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Not bad for a first-time fund managerand considering what he was up against. Jacob took over the Internet Fund at the end of 1997. He was 28. The job wasn't exactly a prestige position; in fact it wasn't even lucrative enough to be a full-time gig. In a market crammed with over six thousand mutual funds, the homespun Internet Fund had just $149,754 invested in it and made its headquarters in the den of a retired Long Island postal worker.
Jacob pioneered a new strategy, becoming the first fund manager to invest only in "dot-com" stocks. He sold the likes of Microsoft, which had been a top holding of the fund's previous manager, and bought Yahoo! and Amazon.com. A moon-shot run of Net stocks followed. Jacob and the Internet Fund got so popular, 24 phone lines had to be installed in the modest North Babylon, New York, home that serves as its command center. Then the fund briefly ran out of shares to sell. By this June, the Internet Fund had accumulated over $700 million.
Of course, there's probably more to Jacob's popularity than numbers. He is, after all, the only fund manager with his own online fan club. Many mutual fund managers sport bull necks, bald heads, and leathery skin. Not Jacob. He was recently billed a "heartthrob" by the online magazine Upside. He's pictured running his hands through his black hair, which hangs an inch or two below his ears, on the cover of the August issue of Kiplinger's, a personal finance magazine, in a shot so tight you feel chummy with his pores. Call it finance with a dash of Mick Jagger.
The hair, actually, is a topic of Web debate.
"Looking at the photos, it's obvious to me that he's keeping his hair longer," notes "Natalie," in a post on the Internet Fund Fan Club. "What does this mean? I recall Kremlinologists speculating on the direction of that empire on the basis of the amount of hair on the leader's head."
Jacob resigned in July after the fund's owners scrapped a deal he supported to sell the Internet Fund to an established investment company. His departure proved a CNBC-worthy news event, and his devoted Web following cluttered message boards with such mournful ruminations as "Holy Sh*t, Net Fund Manager Resigns!"
Standing at his desk, Jacob takes it all in stride. "I'm an open book," he shrugs. For now, he has set up camp at Lepercq de Neuflize, a small midtown investment firm, as he prepares to launch his own Internet fund (www.jacobassetmanagement.com). He has no office, just a desk perched in a prime spot overlooking Broadway. A Felix the Cat statuette grins next to a computer screen pulsing with stock data. Jacob's tie, shoes, and pants match his hair, jet black. He is crisply dressed and has the trim physique of a gym hound.
With a three-bedroom apartment on the border between the Upper East Side and midtown, he must be living large, right? Not exactly. Jacob confesses to having three roommates. Then again, they're all women. We asked him about his days at the Internet Fund, what's next, and what he eats for dinner.
MACHINE AGE: You were 28 when you took over the Internet Fund. What were you thinking? You had managed some money before, right?
RYAN JACOB: Yeah, I had managed some money, but I'd worked more in an assistant role in the past rather than having a lead position. I thought it would be fun, I thought this was a very exciting area to be investing in, and I thought there were a lot of opportunities.
Who were the investors at that point?
At that point, it really was mostly friends and family, and a few people who had heard about the fund through other channels. We had less than 20 shareholders in the fund.
What were some of the first stocks that you bought?
At the time, we bought companies like Yahoo!, Excite, and Lycos.
And what were some of the companies in the fund already that you were selling off?
Companies like Microsoft, Intelbelieve it or not Cendant [a diversified company that owns real estate, car rental, and hotel brand names like Century 21, Avis, and Ramada] was a pretty major holdingand a number of other, smaller software and hardware companies. Traditional tech names.
Why sell off companies like Microsoft?
To me, there will be many companies that will be beneficiaries of the growth of the Internet, but I wanted to look at those companies that would benefit most from more people coming online, spending more time online, and transacting more online.
What about, now, those first-generation horses like AOL and Amazon and Yahoo!? Are they like Microsoft was when you first came to the Internet Fund?
No, I wouldn't quite put it that way. I think what you have to be careful of are [those] companies inherently assuming hyper-growth will be continuing. As they get larger, that may become more difficult.
What Internet stocks look like good buys right now?
A lot of the media companies, primarily because, believe it or not, it's still controversial whether or not these are viable long-term. We like controversy. Controversy gives us better prices to buy at.
Can you name some of these?
We were very positive, in the financial area, on Marketwatch.com and TheStreet.com. [Also] companies that are offering different takes on portal services, like GoTo.com and About.com.
So what does a young fund manager do in the city for fun?
[Laughter]. You know, I'll tell you, it's funny, when I first came up to the city, which was for the Bankers Trust company in '92...I think when you first come into the city, for the first few years, you hit the circuit pretty hard, and that's pretty much what I did. Then, I think, probably less and less so. Whether you're involved in a relationship, or what have you, you have less time for that, and given how much work I've been doing...I do go out occasionally, but not nearly as much as I used to.
Any favorite restaurants?
I've been to a lot. I will admit, I don't cook. I can't even remember the last time I actually cooked something for myself. So I do eat out a lot, but I'm not going to Tribeca Grill every night, or Le Cirque.
Depends. I have weird eating habits. I do try to get to the gym every day and I drink Met-Rx, which is a meal replacement.
Like the athletes drink?
Well, I do it more as a habit. I can just drink it and go on with my day. I usually eat it between breakfast and lunch. So I kind of snack; I don't really eat a lot of meals. It's partly because of my schedule. I eat when I have a chance.
What gym do you go to?
I go to Bally's over here on 50th and Eighth Avenue. It's funny, every once in a while, someone will come up to me.
Yeah, every once in a while, believe it or not.
Tell me about the last time you met an investor at Bally's.
The last time? Getting changed in the men's locker room, and somebody comes up to me and says "Hey, are you Ryan Jacob?" I say, "Yeah," and he says, "Oh, you know, I'm an investor in your fund. How are things going? I understand you just left."
I said, "Yeah," and he said, "I sold my shares when I heard. What do you think of the new guys?" I said, "Well, it's out of my control." And he said, "Oh, well, I'm going to keep a look out for your new fund," and, "Thanks so much," and, "I've been an investor for a year." As soon as they say that, I know they've had a good experience. I know he's made a lot of money and he's happy.
When does your new fund launch?
Shortly after Labor Day.
Net stocks have been getting shelled lately. Will September be a good time to buy an Internet fund?
Yeah...of course! Really, I can't tell you about next week, let alone next month. But there are a lot of very cheap stocks out there. Not the leaders, but some of those second-tier companies getting chucked. Plenty of opportunity.
Danny Hakim is a staff editor at SmartMoney.com. He can be reached at email@example.com.