Things are going very well here at Wanger Investment Management, in fact, they’re going great: The Long Term Opportunity beat its benchmarks during first quarter by more than 5% and our new fund, the Income and Growth Fund, was officially launched on April 1st. Want to know more? Give us a call or check out our website: www.wangerinvestments.com.

Yield in an Inflationary Time

You, our investors, asked for an investment vehicle that provided reliable yield while offering some protection from inflation. The Wanger Income and Growth Fund is open for business under the skillful hand of portfolio manager Bill Andersen. If you’re an accredited investor and wish to learn more about Bills’s thinking regarding current income and inflation protection, please contact us.

Economy is Not Out of the Woods Yet

2008 came in like a bear and, thus far, has overstayed its welcome. And all but the most optimistic “permabulls” see a long trudge ahead for the US economy. Q1 took some major indices off 10-20%, knocking the stuffing out of many funds and managers. (This is why we hedge the WLTOF.)

The bulls may say that the worst of the crisis is over: The Fed has pumped enough liquidity into the financial markets, the dollar has bottomed, and the huge write-offs have all been taken. Unfortunately, we’re not quite that optimistic. While we may have put the worst of the sub-prime crisis behind us, the global financial system still has to unwind a lot of leverage. As of this writing, interbank lending is still at a standstill with auction-rate securities frozen from illiquidity. Massive contingent liabilities in credit insurance derivatives are still looming over the balance sheets of bulge bracket banks and hedge funds. And inflation—well, the CPI is already at 4%. Do you think it’s coming down soon? We don’t.

Catastrophe or not, we are not yet done with this credit-crisis. Hopefully, we’ve avoided a full-on recession.

Good Hunting

For long term purposes, this is our kind of market. We are always on the hunt for high quality and yield rich companies at excellent valuations.

Markets like these favor a flexible approach to valuation, growth and value alike, a fundamental research based methodology and a long-term time horizon.

It’s a Great Time to Invest

There is no shortage of things to be worried about. But for us, it’s a call to action. Valuations are down and yields are up. Our job is to find those opportunities for you, our partners. Opportunities abound if you are willing to look for them.

This is a great time to be nimble, aggressive and activist.

Yours,
Eric Wanger, JD, CFA