Among the disconcerting passages of aging are the increasing frequency of calls, emails, and texts from family, friends, and former business associates that begin, “Do you remember?” Almost invariably the purpose of the inquiry is to let me know that the person in question has died. Attending funerals and memorial services also becomes a bigger part of one’s routine, and the longer one lives, the smaller the number of attendees.
I recently received an invite to a Munder Capital Management reunion in suburban Detroit and celebration of life of Paul Cook, the firm’s famed former portfolio manager of its once red hot NetNet mutual fund. Munder, along with Royal Bank of Canada, were my PR firm’s founding clients, and working with the suburban Detroit money management firm was always a delight and reinforced my favorable view of Michiganders.
As an example of the sorts of persons working at Munder, when I launched my firm the then CFO, who I previously had limited dealings with, called me out of the blue to say he was advancing me two months of retainer payments.
“You’re likely going to need some extra cash to get your company up and running,” I recall Terry Gardner saying.
In the service business, one is always grateful if a client pays their bills in a timely manner, let alone 60 days in advance.
I was saddened to learn about Cook’s passing, which I’ve since read was in July and due to advanced gall bladder cancer. He was only 62, and I wasn’t aware that he was ill. I hadn’t spoken with Paul in years, but I quite liked him. He always treated me and my team with respect, even when he became a money management celebrity.
Cook at the turn of the century was the media’s most sought-after money manager, and his celebrity was such that people would stop him at airports or restaurants and ask for his autograph. Munder’s NetNet fund was Cook’s brainchild and in its day, was practically a household name. While technology-focused funds are commonplace today, Cook was the visionary who convinced Munder’s founder to allow him to launch a mutual fund focused on so-called dot.com companies poised to profit from the internet, traditional brick-and-mortar businesses with internet focused business models, and tech outfits building and supporting the internet’s infrastructure.
Cook was crowing about the internet long before Wall Street and the media appreciated its disruptive potential.
At the height of the dot.com boom, Cook was the Warren Buffett of his asset class, as Buffett initially had an early aversion to technology companies because he admitted he didn’t understand their business models. For several years, Cook’s fund was far-and-away among the best performing in the country, yielding triple digit returns. In 1999, for example, it returned about 175%.
When the dot.com bubble burst so did Cook’s fund. The dot.com implosion is generally attributed to this Barron’s March 2000 article by Jack Willoughby, which warned that the leading dot.com companies were about to run out of money. Willoughby is a good friend of mine going back more than 30 years when he worked at the Globe and Mail, and I worked at the Toronto Star. It was cruel twist that a longtime friend was responsible for blowing up my client’s fund.
Cook’s NetNet fund is deserving of Wall Street lore, and I’m excited to share it, especially since I was a footnote in Munder’s early success and was involved in the marketing evolution of NetNet.
Munder Capital was founded in 1985 by Lee Munder, a successful senior partner in the Detroit office of money manager Loomis Sayles & Co. Lee Munder was alarmed by how much Michigan money was managed out of state, and his vision was to create a world-class firm comprised of Michiganders managing Michigan money. It wasn’t a far-fetched idea; decades earlier Detroit was considered a so-called money center along with New York, Chicago, and San Francisco.
When I was reporter at the Detroit News, I received a phone call from the head of PR at Security Pacific Bank, then a large and very highly regarded Los Angeles Bank, asking if I’d meet with Munder, whose firm the bank had taken a small position in. Munder wowed me with his vision for a Michigan firm and I wrote a feature about his plans for the Sunday paper, which had the biggest circulation in the state.
The feature gave Munder considerable visibility and credibility, which accelerated his firm’s growth.
More than a decade later after I moved to New York, I called Munder after seeing a favorable write up about his firm in a trade publication. I was working at a major investor relations and PR firm, and Munder just happened to be looking for a PR firm. He invited me to Michigan to pitch his marketing manager, Elyse Essick, who fortunately had a sense of humor. Munder had shared with Essick an impolitic comment I once made over dinner years earlier that he found amusing given my ethnic background. Let’s just say it would have been understandable if Essick didn’t find it quite as humorous.
When I began working with Munder in the late 90s, the firm had already achieved considerable success and grown to a significant size, occupying three floors of a choice building in the tony suburb of Birmingham. The firm had distinguished itself for its conservative investment style known as GARP – growth at a reasonable price. The firm managed institutional monies like the pension funds of police and fire departments, and a suite of mutual funds, which were sold through brokers and financial advisors at leading Wall Street firms.
Paul Cook began as Munder’s IT manager in the late-80s. While developing the firm’s website it dawned on him how many thriving upstart companies he was working with and he saw considerable potential investing in them. Lee Munder initially resisted Paul’s idea because he deemed internet stocks inconsistent with the firm’s conservative style of investing.
Cook, who had an MBA and later became a certified financial analyst, ultimately convinced Lee Munder to let him launch his fund, albeit with a severe restriction. As Munder deemed the fund risky, he only allowed it to be marketed over the internet, which in the mid-1990s hadn’t yet become commonplace. Munder figured that if an investor could find the fund, they’d likely appreciate its potential and risks. The fund was called NetNet because it focused on internet stocks and could only be purchased through the internet.
Essick, Munder’s marketing chief, believed in Cook’s fund and tasked my firm with marketing it to the media. It was tough slogging early on because few reporters understood the internet, let alone its investment potential. My colleague Jackie and I fast developed the thick skin required to deal with constant rejection.
“An internet focused fund? Sounds like a gimmick,” was the familiar refrain we heard from financial reporters. Few were interested in meeting with Cook and hearing him wax on about the internet’s potential.
Cook’s fund took off with a vengeance, posting stratospheric returns most money managers could only dream about. Savvy brokers at the major brokerage houses took note of Cook’s performance and began clamoring to sell NetNet to their clients. Lee Munder left his eponymous firm in 1997, and Essick and other members of the firm’s management team acquiesced.
When Lee Munder left, the NetNet team reported to Jim Robinson, a wicked smart bond trader who managed Munder Capital’s fixed income business and eventually became the firm’s CEO. In one of my initial meetings with Robinson, he mused that the NetNet fund was gaining far more traction being sold through traditional brokerage firms than when it was marketed exclusively on the internet. The delicious irony made for a great story, one I knew that Charlie Gasparino, who at the time was a lowly Wall Street Journal reporter covering mutual funds, would appreciate. (Gasparino is now a FOX Business News reporter, a New York Post columnist and author of Go Woke Go Broke, which I highly recommend).
I arranged a dinner for Robinson and Gasparino, tasking Robinson to share the irony of NetNet’s marketing success. The two hit it off, and by the time dessert and nightcaps were served, I feared Robinson had forgotten the point of our dinner. As we were winding down, Robinson mentioned the NetNet fund’s improved success being sold through brokerage firms. Gasparino instantly took out his pen and began taking notes. He called me the following morning to double check some facts and later that day the Journal published Gasparino’s story.
I can’t find an electronic version of Gasparino’s story, but I recall it running in mid-December sometime in the late 90s. In those days, the Journal had a lot more influence and clout. When Gasparino published his story, NetNet had less than $400 million in assets. Within two weeks, it soared to $1 billion. By 2000, assets swelled to more than $11 billion, which forced Munder to close NetNet because Cook and his team couldn’t prudently invest all the cash.
During Cook’s peak years, financial reporters and CNBC bookers aggressively sought his insights and appearances, so much so that Jackie and I possibly could have negotiated a first-born or two as one of the conditions. Prominent founders of internet companies also aggressively sought the attention and interest of Cook and his team. The tony Townsend Hotel next to Munder’s Birmingham offices did a tidy business off dot.com entrepreneurs making their pilgrimages to Michigan hoping to secure NetNet as an investor.
Even at the peak of his popularity, Cook remained as kind and down-to-earth as he was before his fund gained traction. He had a knack for dealing with journalists, and even initially hostile reporters looking to take him down were smitten by his Michigan niceness and decency. Cook eventually built a team of a half dozen other portfolio managers and researchers, and he was always gracious and generous allowing them media prominence and exposure.
To my knowledge, even after he attained national prominence, Cook never held Munder up for ransom, threatening to accept the legions of lucrative employment offers he no doubt was receiving. Cook’s Munder colleagues were like family to him.
Cook’s fund took a pounding after Willoughby of Barron’s wrote his groundbreaking story and lost a huge chunk of its assets after the media began trashing internet stocks and money managers who invested in them. It was yet another example of the media’s myopia and being a lagging indicator.
From 12/31/99 to 12/31/02 NetNet was down 87%. But from 12/31/02 to 12/31/04 NetNet was up 93%, again outperforming its rivals.
Cook left Munder in 2005 to become CFO of an online people-search company in suburban Seattle and later pursued entrepreneurial interests. Nearly two decades after relocating to the West Coast, Cook never forgot his roots or lost his Michigan persona. Indeed, his son Daniel, 35, who lives in Seattle, and his daughter Emily, 31, who lives in Brooklyn, NY, are die-hard Michigan State Spartans fans.
Cook attended MSU, where he met his wife, Koleen in their freshman year. Koleen’s brother, Kelly Sweeney, owned a local real estate firm and found Lee Munder his initial office space. Munder mentioned he was looking for an IT person, and Sweeney recommended Paul.
The rest, as they say, became history. Cook died one month before his and Koleen’s 37-year wedding anniversary.