Gary Pilgrim

Gary Pilgrim (born Birth date|1940|11|05 in Nowata, Oklahoma) is a retired investment manager and a founding partner of Pilgrim, Baxter, Hoyt & Greig, later known as Pilgrim Baxter & Associates (PBA). Pilgrim is best known for his management of the PBHG Growth Fund, one of the most popular growth-style mutual funds of the mid- to late-1990s. He is considered a pioneer of the "earnings momentum" style of investing, which seeks out small, growing companies with the potential to beat quarterly earnings expectations. This style is characterized by high volatility with the potential for dramatic gains and losses.

Pilgrim, Baxter & Associates

Pilgrim started work at the Philadelphia National Bank's Trust Department in 1970 and over the next 12 years rose to the position of Senior Vice President. It was at PNB that he met Harold Baxter, Stephen Hoyt, and George Greig, with whom he left in 1982 to establish Pilgrim, Baxter, Hoyt & Greig. (With the departures of Hoyt and later Greig, the company was renamed Pilgrim Baxter & Associates.)

PBH&G was initially dedicated entirely to managing money for institutional pension funds, and as a result was virtually unknown to the general public. In 1985, they entered the mutual fund market with the PBHG Growth Fund. For its first eight years, the fund went largely undiscovered due to the fact that it was a load fund and was not marketed to the public. Its performance was impressive, however. The fund returned 46.6% in 1993, and rose 225% over the three years ending November 1993. [John Waggoner. " [http://www.usatoday.com/money/waggon/archive/wag0006.htm Bottom-fishing for mutual funds] ", "USA Today", January 6 2000.] This performance came to light in late 1993 when the fund went no-load and received a torrent of media attention, beginning with the August edition of Money Magazine which declared that "few people other than his clients recognize the name of today's hottest fund manager: Gary Pilgrim." [Junius Ellis. " [http://money.cnn.com/magazines/moneymag/moneymag_archive/1993/08/01/88186/index.htm THIS LITTLE-KNOWN HOTSHOT'S PICKS COULD GET YOU 45%] ", "Money", August 1 1993.] At a time when public awareness of mutual funds was rapidly increasing, Pilgrim quickly became one of the industry's most famous names. The fund continued to deliver very strong performance over the next three years - in the beginning of 1996, it had a three year annualized return of nearly 30%. Meanwhile, the fund's assets under management had increased from about US$8 million in 1993 to US$5 billion in mid-1996. During Pilgrim's peak popularity in 1996, Sheldon Jacobs, the editor in chief of The No-Load Fund Investor, stated "I have never seen a group that has done so consistently well."Reed Abelson. " [http://query.nytimes.com/gst/fullpage.html?res=9D00EFDB1539F930A15755C0A960958260&scp=12&sq=pbhg+pilgrim&st=nyt MUTUAL FUNDS] ", "The New York Times", June 23 1996.] The October 1996 Kiplinger's Personal Finance Magazine gave him the following review: "Forget Peter Lynch: Gary Pilgrim is the best stock picker of the past five years and the past ten." [Fred W. Frailey. " [http://www.allbusiness.com/company-activities-management/financial/8673068-1.html Gary Pilgrim: insider interview] ", "Kiplinger's Personal Finance Magazine", October 1 1996.]

Unfortunately for many investors who, in response to massive media attention, bought into the fund at this time, late-1996 to early-1999 was a difficult period for PBHG Growth as market trends turned against small growth stocks, even as the economy at large flourished. During this 10-quarter period, the fund struggled to break even, while the S&P 500 returned 95%.Manuel Schiffres. " [http://findarticles.com/p/articles/mi_m1318/is_4_54/ai_60377260 Big Mo Is Back] ", "Kiplinger's Personal Finance Magazine", April 2000.]

As the technology boom took off, however, PBHG Growth's performance skyrocketed, returning 93% in 1999. But with the economic downturn which began in early 2000, the fund, true to its volatile nature, began to fall precipitously, losing 23% in 2000, 34% in 2001 and 30% in 2002.

Gary Pilgrim appeared in the 1998 and 2004 editions of Jason Kelly's book "The Neatest Little Guide to Stock Market Investing" as a "master" investor whose strategy should be studied, though probably not strictly emulated, by individuals seeking success in stock market investing.

Quotes

"Anyone who sticks with a particular investment approach will be frustrated by the market occasionally. Our history suggests that we're usually in the top quartile or bottom quartile of returns and don't spend much time in the middle."

"I'm very confident that as long as I can put together a portfolio of companies growing 40% a year, these stocks can be leaders. In my mind, this is the natural state of affairs."

"As growth managers go, we're among the most aggressive because we always look for companies in the early to middle stages of maturity." [Nanette Burns. " [http://www.businessweek.com/1995/52/b345645.htm FOUR GURUS AND A LOFTY MARKET] ", "Business Week", December 25 1995.]

"I focus on companies that are doing well, not ones that have stumbled, or missed by just a little bit. I like to be in a good mood, and every stinker I don't get rid of just irritates me. I like to like my portfolio." [" [http://www.usatoday.com/money/perfi/stocks/0004.htm When to sell stocks depends on who you ask] ", "USA Today", October 20 2000.]

"We all strut around here with our good performance records, but things can change very quickly. I would be the first to admit to any user of highly stylized types of funds that there is a trade-off between great returns and enormous style risk."

Market timing

On November 20, 2003, both the Securities and Exchange Commission and New York Attorney General Eliot Spitzer filed charges against Gary L. Pilgrim, Harold J. Baxter, and PBA for civil securities fraud and breach of fiduciary duties. [Leticia Williams; Jonathan Burton. " [http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BB046058D-CFCB-4EA7-9D0E-5386C0BE192F%7D&siteid=google&dist=google Pilgrim Baxter charged with fraud] ", MarketWatch, November 20 2003.] [ [http://www.sec.gov/litigation/litreleases/lr18474.htm LITIGATION RELEASE NO.18474 ] . U.S. Securities and Exchange Commission (November 20 2003).] Pilgrim was accused of allowing one of his friends, Michael Christiani, the manager of a hedge fund called Appalachian Trails L.P., to use a market timing strategy to profit from rapidly trading shares of, among other funds, the PBHG Growth Fund. Though market timing was not illegal and was a practice in widespread use, it had increasingly been viewed as potentially harmful to long term shareholders. At the time charges were brought in 2003, PBA had already decided to eliminate market timers in its funds and had allowed no such activity since December 2001.

On November 17, 2004, the S.E.C. announced a settlement whereby Pilgrim and Baxter, while neither admitting nor denying wrongdoing, would each personally pay US$80 million, and PBA would pay US$90 million. In addition, both Pilgrim and Baxter were required to never again seek employment in an investment-related capacity. [cite press release |title=Harold Baxter and Gary Pilgrim Agree to Pay a Total of $160 Million to Settle Fraud Charges Concerning Undisclosed Market Timing |publisher=U.S. Securities and Exchange Commission |date=November 17 2004 |url=http://www.sec.gov/news/press/2004-157.htm]

Despite attempts to recover, the PBHG Funds brand was too badly damaged by the market timing incident to remain viable. In 2004, PBA was renamed Liberty Ridge Capital by parent company Old Mutual. The PBHG Funds have since been absorbed into the Old Mutual Funds group, and Liberty Ridge now manages primarily institutional money.

Philanthropy

In 1998, Gary Pilgrim established the Pilgrim Foundation, with the purpose of benefiting at-risk children in Chester County, Pennsylvania. The Foundation is still in operation today and has expanded its mission to include support for organizations in India and southern Africa.

Notes