Fund name: FMC Select (no ticker)

Objective: the fund seeks total return, principally through capital appreciation and, to a limited degree, through current income. It invests primarily in US mid- and large-cap stocks, though it can hold up to 20% international. The cut-off for mid-caps is quite low at $1 billion. The manager emphasizes companies with strong balance sheets, above average returns on equity and businesses that he believes he understands. He takes a buy-and-hold perspective on the portfolio.

Adviser: First Manhattan Co (FMC). FMC specializes in providing professional investment management services primarily to individuals as well as partnerships, trusts, retirement accounts and institutional clients. They manage investments in securities for accounts that range from under $1 million to over $100 million. As of December 2006, they had about $15 billion under management. They’ve been in operation since 1964.

Manager: Bernard C. Groveman, CFA, is a Senior Managing Director and portfolio manager. He has managed or co-managed the fund since the Fund began in 1995. He has more than 25 years of investment experience. Before joining First Manhattan in 1985, Mr. Groveman worked at CS First Boston and Lehman Brothers Kuhn Loeb.

Management’s Stake in the Fund: as of 2007, Mr. Groveman had somewhere between $500,000 and $1 million in the fund and had several hundred thousand more in the Strategic Value fund.

Opening date: May 8, 1995.

Minimum investment: $10,000 across the board. And they will take your money. The Strategic Value manager admitted last year, "People are free to call First Manhattan and buy into the fund. But we don't promote it."

Expense ratio: 0.99% on assets of $191 million.

Comments: as is the case with many of the Stars in the Shadows, the FMC mutual funds started out as a "friends and family" operation. They were designed to offer FMC’s investment expertise to folks who were connected with FMC or its clients, but who could not meet the firm’s $200,000 investment minimum. They’ve quietly succeeded in consistently making money for those folks, without any interest in attracting attention. One simple measure of their reticence is the fact that the fund, nearly ten years old with nearly $200 million in assets, still doesn’t have a ticker symbol.

Researching the fund is a bit of a challenge. There are certainly no marketing materials and FMC is not particularly interested in giving interviews. The annual and semi-annual reports are brief and focus, almost exclusively, on the prospects of a half dozen portfolio investments. And, as I noted above, I couldn’t for the life of me find the SAI.

All of which is frustrating since the fund’s ten-year returns, as of December 2008, make it one of the top large-core funds in Morningstar’s database. They’re in the company of CGM Growth, Hartford Capital Appreciation, Mairs & Power Growth and the like. They have a similarly strong record for the period since inception. The December 30 2008 Annual Report notes:

Before 2007, the fund also typically had a small portion of its portfolio invested in bonds which would have been a drag on its performance for much of the fund’s history.

Mr. Groveman attributes the fund’s success to consistent, conservative investing. Just like everyone else, they look for high quality companies selling at a discount. Unlike many of their peers, it seems the FMC Select actually finds and buys such companies. Here’s a snapshot of the fund’s portfolio from the latest annual report.

You might summarize that table thusly: better companies, growing faster, bought for less. And after buying, the manager tends to hold. Portfolio turnover has never exceeded 20% in a year and is typically in the mid-teens. That’s about one-fourth of the average stock fund’s turnover. At the moment, the fund holds about 38 stocks which account for 95% of its portfolio.

The manager is particularly leery about investing in cyclical industries or leveraged companies. He explained his conservatism on the subject in December:

Bottom Line: like its small- to mid-cap sibling, this mid- to large-cap fund seems to be the anti-thesis of "flashy." It offers its investors strong, consistent returns with controlled volatility, reasonable expenses and good tax efficiency.

Fund website: http://www.firstmanhattan.com/. Perhaps in defense of their "we don’t really want your money" philosophy, there does not appear to be an investment application on FMC’s website. For that you’ll need to call the transfer agent: 1-877-FMC-4099 (877-362-4099).