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Start Me Up

Ryan Jacob
Jacob Internet Fund

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"This looks like the cover of Teen Beat!" says Ryan Jacob, yanking a copy of Kiplinger's out of a file cabinet and examining it with theatrical disgust. Jacob was the August cover boy, and he isn't quite finished living it down. "I look like Leif Garrett," he groans.

The mutual-fund manager has two things nearly all of Wall Street wants: great performance and a full head of hair. Then again, he's only 30. After attending Drexel University, he did time in the sleepy family-trusts department at Bankers Trust before he got restless and moved to a job analyzing IPOs for a small Manhattan asset-management company. Then he went from small to minuscule, managing an Internet fund for Kinetics Asset Management, a company so tiny its back-office operations were run out of a North Babylon, Long Island, garage. Jacob had only a piddling $200,000 to throw around, but that was enough. A stunning return of 196 percent by 1998 stamped him the No. 1 mutual-fund manager in the country. He both reaped the benefit of early recognition and paid the price. After watching his fund balloon to $715 million by July 1999 and establishing an eighteen-month return of 531 percent, Jacob quit: A deal to sell the fund to a more established company fell through, and Jacob informed Kinetics' owners -- a Russian-émigré computer programmer and a retired school superintendent -- that he simply couldn't afford to stay.

Living Dangerously Within days of his departure, Jacob staked out his own shop. His target launch was Labor Day, but Jacob immediately found himself mired in regulatory hell at the SEC, arguing over ownership of his track record with his former employer. "They had to protect their business," he explains, "so they said, 'Well, Ryan was just part of a team managing the fund, and he really wasn't the one driving the investment decisions,' which was completely false."

Jacob Asset Management kicked off its flagship Internet fund on December 13 -- but not without incident. The fact that Jacob recruited his uncle, InKine Pharmaceuticals chairman Leonard Jacob, to serve on his board has attracted scrutiny. "I'm lucky to have somebody like him," says Jacob. "We're not paying board members a lot of money, and they're taking on some liability." Besides, he says, "my uncle doesn't pick up trash; he's on the boards of other companies and foundations."

Moneymaking Mantra "MTV was not profitable in its first year," says Jacob. "CNN was not profitable in its first year. Yet once these companies achieved critical mass, they became extremely valuable franchises. That's eventually going to happen on the Internet as well. The sector as a whole is overvalued, but companies that are able to establish leadership positions in their markets are drastically undervalued."

Jacob maintains he's a buy-and-hold kind of guy. "The media thinks I'm here with two six-shooters and spurs -- that I'm, like, this Internet-fund day trader, which is the furthest thing from the truth."

Where He's Headed In 2000 He's trying to set up his own Internet hedge fund -- and can you blame him? In the meantime, his mutual fund is positively sweltering; in the initial two-week subscription period, Jacob says, 30,000 people called up, begging for the prospectus. With a take of $230 million, he's now busy building concentrated positions in 30 "sweaty-palm stocks" -- young, unproven companies that could double or triple in value in a very short period of time. Right now, Jacob likes auctioneer eBay for its brand name and "trillion-dollar market opportunity, here and abroad." Jacob's also eyeing MarketWatch, because he senses that financial news will be huge on the Internet -- "a much more efficient way" to transmit time-sensitive information.


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