37-year-old president and chief executive of Greenspring. "That is when we shine."

Greenspring, which has $108 million assets under management, has received high marks for producing steady returns with far less volatility than Standard & Poor's 500 stock index. And it hasn't sacrificed performance for safety.

A $10,000 investment in Greenspring when it opened in July 1983 would have returned a total $55,291 through last year, assuming dividends were reinvested. The company requires a minimum investment of $2,000 and it doesn't charge a sales fee.

Greenspring returned 22.65 percent last year, and its annualized return over the last five years is 14.89 percent, according to Morningstar Inc., the Chicago-based mutual fund ratings company.

"They have a terrific track record," said Rob Brown, chief market strategist with Ferris, Baker Watts Inc. "For a small fund they rank nationally quite well."

Carlson often invests in companies that have had problems, but are on the upswing. He also buys real estate investment trusts, convertible bonds, junk bonds and even companies in bankruptcy.

"You buy a stock that is out of favor; hopefully, all of the risk is VTC wrung out," Carlson said.

The stocks and bonds he selects, he says, aren't sensitive to the gyrations of the stock market. So, if the market falls, their values might rise or at least hold steady.

Carlson hunts for his investments. Many of them are companies that Wall Street largely ignores, like UNR Industries Inc., a Peoria, Ill.-based company that builds towers and shelters for telecommunications dishes; Woodward Governor Co., a Rockford, Ill.-based company that makes engine fuel control systems; and Seven-Up/RC Bottling Co. of Southern California.

Sixty percent of Greenspring is invested in equities, 25 percent in bonds and the rest is in cash. About 14 percent of the portfolio is invested in bank stocks, including Chase Manhattan Corp., Baltimore-based Mercantile Bankshares Corp., Columbia Bancorp Inc. and Richmond-based Crestar Financial Corp.

These are hardly tough-luck stocks, but Carlson likes them because banks are making money and there are opportunities for consolidating.

Greenspring's biggest success was its investment in Loyola Capital Corp., a Baltimore-based savings and loan that sold to Crestar over a year ago.

Greenspring snapped up shares in 1986 and 1987 at around $4 a share. Crestar bought the company for $19 a share after adjusting for stock splits, Carlson said. The value of Greenspring's Crestar holdings total $3.4 million.

Greenspring has also picked up a number of high yielding bonds that Carlson says reduce the portfolio's risk.

"Clearly, he is boosting his return by getting these great bonds," said Jim Raker, senior research analyst with Morningstar. "These are some pretty good yields."

While Greenspring has turned out solid returns in bull markets, the fund performs best when the market is bleak by holding losses to a minimum.

When the market swooned last May, Greenspring outperformed both the S&P; 500 and the Dow Jones industrial average. From May 22 through July 23, the S&P; 500 fell 7.6 percent, the Dow industrials dipped 7.5 percent, and Greenspring slipped 3.3 percent.

Greenspring held losses to a minimum when the market crashed in 1987, too. From Aug. 25, 1987, to Dec. 4, Greenspring fell 10 percent, while the Dow fell 34 percent, and the S&P; was down 33 percent.

Carlson became hooked on stocks when he was in high school. His father, Rod, a vice president at Baltimore's MNC Financial Inc., managed his own portfolio at home.

"He used to talk about his strategy. He used to buy stocks and sell options against them. That carried over to me," Carlson said.

But Carlson doesn't write options against individual stocks he holds in the portfolio.

"I don't know if it is worth all of the bother," he said. "We are more of a buy-and-hold" mutual fund.

Carlson graduated from Johns Hopkins University in 1982 with an economics degree. In 1983, he joined Corbyn Investment Management Inc., a Lutherville investment adviser that manages money for pension funds, endowments and individuals.

Corbyn formed Greenspring in 1983, and Carlson was named president of the investment management firm in December 1991. He became Greenspring's sole portfolio manager shortly thereafter.

Carlson says his objective is a simple one: "We just want to provide steady, consistent performance for our shareholders. I want to be able to sleep well at night, and I want our shareholders to be able to sleep well at night, too."

Pub Date: 3/09/97

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