FRESH YOUNG FUNDS FROM THE OLD PROS
By Susan E. Kuhn

(FORTUNE Magazine) – In a perfect world investors could sidle up to a hot money manager who'd whisk their money into his or her favorite stock pick in a flash. It's rarely so easy. By the time you learn about a good manager's funds, they are often / closed to new investors. Or the funds have grown too big to be nimble, scarcely able to sell large holdings or buy into great little discoveries. Is there a solution? Why not get in on a new fund from an old pro? John Rekenthaler, editor of Morningstar Mutual Funds, says, ''Buying a new fund from a seasoned manager is a terrific strategy. Small funds are full of their best ideas. Like a new girlfriend, managers get infatuated with them.'' Below are eight funds created in the past three years, all run by infatuated folks who have chalked up double-digit returns in other funds for at least five years. Portfolio managers David Dreman and James Gipson each have new no-load funds that concentrate on smaller stocks. Dreman founded Dreman Value Management in Jersey City, New Jersey, 17 years ago. Last May he unfurled the $5 million Dreman Small Cap Value Portfolio, which is co-managed by James Holmes. It is full of stocks whose price to earnings and book value multiples are below the market's, including many banks and savings and loans. Gipson, president of Pacific Financial Research in Beverly Hills, buys the stocks of companies with undervalued assets. His Schooner Fund opens in July. A small-stock favorite that he plans to put in it: Scotts, a Midwest lawn care company whose stock sold recently for $17 a share, 12.9 times his 1993 earnings estimate. Since 1985, Peter Schliemann of Jones and Babson in Kansas City, Missouri, has been buying tiny stocks -- with a market capitalization of less than $100 million -- for the Babson Enterprise Fund. Two years ago he and co-manager Lance James began Babson Enterprise Fund II. This one buys stocks capitalized at about $500 million. Schliemann loves neglected companies mired in miserable margins. His bet: They'll turn around before the Street notices. At $28 a share, for example, he figures La-Z-Boy Chair can double in three years. Over the past 12 months, his $21 million BE II returned 16.6% to investors. The $256 million Acorn International fund, which started last September, is a small-stock fund with a twist: Only foreign companies need apply. Manager Ralph Wanger first proved himself on the now-closed $1.7 billion Acorn fund, a growth-oriented small-stock fund with an average annual return of 17% over 23 years. Acorn International has returned a booming 20.8% so far this year. For true exotica, though, seek out Mark Mobius, who has run the $357 million Templeton Developing Markets Trust since October 1991. Portugal, Greece, + Turkey, and Brazil are his favorite countries to invest in now. So far this year, the fund has belted out a 23.8% return. It is a cheaper bet than his similar closed-end Templeton Emerging Markets Fund, which is currently selling at a 16% premium to its net asset value. Developments of a different sort attract Martin Whitman, who started the $90 million Third Avenue Value Fund in New York City in 1990. Whitman buys large stakes in companies in the midst of a restructuring. Third Avenue gained 33.6% in the past 12 months. Equity Strategies Fund, his earlier success, will soon be liquidated.

For more common stock fare, try Thomas Marsico at the $444 million Janus Growth and Income Fund in Denver, or Donald Yacktman, who started the $126 million Yacktman Fund in Chicago last April. Marsico likes to buy into the expanding earnings of companies like Fannie Mae. Growth and Income, introduced in 1991, is the only no-load fund he runs that is open to investors. Yacktman, who looks for companies with high returns on tangible assets, is buying drug and consumer stocks. He has yet to make money, while Marsico's fund gained 12.9% over the past 12 months.

CHART: NOT AVAILABLE CREDIT: ROBERT DOMINGUEZ FOR FORTUNE CAPTION: PROMISING NEW FUNDS FROM PROVEN MANAGERS