Internet Man - internet mutual fund manager Ryan Jacob

Kiplinger's Personal Finance Magazine, May, 2000 by Robert Frick

FUNDS | RYAN JACOB is a media darling. But what lies beneath that great head of hair?

RYAN JACOB pumps iron most every evening. Much has been made of this in the press--the Village Voice dubbed the hotshot fund manager a "gym hound." But on this evening no bristling pecs are in evidence. Jacob stands bounded by mirrors, machinery and a surfeit of spandex at the Bally's gym in Manhattan's theater district and waits patiently to insert himself into a Cybex station and work his latissimus dorsi. He doesn't break a sweat--not because he's any kind of gym rat (his physique is trim yet unremarkable), but because Jacob is methodical by nature and ha a sublime faith in what he's doing.

That holds particularly true for investing in Internet stocks. And when he led the mutual fund world with a 196% return in 1998, then ran up a 113% return for the first six months of 1999, everyone seemed to share his faith. Money streamed into his Kinet ics Internet fund, swelling assets from less than $1 million to $700 million-plus in a year. The quotable and young (now 30) fund manager with the really great hair became known as the Internet-investing wunderkind.

Now, just months into running ms new Jacob Internet fund, he's still high-profile, but it's stick-your-head-out-of-the-bunker high-profile. His fund is up somewhat this year (23% to March 13), but other Internet funds are up more. Some of the same investors who lionized him a year ago now post nasty messages on the Internet: "I don't see how anybody can be patient with the performance of JAMFX [the fund's symbol]. Too many others are blowing by to wait on Ryan Jacob." And: "I think Jacob loves himself and his hoity-toity lifestyle. Even a blind squirrel sometimes finds a nut."

Jacob remains unperturbed. Not that he never gets rattled. He does. In fact, he did last August, about the time he put a contentious breakup with his old firm, Kinetics, behind him, and later when he thought the Securities and Exchange Commission would approve his fund by Labor Day. It was December before he could open for business. He was benched for an entire season, watching from the sidelines while some of his favorite stocks quadrupled.

The driven boy

TO UNDERSTAND Jacob, you should know that in third grade he smoked cigarettes. "I was trouble," he says with an embarrassed smile. Bored in school and hanging out with the wrong crowd in northeast Philadelphia, he back-talked his teachers and bonked them with erasers. The suggestion was strongly made that young Ryan be put in a private school, and when his parents moved to affluent Bucks County, Pa., the following year, they did just that.

Attending a Jewish day school for the next few years helped, but what channeled his energy and gave him the discipline he lacked was Boy Scout Troop 185. "It was a spit-and-polish troop--there's no question about that," says Michael Dubrow, one of two senior analysts on the Jacob Internet fund and a member of Troop 185's Flying Eagle patrol. "We went by the book---the scoutmaster's book."

Scoutmaster Merv Sluizer led Boy Scout troops for something like a half-century. He recalls that one maxim he preached to his young charges was "Excuses don't make results." Says Jacob of Troop 185: "It was harsh." How harsh was it? Because most of the boys were Jewish, Sluizer insisted that even on hiking trips they keep kosher, meaning they had to lug two sets of pots, pans and utensils--one for meat and one for dairy.

Jacob made Eagle Scout and was known as the most intense of a very competitive bunch. Another Troop 185 Eagle Scout, Jeffrey Schwarzschild, recalls asking, then begging, Jacob to share a head of lettuce so Schwarzschild could get his meal finished and earn points for his patrol. Schwarzschild, now a lawyer in San Francisco, recalls Jacob taunting him with: "You want the lettuce? You want the lettuce?" Schwarzschild snapped. "So I pulled my knife out and chased him around the table," Schwarzschild says with a laugh.

Jacob is a true believer in the Internet, and brings his natural intensity to investing in it. "A lot of the Internet funds have started looking like tech funds, and many tech funds have become almost Internet funds, but Jacob's is a pure Internet play," says Scott Cooley, a senior analyst with Morningstar. You won't find quasi Net firms, such as Cisco and Intel, in Jacob Internet fund.

"The Internet has really just scratched the surface of how it will change our lives on the social and economic levels," explains Jacob. "Until that's complete, this evolution in the Internet will continue to spawn new business opportunities. So rather than this being like a bubble that keeps expanding until it finally goes"--his fingers explode upward--"kablam! I look at it as more of an evolutionary process."

Into the fray

HE SAYS ALL THIS so sincerely that you're tempted to answer amen when he finishes. Jacob's evangelical delivery was honed before he ever traded Internet stocks. He booked hours of on-camera time while research director for the newsletter IPO Value Monitor. "Ryan is very aggressive in promoting himself," notes business associate Frank Alexander, who was the original Kinetics Internet fund manager. "Even given all his other good attributes, he might not have gone anywhere without that quality."