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The 40-percent-a-year man is launching a mutual fund


AT THE AGE of 62, Lee Kopp appears to have everything.

The Edina, Minn.-based investment adviser has returned an average 40 percent for his clients over the past five years, making him the best-performing money manager in the country as ranked by Thomson Investment Software of Boston.

His company, Kopp Investment Advisors, just 7 years old, oversees more than 2,000 accounts and $4 billion.

So how is Kopp celebrating his 63rd birthday this week? He's starting his first mutual fund.

"I love challenges," Kopp said. "My plan is to start concentrating on my golf game in about 17 years."

Thus far, Kopp's services have been available only to wealthy people. It takes a minimum $1 million to open an account.

His new fund, the Kopp Emerging Growth Fund, has an entry price of $5,000 for regular accounts or $2,000 for a retirement account. There'll be a 3.5 percent upfront commission and a 1 percent management fee. It opens for business Oct. 1.

Despite his record, Kopp is little known in the mutual fund industry, and he isn't doing much to raise his profile. He thinks he can do a better job managing the fund if the money comes in a steady trickle rather than a flood.

"We don't want a billion dollars in 90 days," he said. "But if it comes in, we'll deal with it."

Like many investors who have had big gains in recent years, Kopp has ridden the boom in telecommunications and computer-related stocks.

They account for about 60 percent of his clients' portfolios. Among his favorites are ADC Telecommunications Inc., Western Digital Corp. and Tellabs Inc.

Kopp tends to buy companies with small market capitalizations.

And he buys and holds. Many investors who invest in small caps tend to sell when a stock rises to its "price target" or when it reports disappointing earnings.

So, the average mutual fund holds a stock for less than a year, according to Morningstar Inc., a fund information company.

Some small-cap investors turn over stocks even more quickly. Kopp tends to hold a stock for an average of four years.

"The big money in this business is made in three or five years," Kopp said. "And for every 10 investments we make, I can guarantee we'll be wrong at least two times. But we hope we'll also have a few home runs to make up for our mistakes."

Kopp differs from so-called momentum investors in other ways. He doesn't believe one can assess a company's prospects by merely studying its numbers. He's scrupulous about meeting regularly with management.

"There's a key person behind every organization," he said. "We're on the lookout for the next [General Electric Co. CEO] Jack Welch. Someone who can really move it forward dramatically over the next few years."

Kopp claims no particular expertise in technology. The son of a parking lot attendant, he spent the first three decades of his career selling stocks of all kinds.

He started as a broker, then moved on to the post of branch manager of Dain Bosworth Inc.'s Edina office. He lived through bear markets as well as the crash of 1987. "To be a strong retail broker, you have to deal with a lot of pain and punishment," he said. "Immediate gratification is not the answer."

Kopp makes no claims that he and his deputies will continue delivering 40 percent annual returns. His goal is for more modest gains of 15 percent to 20 percent a year.

Kopp plans to continue giving to charity and creating high school and college scholarships. Kopp's firm gives away 10 percent of its profits every year, and Kopp gives away 30 percent of his income. Last year their combined charitable giving was about $3 million.

Pub Date: 9/22/97

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