From Reuters: Active Trader PM 07/23 11:06A (RT) Investor Profile: Ira who? Fund investor quietly crushes rivals By James Paton NEW YORK, July 23 (Reuters) - Peter Lynch never suffered a losing year as skipper of the Fidelity Magellan fund from 1977 to 1990. Legg Mason's Bill Miller is the only one who has beaten the Standard & Poor's 500 index for 11 straight years. Their stellar investment records have turned them into industry legends and media celebrities over the years. But ignoring the wisdom of the sages, a relative unknown has pulled off a star-worthy feat of his own in the toughest stock market in years. Ira Unschuld, manager of the Schroder Ultra Fund <SMCFX.O>, has returned more than 90 percent a year, on average, over the last three years, at a time when nearly everyone in the stock fund universe has nursed huge losses. His Schroder Ultra is the top gainer in the fund universe over that rocky period. What makes it more remarkable is the fact that no one else is even close and that he's done it by ignoring all the traditional rules of patient investing. Unschuld has made bundles of money by shunning the traditional buy-and-hold mantra that has burned so many investors recently. He is unabashed about trading often, quickly locking in profits after a winning stock has risen, and bailing right away when the losers seem poised for more bloodshed. "One of the worst things you can do is not take profits because you don't want to pay taxes, and wait and wait and wait and suddenly see your profits go away," Unschuld said in a telephone interview. "Or the other thing you can do is not cut your losses fast enough, and hope your stocks come back." Take farm and ranch store chain Tractor Supply <TSCO.O>. The fund's biggest holding at the end of April, according to the latest regulatory filing, the company is no longer among his top 10 positions, he said. The stock rose 62 percent in the first four months of the year, hitting $55.15 on April 30. It kept climbing after April, but then dipped in recent days. Unschuld, who is based in New York, is "glued to the screens" when the stock market is open and "trades frenetically," almost like a day trader, according to Bridget Hughes, an analyst at research firm Morningstar Inc. As a result, Schroder Ultra shareholders are hit with hefty tax bills at the end of the day. Funds must divvy up among investors their capital gains, or profits from selling stocks. Investors then are taxed on those gains, even if they don't unload their shares. Still, even his after-tax return of 65 percent a year over the last three years is miles better than his rivals, according to Morningstar. The next best stock fund that is not confined to a specific sector, the Turner Micro Cap Growth Fund, is up 28 percent annually in those years. Investors, though, probably are not familiar with Unschuld. The 37-year-old manager won't go on television talk shows to tout himself, his spokeswoman said, and he is reluctant to reveal his stock-picking secrets, doing few interviews and providing scant details to analysts who follow the fund. "Unfortunately he's pretty tight-lipped," said Hughes, the Morningstar analyst who talks to him regularly. Investors who want a piece of the action will be disappointed, though. The fund shut its doors to new investors in late 1998 to try to stay nimble in the small-cap market. Remaining small has helped keep returns at lofty levels. GOING SHORT In the midst of a miserable market, it is worth taking a close look at what the skipper of the $240 million portfolio is up to. Unschuld, who got his feet wet working at Boston mutual fund giant Fidelity Investments while earning a business degree at The Wharton School, has quietly racked up returns that have made him the envy of the mutual fund world. Trading in the fast lane has helped, but other tactics have served him well, too. Like a hedge fund, Ultra shelters itself from market declines by shorting stocks, in effect placing a bet they will fall. He also has found smaller, more mundane companies that have been overlooked by Wall Street. Industrial products maker Actuant <ATU.N>, truckload carrier P.A.M. Transportation Services <PTSI.O> and fabric retailer Hancock Fabrics <HKF.N> were among his biggest holdings and more obscure stocks fueling the fund's performance so far this year, according to filings. Unschuld does not advertise the companies he has taken short positions in. In short selling, fund managers, often running hedge funds, profit from stock declines by borrowing a stock from a broker, selling it, and then hoping to buy it back later at a lower price. Unschuld does not like to talk about that part of his game, saying only that most of his returns have come from stock gains, not losses. It is, of course, premature to mention Unschuld in the same breath as Lynch, Miller or Mario Gabelli, the prominent "value" fund manager who has long impressed investors with his knack for finding undervalued stocks. Unschuld only has steered the fund since its October 1997 inception. The others have been doing it with big funds, and for decades that span bull and bear markets, not just a few years. Still, he is making a splash in the industry. Other funds have posted big gains in the bear market, but most are gold, country-specific or bear funds, which are designed to prosper when stocks fall. Often those funds struggle when the market soars. But Unschuld also thrived in good times, rising 63 percent in 1998 and 95 percent in 1999. Hungry investors on Morningstar's online discussion board have taken notice, posting messages offering to pay others for shares of the Ultra fund, and even fork over a premium, since the portfolio will not accept new cash. They also have clamored for more information about the largely unknown manager, who also oversees the $48 million Schroder U.S. Smaller Companies Fund, which has delivered sizable gains during the bear market, but has lost its step this year, down 17 percent. "Even if we did get an interview with him, we probably wouldn't learn much," one investor, calling himself AWalker, said in a message in early May. "If I had such a good thing going like Unschuld does," the investor said, "I would probably keep it to myself too." ((--James Paton, U.S. Fund Desk, 646-223-6134--)) REUTERS Rtr 11:06 07-23-02 Additional Codes ( I/STX, I/NEWS)