Is Warburg Pincus's Magic Waning? --- Investor Pins Hope On Turnarounds
NEW YORK -- Warburg Pincus & Co. is a classic Wall Street "smart money" investor.</br></br>From 1971 to 1978, Warburg Pincus and its affiliated partnerships invested $15 million in Waste Management Co.; it cashed out in 1981 for $66 million. The low-profile partnership scored another coup in 1983, when it led a group that bought 45% of troubled toy-maker Mattel Inc. Since then, Warburg Pincus has quadrupled its money in Mattel.</br></br>"They're brilliant," says John Myers, an executive vice president at General Electric Co.'s pension fund, which invests with Warburg Pincus. Adds another investor, William Snow, treasurer of Johns Hopkins University: "They pick good companies, and they get very involved in management."</br></br>The only trouble is, Warburg Pincus's knack for smart investments may be waning. The firm still boasts an extraordinary long-term record: profits that average 25% a year since 1971. For most of the 1980s, though, its gains have slipped to about 18 1/2% a year after fees -- only slightly ahead of the stock market's performance, investors say.</br></br>Currently, Warburg Pincus is mired in a losing position in Community Newspapers Inc., a joint investment that it made with newspaper publisher Ralph Ingersoll in 1987. Last year -- when stock market averages jumped 31% -- Warburg Pincus's $1.1 billion 1986 fund posted only a 10% gain. Concedes Chairman Lionel Pincus: "It wasn't a great year for us."