Thank You John Neff

Many times over the past twenty years we have discussed our mentors, those great investors who have influenced our thoughts, opinions, methods, techniques, stock selection and portfolio construction. We’ve shared the words and writings of Benjamin Graham, John Templeton, Marty Whitman, Bernard Baruch, Philip Fisher and so many others who deserve our thanks.

On June 4th of this year, one of our mentors, John Neff, passed away in his adopted state of Pennsylvania. Neff managed the Vanguard Windsor Fund from 1964 through his retirement in 1995. I first learned of his existence and the Windsor Fund from an individual I was attempting to solicit as a new client. I was a relatively newly registered representative, and I did the best I could to find some information about the Fund and its manager. As a naive young man a bit too trusting of my superiors, I mentioned the Fund to a gentlemen in charge of mutual fund distribution at my firm in hopes that he would share his thoughts. This wasn’t a very good idea on my part, because his opinion was that the Windsor Fund, and any other fund that was offered at no or reduced commissions, was going to destroy the business. He followed this comment with a stern reminder that my job was to sell and that the best investments to sell were those recommended by the firm. Of course this reprimand just encouraged me to further investigate the Fund.

John Neff was born and educated in Ohio. His first venture into investing was as an analyst at a bank in Cleveland. This basic training, and I assume some success in stock selection, gave him the desire to apply those skills with a bit more freedom than allowed under the prudent man rules of a bank trust department. It just so happened that a little mutual fund company was in need of an individual to revive a fund with a not so great record of performance. That little company was the Wellington Management Company. The year was 1964, and the fund was the Windsor Fund, with total assets of $75 million. When Neff retired 31 years later, the fund had total assets of $13.7 billion, one of the largest in the country.

Over those 31 years, the Windsor fund outperformed the S&P 500 for 23 of the years. The average rate of return was 13.7% versus the 10.6% average for the index. If one had invested $10,000 in the Windsor Fund under Mr. Neff’s management and held onto it for those 31 years, he or she would have turned that investment into $537,271. The same investment in the index would have grown to $227,200. Those results place Neff into the legend category of money managers.