The money managers.

• Author: Bailey, David
• Position: Includes related article

In the first compilation of the state's largest investment advisers, we find what lies behind the names and numbers.

Once upon a time, those Tar Heels who had more money than they knew what to do with had three options: New York, Boston or Wachovia Bank. "I would say Wachovia has been, by far, the premier trust institution in North Carolina," says Olin Nisbet of Charlotte's Sterling Capital Management Inc.

But when Nisbet and his partners opened shop in Charlotte in 1971, they demonstrated that independent money managers can compete with -- and sometimes beat -- the banks. Others soon joined them, battling for billions of dollars wealthy individuals and institutions turn over to specialists. According to McGraw-Hill's Directory of Registered Investment Advisors, 6,500 of the 20,000 people registered actually manage assets full time -- 89 of them in North Carolina.

Since the barrier for entry is so low (filling out a form and mailing it to the Securities and Exchange Commission), a lot of people who provide a broad range of services -- from financial planning to brokerage -- call themselves money managers. BUSINESS NORTH CAROLINA's first compilation of Tar Heel money managers narrows that number to seven banks and trust companies and 21 firms. To be included, they had to be based in the state and have full discretion in managing at least $20 million in assets.

A few are well-known -- WEDGE Capital Management Inc., Sterling and the Big Three banks. Many others have become quietly successful. In fact, they're so quiet other managers in the same city sometimes aren't aware of them. Some report performance figures to anyone who asks for them. Others keep them close to the vest, contending they are only meaningful to clients.

Since fees are pretty standardized -- about 1% on the first million or two and about a half to two-thirds of a percent on really big bucks -- money managers don't generally market their services on price. That means each has to offer clients something special -- super service, outstanding performance, an investing strategy that pushes a client's hot button or a combination of the above.

Maybe that's why money managers are such a diverse lot. Chapel Hill-based Smith Breeden Associates Inc., for instance, specializes in mortgage investments. In Charlotte, Sovereign Advisers Inc. concentrates on that small universe of corporations that have increased dividends for 10 years or more, a strategy that won Fortune's faint praise as the "best of the bunch" for the fainthearted. Across town and at the other end of the risk scale, Capital Technology Inc.'s number crunchers engage in electronic trading and computer TABULAR DATA OMITTED analysis to find stocks with hidden value.

The Employment Retirement Income Security Act of 1974 "basically opened up the market to independent investment counselors," Nisbet says. "That law allowed managers to accept fiduciary liability and responsibility." By '74, Sterling had been up and running for three years. Nisbet, whose father helped found Interstate Securities, the predecessor of Interstate/Johnson Lane Inc. brokerage, was glad to take on business that the banks -- by law -- had a lock on before ERISA. In 1979, he could boast that individuals and profit-sharing plans had trusted Sterling with $70 million. Sterling's nimbleness, plus the performance of the stock market in the early 1980s, attracted more clients, boosting Sterling's assets to $470 million by 1984.

Those were the days, and Michael J. Tierney, a Wachovia Corp. senior vice president and manager of its trust investments, recalls them fondly. Investors who had put their money in hard assets during the '70s -- real estate, gold and oil -- turned to Wall Street with a vengeance. "The market was priced at about 25 cents on the dollar relative to...