My lifelong love with investing was an unlikely affair. It started in my late 20s, as soon as I had some income to spare. But, I am not a math person, have no real analytical skills, nor could I dissect a 10-K if my life depended on it. I am interested in building wealth but not obsessed with it. Money was always about freedom from worry, not things or status. I never thought of going to Wall Street as a career, nor did I envy those who did. If anything, I would characterize myself as an entrepreneur junkie. The art of creating, building and selling innovative goods and services fascinates me. Trend-spotting, too, is at the top of my interests. Where these all meet is what investing is to me.
I am also an odd man out. I have zero interest in sports. I could not name one current professional athlete in baseball or football. Is Magic Johnson still playing? Is Willie Mays still in center field? Not one minute is spent watching, talking about or attending professional sporting events.
Instead, my time is spent reading about business and investing. In my Soho loft in the 1980s, I spent hours reading Barron’s, Fortune, Forbes, Worth and the daily Wall Street Journal. I learned all about earnings, valuations, prices and multiples. I read up on the bond market, credit tranches, sovereign defaults, preferred conversions. Closed-end funds with NAV discounts had my keen attention. Meteoric stock rises and the crushing declines of individual companies enthralled me like a Dickens novel. Tracking the zeitgeist of the country against the direction of the S&P tested my intellect.
Instead of playing fantasy sports, I followed the Fed’s M1 money supply data and made bets that inflation could be on the horizon.
When, over the next few decades my capital grew, I eagerly put it to work. My strategy was to find the best professionals and let them make the decisions. I did some stock picking—who could resist a hunch? But the real goal was to create a team of advisors; I looked for the best in class.
This led to a diverse collection of advisors in hedge funds, closed-end funds, equities, distressed debt, investment grade credit, private equity and emerging market debt. My role became akin to an orchestra conductor’s. I decided how much to allocate to each and waved my baton in their direction. It was challenging, frustrating, but always engaging. The conversations were fascinating, the monthly or quarterly reports often illuminating. I felt at one with the investment world.
Yes, mistakes were made—investments went south, markets collapsed, stocks sank and bonds defaulted. Yet, my accounts grew. I weathered the worst of storms without concern, mostly because I abhor leverage and never had a margin call, so all in all, I was pleased with the big picture.
Surprisingly something came over me when I officially became a senior citizen. I decided to let it all go. Perhaps it was the awareness of mortality. When so many obituaries are for people younger, I understood nothing is forever. Also, it would not be fair to my non-investment-minded wife if something were to happen to me. She avoided meeting any of the advisors and never even looked at a statement. How could I put her through the stress of deciding what to do?
My lifetime interest in investing had taught me what to look for in portfolio management. Having been periodically burned by advisors taught me whom not to hire.
For starters, no public companies. To my mind, investment firms cannot serve two masters. You either put the shareholders first or the investor. The vast majority of financial scandals and SEC governance sanctions are against public firms because management needs revenue and profit growth. This has to be extracted from the investor, either via fees, self-dealing funds or breakneck expansion. I needed a firm that only cared about itself and me.
Also, I believe in the old-school practice of partnerships, where my advisors have their capital in the same positions they have put mine.
No index funds. I have written about this before. The idea of putting my money into a stressed-out, poorly-run company, or one that gives me ethical concerns such as gun manufacture, oil drilling, known worker abuse or fast food/soda (which makes people unhealthy via poor nutrition), goes against my beliefs. I have read under the hood of some ESG funds and don’t think many of their companies are all that ESG.
I needed active management, no matter what some academic studies show about lower performance results.
Longevity is a good thing. I wanted a company that had lived through many investment cycles, that survived the fatal crashes that felled so many, like Bear Stearns and Lehman Brothers. It would be good to have a firm with real bench strength, one that brought up its staff over time, one that didn’t overbid for and poach other firms’ advisors, leading to silos. Investing is hard. It requires all hands-on deck. Everyone at an investment firm should be all in.
Lastly, the managers and firm should be scandal free. I hate reading about the misdeeds committed by a firm I invest with. Mea culpas to the SEC should be for others.
It’s not easy, but it can be done. There were a few firms fitting my requirements. I chose one. Document signing day was bittersweet, as was telling my current advisors I was leaving. They all understood. Many were at the age where they too needed to make custodial changes.
Have I been happy? Actually, I have. The strategies, allocations and investment selections have all been met with my approval. If I do not like a company because of ethical concerns, my new advisors are quick to jettison it, no questions asked. But that is rare. They have done a great job managing my resources. They have centuries of investing experience. They are conservative, smart and ethical in the extreme.
Best of all, I now have so much more free time—to write, read, stay healthy, sail, engage in philanthropy, see friends and family, fix the house and travel (as least pre-COVID-19).
Letting go was the right decision.
