Ralph Shive doesn't care about style boxes, relative performance, or Wall Street. He just wants to make money for his clients.
There are the outward trappings of the Corn Belt, of course. Ralph Shive and the 1st Source funds team work in South Bend, Ind., a sleepy town in the northernmost part of the state best known for being right next to the University of Notre Dame. The office is a small and close-knit operation, occupying the first floor of the 1st Source Bank building in downtown South Bend. Over a hearty lunch at a café a few steps from the office, the team joshes with our server. "She used to babysit for my son," says Mike Shinnick, who runs the team's long-short fund.
Shive, the firm's chief investment officer and manager of its flagship fund, 1st Source Monogram Income Equity
Given Shive's blunt talk and disdain for Wall Street, it's no surprise that he's spent his career elsewhere. He started out at a small trust firm in 1975, then joined InterFirst Bank as a technology analyst a few years after that. Shive worked briefly as a sell-side analyst for Rauscher Pierce Refsnes before moving to a family office in Dallas, where he ran money from 1984 to 1989. Shive still counts that experience as the most formative of his investing life. "Great people, great long-term focus, pure investments, no distractions," he says. "I also learned to embrace that idea that risk is losing money."
Up until then, however, Shive did not have an independent public track record, and that's what brought him to 1st Source in 1989. He ran a common trust initially, then the Income Equity mutual fund, which launched in October 1996.
Since that launch, Shive has amassed a performance record to crow about: The fund has trounced its large- and mid-cap value counterparts as well as the S&P 500. The fund's track record also speaks to Shive's focus on absolute rather than relative returns. During the 2000-2002 bear market, its losses were mild, even though the fund also managed to keep pace during the great bull market of the 1990s.
"We've evaluated Ralph's performance over many time periods and he has consistently stood out relative to other managers we've used," says A.J. Paul, an Elkhart, Ind., financial advisor who manages assets for high-net-worth clients. "He makes money in up markets but often loses less when things are going down. In 2008, no one is having a stellar year so far, but he's lost less than everyone else."
Don't Box Him In
Shive's approach to managing client assets is very much in keeping with his sensible, no-nonsense personality--and also speaks to his unwillingness to be pigeonholed. His investment style is distinctly value-oriented, but not dogmatically so; the fund's holdings are dispersed across the upper two thirds of the Morningstar Style Box. That's because Shive is emphatic about preserving the fund's flexibility and makes room for what he calls "franchise value" stocks--essentially GARP names--alongside traditional value fare. While industrials have long played a big role in the portfolio, he has given the fund more of a growth tilt over the past year or so.
"The objective is making money, and I maneuver around a little bit," he says. Zimmer Holdings