Diverse Portfolio Helped Heinz Kerry

The Times estimated Teresa Heinz Kerry’s assets by closely examining how she invested her family’s money between 1995 and 2003, plotting each big publicly traded investment.

She began in 1995 with 9.8 million shares of H.J. Heinz Co., worth about $400 million, according to a Securities and Exchange Commission 13D filing. She also held about $100 million in bonds and other assets, according to Sen. John F. Kerry’s 1995 Senate disclosure report.

The lowest possible estimate assumed that the $400 million in Heinz stock was left alone and that the $100 million in bonds appreciated by their average rate of 5% annually. This approach yielded about $900 million after subtraction of living expenses and charitable contributions.

But the portfolio was being rapidly diversified out of Heinz stock into better-performing investments. There were many big winners, such as Nokia, Home Depot, HCA, Gap and Biomet, among others. And there appeared to be no investment disasters, such as Enron or WorldCom.

The Times calculated that the gain on the portfolio’s big investments in publicly traded securities would have boosted the value of Heinz Kerry’s assets to $3.2 billion, assuming equal investments were made in each stock.

While capital gains taxes might have eaten away some of those increases, they could have been offset by charitable giving and other tax strategies, trust experts said.

In the end, The Times selected a more conservative approach that assumed the portfolio grew at the rate of the Standard & Poor’s 500 index, which returned 182% over the period. It also assumed that 20% of the portfolio remained in bonds paying about 5% tax-free.

An alternative method to value the investments validated the use of the S&P; index. Senate financial disclosure reports identify individual stocks and bonds, but list their value only within a minimum and maximum range. The Times calculated how much the minimum value of Heinz Kerry’s assets changed over the nine-year period and found they rose 208%, within the same ballpark as the S&P; 500 index.

Using the S&P; index, the family’s accounts would have generated principal of about $1.3 billion, while no more than $300 million was withdrawn for living expenses and charitable contributions. A more complex calculation that subtracted expenses and added gains each year as they occurred yielded similar results.

The analysis was reviewed by three senior executives at investment firms, who said the assumptions and methods appeared as fair as possible. They are L. David Tisdale, chairman of Starbuck, Tisdale & Associates; Philip J. Holthouse, a founder and partner in Holthouse Carlin & Van Trigt LLP; and Douglas A. Christopher, a partner in Crowell Weedon & Co. All three firms manage assets and advise wealthy clients.

“It is a conservatively managed portfolio,” Christopher said. “It is fair to assume it appreciated at the S&P; 500 rate.”

In terms of withdrawals from the accounts, Heinz Kerry disclosed last month that she had income of $5.1 million in 2003. If she and her three children all received such generous payouts, it would have subtracted $180 million over the nine years.

Public documents also show that about $6.5 million was given away each year as charity from the trust funds. If that amount were doubled, it would equal $120 million. With family expenses and charitable contributions, the withdrawals would amount to $300 million, still leaving assets of about $1 billion.