Investment: Pierre as Financier

Since he left the White House in 1964, Pierre Salinger has dabbled in both politics and business. The former press secretary to Presidents Kennedy and Johnson served five months as interim U.S. Senator from California, then lost an election for a full term. He left the $50,000-a-year vice-presidency of Continental Airlines last January and campaigned for the late Robert F. Kennedy, After Kennedy’s assassination, he worked for Senator George McGovern. Now, with McGovern out as a presidential aspirant, Salinger’s focus of attention has come back to commerce.

Portly, cigar-puffing Pierre, 43, owns an eighth of The Factory, the swinging Los Angeles nightclub that he founded last year with Sammy Davis Jr., Peter Lawford, Anthony Newley, Paul Newman and four other investors. Although he has just sold his small interest in the San Diego Chargers, a top-ranking team in the American Football League, Salinger remains a director of National General Productions, the motion-picture producing arm of National General Corp. But Salinger’s chief concern today is finance. He is chairman of Great America Management & Research Co. International (GRAMCO), which controls a fast-growing, Nassau-based mutual fund, U.S. Investment Fund.

Landlord’s Profits. Most mutual funds invest their shareholders’ money in stocks and bonds, but U.S. Investment Fund puts 70% of its revenue into income-producing U.S. real estate. Moreover, the fund sells its shares only outside the U.S. to non-U.S. citizens in order to avoid supervision by the Securities and Exchange Commission. Last week the fund’s realty holdings passed the $100 million mark as it bought Ling-Temco-Vought’s 32-story headquarters building in downtown Dallas for $16.5 million. L.T.V. will lease the space it already occupies, and the fund will add a landlord’s profits to those already generated by 33 other properties in eleven states and Puerto Rico. Though still small as mutual funds go, the fund is currently growing at a $5,000,000-a-month pace. It is able to reap a tidy income from large holdings because they are mostly financed by borrowed mortgage money. As a consequence, the value of each share has climbed 20% since the fund’s birth in January 1967—a performance creditable enough to stir the interest of some well-established U.S. investment funds in forming similar offshore ventures.

Both GRAMCO and U.S. Investment Fund are the brainchildren of a one time White House summer intern, GRAMCO President and Founder Keith Barish, 25. Even before he left the University of Miami after his junior year in 1965, Barish had accumulated a small fortune with various enterprises, including a housing project in Mexico; he had also founded Manufacturer’s National Bank of Hialeah (assets: $10 million) and become a director of Hamilton Life Insurance Co. Though his first love was politics (“I thought the greatest thing in the world would be to be a U.S. Congressman”), Barish decided to concentrate first on making money. He took aim at a hitherto overlooked market: foreign investors eager to put funds into the U.S. but imbued with a traditional preference for real estate rather than stocks and bonds.

To give his venture prestige, Barish shrewdly enlisted as directors of GRAMCO Ltd. not only Salinger but half a dozen other Government aides. Among them: former HEW Under Secretary Ivan Nestingen, former Commerce Department Executive John Stillman and former White House Assistant Richard Donahue. As chairman, a role that he assumed on leaving Continental

Airlines, Salinger concentrates on helping the fund expand into new territory. Although there are 350 salesmen in 40 countries, 70% of the fund’s sales so far have come from Latin America. Last week Salinger and his third wife, French-born Nicole, flew to Paris, where Pierre plans to live for the next year and a half while promoting the fund’s European sales, which are thus far confined to West Germany.

No Brass Plate. For his efforts, Salinger gets a hefty salary plus stock options. One of his frequent tasks, Salinger concedes, is helping to dispel investor worries about GRAMCO’s Nassau base. Lax laws, loosely enforced, have given the Bahamas a reputation as a haven for promoters of dubious activities.

Yet for GRAMCO as well as its customers, the location offers some important advantages. When buying, foreign investors escape the 15% U.S. interest-equalization tax. When selling their shares, they avoid U.S. capital-gains taxes. Because the Bahamas have no income tax, GRAMCO’s revenue also enjoys a tax-free status.

While all too many Nassau-based firms consist chiefly of a brass plate on a lawyer’s door and someone to answer the mail, GRAMCO’s 100 Nassau staffers fill three floors in two office buildings. To make sure that every penny of income and outgo is handled meticulously, GRAMCO has turned the routine operation of the fund over to the prestigious Trust Corp. of the Bahamas, which is jointly owned by such institutions as Manhattan’s Morgan Guaranty Trust Co., the Royal Bank of Canada and London’s Westminster Bank Ltd.