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March 26, 2007, 5:01 p.m. EDT

Back in First Eagle's nest

Noted value investor Eveillard returns to fund management; de Vaulx out

By Murray Coleman, MarketWatch

SAN FRANCISCO (MarketWatch) -- Legendary mutual-fund manager Jean-Marie Eveillard is emerging from retirement to run several highly regarded First Eagle funds following the abrupt departure of his hand-picked successor.

First Eagle funds gave no reason for the departure of Charles de Vaulx. The 45-year-old fund manager ran the popular First Eagle Global (NAS:SGENX) and First Eagle Overseas (NAS:SGOVX) funds since Eveillard's retirement at the end of 2004. De Vaulx also ran First Eagle Gold Fund (NAS:SGGDX) , First Eagle U.S. Value Fund (NAS:FEVAX) and First Eagle Fund of America (NAS:FEFAX) .

The firm that runs the funds, Arnhold and S. Bleichroeder Advisers, said Monday de Vaulx had stepped down without providing any reasons. De Vaulx could not be reached immediately for comment.

Eveillard, 67, was named Morningstar Inc.'s International Stock Fund Manager of the Year in 2001. In 2003, he received a Lifetime Achievement Award from Morningstar for building one of the most successful long-term records in the mutual-funds industry.

"I came back because [Arnhold and S. Bleichroeder Chairman] John Arnhold asked me for help," Eveillard said in a telephone interview from his New York headquarters. "I was in Europe and got a call out of the blue. I was very content and happy in retirement."

He added: "This is my baby, so to speak. I had been running the old fund that goes by the name of First Eagle Global for 26 years. So I felt responsible since there appears to be a need for me to help."

Besides First Eagle's two well-regarded diversified global funds, Eveillard will resume oversight of the three smaller funds and serve as Arnhold and S. Bleichroeder's lead portfolio manager for its global value team.

"Jean-Marie was one of the top international money managers in the business when he retired a little more than two years ago," Russ Kinnel, fund research director at Morningstar, said. "He's a legendary value investor who put together an impressive track record over the years of preserving his shareholders' money in down markets and doing very well in up markets as well."

Eveillard maps a future

Eveillard says how long he stays will depend on how quickly new managers can emerge as leaders on their various funds. "With the investment approach we have, our nine securities analysts are at the heart of our process," Eveillard said. "The way we set it up was that they would come to me and initiate a dialogue. The point was to get our analysts to feel like these portfolios were their baby, too."

Such an analyst-driven system remained intact after he left. As a result, Eveillard says his return "won't last five years or something like that."

Instead, he expects to help evaluate and nurture a stable of in-house talent to permanently replace him. The final decision, Eveillard says, will be up to Arnhold and S. Bleichroeder.

"We have some members of the team who've been with us as long as 10 years," Eveillard said. "They're perfectly capable of handling the actual money management function."

The funds use a disciplined, fundamentally based value-style approach. "The success we've had over the years has a lot to do with the fact that we don't try to keep up with the Joneses on a quarterly or even past-year basis," Eveillard said. "It's the willingness to take short-term pain that distinguishes us from other investors. We're looking to reward our long-term investors."

He says the funds won't change their strategy as a result of de Vaulx's leaving. "Markets have been going up for more than four years now," Eveillard said. "That means stocks don't look as attractive to value investors like us."

At the same time, he's concerned about credit cycles tightening worldwide. "Bonds are an accident waiting to happen," Eveillard said. "Interest rates are too low because everyone's chasing yield."

Cash remains a residual position, he adds. "If we don't find enough investment opportunities from a bottom-up approach, then cash will build," Eveillard said. "It happened with Charles and we'll see what happens with me. I've been away two years but there aren't many new securities in the portfolio."

Some catch-up work will be required, Eveillard says. "But our portfolio doesn't turnover much," he noted. "With the help of our staff, I'm looking forward to becoming involved again with our research and helping to manage money for our investors."

Eveillard began his money-management career as an analyst on the former SoGen International Fund in 1970. Nine years later, he was promoted to manager of the renamed First Eagle Global Fund. He also became manager of First Eagle Gold Fund, First Eagle U.S. Value Fund and First Eagle Fund of America.

Eveillard hired de Vaulx full-time in 1987 after having met the young French national student on a summer internship four years earlier. De Vaulx rose up the management ranks to become his mentor's co-manager in 1999.

First Eagle Global Fund is the top performer among world allocation funds in the past decade, according to Morningstar. But it slipped last year after de Vaulx let cash build.

"The fund still did pretty well, finishing well in the top half of its category in 2006," said Gregg Wolper, a Morningstar analyst. "But the fund would've done better if it had been invested more in stocks."

Wolper says he's surprised that de Vaulx quit. "The biggest fund, First Eagle Global, has continued to outperform its peers, both in the short-term and long-term," he said.

First Eagle Overseas, though, has lagged. In the past three years through Friday, it trailed three-fourths of its rivals in the foreign small-mid value category. With $11.5 billion under management, the fund was its firm's second-biggest portfolio.

First Eagle Global has $20.9 billion through February. The five retail funds under Eveillard's supervision have about $35 billion of assets.

"It's definitely good news for shareholders that with the surprising and abrupt departure of de Vaulx, someone as experienced and well-respected as Eveillard is coming back to take over," Wolper added.

Roy Weitz, publisher of, was also surprised by the return of Eveillard. He says it's shocking for a manager of de Vaulx's stature and tenure to quit so suddenly.

"Without a performance problem, this seems like a situation where a hedge-fund opportunity came up on short notice," Weitz said.

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