John B. Neff, 87, a plainspoken Ohio native who moved to the Philadelphia suburbs and beat the stock market for a generation, built Vanguard Group’s largest fund, and gave the University of Pennsylvania an Ivy League-size endowment without pay in his spare time, died Tuesday, June 4, after an illness, his daughter Lisa Neff-Ryave said.
Mr. Neff worked at the Philadelphia office of Wellington Management Co. from 1964 until his retirement in 1995. His clients included not only Vanguard, where he managed the Windsor Fund, but its founder and Mr. Neff’s frequent partner in an aggressive brand of tennis, John C. Bogle, who died this year.
Though Bogle is associated with autopiloted index funds, and preached that managers can seldom beat the market, he made an exception for Mr. Neff’s careful focus on neglected companies, often cyclical industrial stocks that paid shareholders high dividends. Mr. Neff’s formula beat the Standard & Poor’s 500 in 23 of his 31 years at Wellington, outperforming the benchmark by an average of around 3 percent through his career at the firm, the company reported on his retirement.
“He was a legend in the industry," and belongs on the “Mount Rushmore [of] investment management," said veteran Philadelphia investor Theodore Aronson of AJO Partners. “He was a money manager’s money manager, a fundamental stock-picker of massive success. Famously, he would read the Wall Street Journal page by page in the morning,” then do it again, “in case he missed something.”
Mr. Neff’s client reports avoided “investment mumbo-jumbo.” Instead they graded his own fund’s performance. “And he was a tough grader.”
Mr. Neff, who graduated with a bachelor of arts degree from the University of Toledo in 1955, worked in securities analysis for a Cleveland bank and earned his MBA from Case Western Reserve University in 1958, before moving east to join the Wellington firm.
He stood for thrifty Philadelphia-style value investing against the higher-flying growth or “momentum” style of buying high-priced stocks in the hope they move higher, whose champions included Neff rivals like Peter Lynch and Jeffrey Vinik at Boston’s Fidelity Investments, in a period when big mutual fund managers were media celebrities -- before the 2000s, when digital innovation speeded up trading, and “passive” funds like Vanguard’s Index 500 overtook actively-managed portfolios like Windsor as the industry’s biggest savings magnets.
Mr. Neff was a champion of the CFA Institute, which provides investor education and manages the study-intensive Chartered Financial Analyst designation. He was collegial, “always cordial, open and encouraging” at investing-industry events held at the Racquet Club of Philadelphia, said Howard Trauger, managing director at Carnegie Investment Counsel’s Philadelphia office and head of the city Bond Club.
In 1980, Mr. Neff volunteered to help the University of Pennsylvania, a school he never attended, boost its endowment from commuter-school level to Ivy League status. Over the next 18 years, he managed the stock portfolio, returning an average of 16 percent a year as it grew to $3 billion from $200 million, with Mr. Neff’s returns inspiring confidence by new contributors.
Mr. Neff resisted suggestions by the Wharton School’s real-estate, hedge-fund and private-equity alumni to dump U.S. stocks and choose riskier investments in hope of still higher returns. When he stepped down as Penn’s stock adviser in 1998, the school began a slow move toward the kinds of private investments favored by Ivy rivals Harvard, Yale, and Princeton.
But Mr. Neff remained an investment committee member — and also a member of Barron’s magazine’s stock-picking panel — for additional years in retirement. And his influence lasted long enough that Penn expanded its private investments carefully, parking the funds in U.S. Treasuries — also a Neff tactic when he found few bargains worth buying. As a result, Penn suffered less when the market collapse of 2008 left other Ivy endowments with billions in illiquid holdings and fat losses on their books.
“John served on the Barron’s Roundtable, an annual gathering of top investors, from 1976 to 2007," recalled senior managing editor Lauren R. Rublin. "He brought considerable wit, as well as investment wisdom, to the proceedings, and was always generous with his time and insights. He was a brilliant contrarian, common-sensical investor, and one of the nicest, most decent people I have ever known.”
Mr. Neff was often labeled a value investor, but colleagues stressed that he looked for dividend income as well as bargain-hunting. His 2000 book, John Neff on Investing, offers copious case studies without adopting prolific author Bogle’s folksy tone. Mr. Neff wrote that he liked to be called a “low price-earnings investor,” calculating the rate of a company’s earnings growth, adding the dividend yield annual percentage, and comparing it to the price-to-earnings ratios of stocks he already owned, buying those that looked as if they had a lot of room to grow.
In a business full of aggressive salesmen, Mr. Neff’s tone often took on a bracing humility. As he told The Inquirer’s Andrew Cassel in 1995: “When you feel like bragging, it’s probably time to sell."
After his retirement, Mr. Neff took an office in Conshohocken with fellow money manager (and former Penn trustees chairman) Paul Miller and other friends, giving it up in the last few years as he faced Alzheimer’s disease, and moving from his longtime Berwyn home to a retirement community in Audubon, Montgomery County, said his daughter. “John Bogle visited him there a few times. It was adorable,” and “bittersweet,” Neff-Ryave said.
Mr. Neff was married for 63 years to the former Lillian Tulak, who died in 2017. In addition to his daughter, he is survived by his son Stephen. Another son, Patrick, died earlier.