The Economist Who Roared

When Richard B. Hoey took charge of the newly inaugurated Dreyfus Growth & Income Fund on Dec. 31, he was encumbered by significant baggage: He was a respected, widely quoted economist and market seer. And it's an article of faith on Wall Street that the most astute market and economic gurus, from Henry Kaufman to Elaine Garzarelli, are not so hot at managing mutual funds.

Well, Dreyfus Corp.'s chief economist has turned the conventional wisdom on its ear: The Growth & Income Fund is a champ. Through Sept. 14, it posted a total return of 11.3%--more than eight points higher than the 2.9% total return recorded by the Standard & Poor's 500-stock index and far exceeding the dreary performance of most equity funds. Not surprisingly, investors have taken notice. As they have poured money into the fund, it has exploded in size, from $5 million to $77 million, in its short life.

DICEY DAYS. For Hoey, noted for on-the-money business-cycle predictions as chief economist at Drexel Burnham Lambert Inc., running money is a "psychological as well as intellectual challenge." He says with a smile: "Losing money for other people is a whole lot different than just giving advice."

The ebullient, 49-year-old Hoey is quick to point out that he is no novice at the money-management game. In the 1960s, he was a junior partner at John B. Braine Inc., which managed money for the well-heeled. Braine later went out of business--common enough on Wall Street.

Indeed, Hoey's resume is generously larded with the distant echoes of yesteryear: W.E. Hutton (founded by kinfolk of the also-defunct E.F. Hutton), Bache Halsey Stuart, Drexel, A.G. Becker, and, most recently, the U.S. arm of Barclays de Zoete Wedd. That, too, has gone to that great wire house in the sky.

Hoey was at Dreyfus for only six months before he got the job of running the fund. It was a particularly dicey time to start an equity fund. The stock market had surged in 1991, and investors shoveled money into stock funds in the hope that the year's gains would be repeated. Instead, the market seesawed--and Hoey proved adept at market timing.

For starters, he was heavily invested in 1991's winners--small stocks and companies that had recently gone public. Stocks were moving powerfully, and Hoey couldn't resist the temptation to "plunge into the churning waters." He was careful to stay away from health care stocks, which were beginning to sour. "It was like going into a restaurant and seeing someone turning blue," he says. "You tell the waiter: `I think I won't order what he's eating.' " By February, Hoey had moved into cyclical stocks and money-center banks, and in July, he reacted swiftly to glum economic tidings by dumping cyclicals and moving into high-yielding stocks.

Nowadays, Hoey is altering his asset mix again by gradually buying cyclical stocks. About 50% of the fund is in common stock, with about 25% in convertible securities and 25% in cash. But if the tide turns, he will feel unencumbered about changing his mind--quite different from his days as a brokerage-house seer, when public consistency was the order of the day. "Forecasting pride doesn't count for much," says Hoey.

Performance alone is the key--and an area where Dreyfus desperately needs an equity-fund star. "You can't point to any of the Dreyfus stock funds and say: 'This is a fund you can really be proud of,' " notes John Rekenthaler, editor of Morningstar Mutual Funds.

But with Hoey proving that an economic maven can manage money, maybe the Dreyfus lion finally has something to roar about.

    Before it's here, it's on the Bloomberg Terminal.