Barron’s profiles Primecap Management, which it describes as “one of the best fund shops you’ve never heard of.” All of its six mutual funds are beating at least 86% of their peers over the last decade. The firm began in 1983 when Howard Schow founded it with Theo Kolokorones and Mitchell Milas. A year later, legendary advocate of passive investing and founder of Vanguard Jack Bogle put up $100,000 in seed money to launch the actively managed Vanguard Primecap  fund, which now manages $64 billion in Vanguard funds, making it Vanguard’s second largest relationship.

Primecap is a very private operation and Barron’s was unable to secure interviews with its current managers. In a 1994 interview, Schow (who died in 2012) explained, “we don’t go for 20% or 30% gains. We go for triples, quardruples, octuples. But that takes years.” The firm is growth-oriented (Milias and all other value-oriented investors either retired or left), and small. It has 35 employees, 10 partners, and 11 analysts. Will Wykle of Highland Associates, which vetted Primecap for its accounts, described Primecap’s “multimanager sleeve approach” as “ensur[ing] independent thinking, individual accountability, and a nice balance of conviction and diversification.” Barron’s summarizes the firm’s approach to investing: “Find superior stock prospects. Research them heavily and buy when the stocks are controversial and prospects aren’t readily apparent. . . . Next, hold them forever.” In 2015, turnover in its investments was 9%. The stock holdings are also relatively concentrated: each of the six funds holds less than 150 stocks, and 32 of them are held by each of the funds. In total, Primecap’s funds hold 271 stocks, holdings that are “substantially different from the [S&P 500] index, and even from other growth managers with good returns.” Returns have slipped as of late, which Barron’s suggests is partly attributable to “the firm’s large stake in health care.” As one unnamed former employee told Barron’s, “it takes emotional strength to buy when the stock is going down.” But, Primecap has retained a culture that heavily values research – “it isn’t unusual for an analyst to meet with a company eight to 10 times before the firm commits money”. Former Primecap manager Jack Liebau suggested that one reason Primecap stands out is that today “we have fewer long-term investors who first think long-term – or, importantly, are allowed by their clients to think and act long-term.”