Oppenheimer 60th Anniversary - 39

ON POINT AT OPPENHEIMERFUNDS:

Assessing Risk, Weighing Opportunity: Black Monday

BOTTOM: AP IMAGES; TOP: GETTY IMAGES

A trader reads the huge headline of the October 20,
1987, New York Post ("CRASH!") over a story about
the stock market events of the day before, which
came to be known as Black Monday.

equity markets posted their worst day in generations,
with the Dow Jones Industrial Average plunging
nearly 20%. But, perhaps counterintuitively, at
OppenheimerFunds something very different was
playing out.
For months before Black Monday, the Company's
fund managers had been accumulating cash-equivalent positions as they warily watched the turbulent
market dynamics. On Black Monday, as the ticker
plunged downward and solid, fundamentally sound
equities declined along with weaker stocks, OppenheimerFunds portfolio managers gathered for a
discussion that focused on a pivotal question: Do we
run from the market even more (in other words, sell
more positions in favor of cash) or do we dive into
the turbulence in the belief that savvy hunting will
lead us to terrific bargains?
Longtime fund manager Art Steinmetz remembered the debate as long and pointed. Do we run or
do we buy? Is this the Great Depression redux, or
one of the greatest opportunities to buy in recent
history? There was lengthy discussion within the
company, and the decision was made: OppenheimerFunds would buy, and buy aggressively, across the
board, wherever undervalued equities were found.
Steinmetz recalled that the Company's fund
managers moved quickly. "Collectively, as a Firm,
all the fund managers started buying stocks in a
big way," he said. "It was a bold stroke." And that
bold stroke paid off as markets regrouped and

Do we run or do we buy? Is this the Great Depression
redux, or one of the greatest opportunities to buy in
recent history? There was lengthy discussion within the
Company, and the decision was made: OppenheimerFunds would buy, and buy aggressively, across the
board, wherever undervalued equities were found.
LONGTIME FUND MANAGER ART STEINMETZ, NOW CIO, FIXED INCOME

rallied as awareness spread that Black Monday's selloff had been an impetuous overreaction to fleeting
market conditions.
The post-Black Monday strategy of the Company's fund managers created tremendous value
for shareholders of the Oppenheimer mutual funds.
As Steinmetz said, "Most of our equity funds were
absolutely at the top of their peer groups for 1987,
having avoided most of the meltdown and caught
the nice rebound that occurred after."
But this notable success was not just about
onetime profits because, as Steinmetz related, he
emerged a better investor - as did the Firm as a
whole. "This was a very formative day," he said. "I

1988
Vice President George H. W. Bush defeats Democrat Michael
Dukakis to become the 41st president of the United States.

learned about having perspective when markets
are bottoming. It's about keeping a cool head amid
chaos and uncertainty."
As a Company, too, OppenheimerFunds won
considerable credibility on Wall Street in the
aftermath of Black Monday. Steadfastness and clear
thinking were exhibited by fund managers and
senior management alike, and the result was the
kind of reputation that can only be earned.

THE STRATEGIC INCOME FUND
If one product could define OppenheimerFunds
in this era, it would be the innovative, paradigmbreaking Strategic Income Fund, which created a
new category of bond funds (see page 38). Instead
of concentrating on one fixed-income asset class,
the Strategic Income Fund portfolio comprised a
diversified allocation of government, international,
and corporate bonds.
This investment mix is the so-called "threelegged stool" basket of bonds, a mix that is intended
to deliver high-yield and low-volatility as well as act
as a natural hedge, with the hope of letting investors profit while including some built-in protection
against the downside.
It seems an obvious portfolio mix now, but back in
the late 1980s, nobody had ever put such an instrument on the market. Ellen Schoenfeld, vice president
and director of educational initiatives, remembered
the buzz the Strategic Income Fund spawned at its
Oppenheimer Strategic Income Fund launches.

1989

1987-1994 Entrepreneurial Innovation

* 39

Oppenheimer 60th Anniversary

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