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Merrill star goes to work
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March 13, 2000: 9:27 a.m. ET
Jim McCall, his fight with PBHG over, takes the reins of two new growth funds
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - Jim McCall sounds pretty relaxed for somebody who has waited nearly a year to start his new job as a fund manager at Merrill Lynch Asset Management.
After a nasty and litigious departure from PBHG Funds, McCall is heading up two new aggressive growth funds at Merrill Lynch -- Focus Twenty and Premier Growth. The funds took in more than $1 billion during a subscription period and started trading March 3.
"We're looking for the fastest-growing, highest-quality companies we can find," McCall said in a recent interview.
 McCall, 46, delivered top returns while managing PBHG Large Cap 20 Fund, PBHG Large Cap Growth, and PBHG Select Equity Fund. But when he decided to take a job with Merrill Lynch in April 1999, the fund's adviser, Pilgrim Baxter & Associates, the relationship soured.
He sued Pilgrim Baxter, alleging breach of contract and other issues. Pilgrim Baxter countersued and replaced him as fund manager. The two sides settled the matter out of court, and McCall joined Merrill Lynch in November 1999.
McCall and Pilgrim Baxter declined comment on the parting of ways.
McCall's arrival at Merrill Lynch will inject some life in a fleet of mutual funds that had been largely value-oriented, fund experts said. Merrill Lynch investors pulled out about $9 billion in assets from the funds in 1999, according to Kunal Kapoor, an analyst at fund-tracker Morningstar.
Click here to read Kapoor's analysis of Merrill Lynch funds and efforts to "get its house in order."
"When (McCall) came to Merrill, they were in dire need of adding growth funds to their lineup," Kapoor said. "There's no denying that he did really well at PBHG. If you go by that, you have a positive feeling."
Merrill Lynch's other growth funds include: Merrill Lynch Fundamental Growth Fund; Merrill Lynch Global Growth Fund; and Merrill Lynch Growth Fund.
 "In the past, these were growth funds in name only," Kapoor said. But all three are doing better recently, Kapoor said.
Bob Doll, co-head of Merrill Lynch Asset Management Group, said the two funds help round out the growth side of the investment choices. But he emphasized that Merrill Lynch does not want to be known as a growth or a value shop.
"When I arrived eight months ago it was pretty clear to me that we needed to broaden our exposure," Doll said. "Our intention is not to favor growth or value, but to have a broad representation for investors as they make their choices."
Merrill Lynch launched a large cap series in December - Large Cap Value, Large Cap Core, and Large Cap Growth - and has plans for an Internet strategies fund, Doll said.
"We're very close to having as broad of a product line of anybody on the street," Doll said. (He spoke via voice mail and was not available for followup questions).
McCall declined comment on most big-picture issues affecting Merrill Lynch, but he did say, "The problem with Merrill is up to the last year and a half, they've been a value-only shop. Value underperformed. People decided they waited long enough for value to come to the fore, so a lot of money came out of value products."
Kunal said one question will be what resources McCall gets at Merrill Lynch.
"PBHG is a momentum shop," Kunal said. "Here (at Merrill) he's got the chance to build his own team. It sounds good, but it's a bit of a challenge. You have to adapt to a new culture."
McCall said the Focus Twenty has equal weightings of "our 20 best ideas." Top holdings include Nextel Communications; Nortel Networks, Veritas; Cisco Systems, and Clear Channel Communications.
Nextel (NXTL: Research, Estimates) will benefit from the trend towards Internet access via cell phones, while Nortel Networks (NT: Research, Estimates) is a leader in high-speed data transmission equipment that has been hammering Lucent (LU: Research, Estimates), McCall said.
Veritas (VRTS: Research, Estimates) is profiting from the explosion in data storage businesses, and Cisco Systems (CSCO: Research, Estimates) is a clear market leader in networking space.
While Clear Channel Communications (CCU: Research, Estimates) has been under pressure lately, McCall is optimistic.
 "We don't do any sector determinations -- we start at the individual company level," McCall said. "Right now, technology is driving the economy. We're overweighted in technology. That could change in six months. We don't care, as long as we're confident the names in the funds are the best ones we can find."
The Merrill Lynch Premier Growth Fund will own the same twenty stocks as the focus fund, as well as about 30 other names, McCall said.
"We layer in our next 30 best ideas for those investors who want more diversification," McCall said.
While many mutual funds own dozens or hundreds of stocks, focus investing has gained in popularity thanks to strong performance by funds like Janus Twenty, Marsico Focus and the PBHG Large Cap 20 Fund.
"It makes an awful lot of sense from a lot of different perspectives," McCall said. "Any portfolio manager is going to start with his best ideas. You can't have 100 best ideas." 
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