Keeping Community in the Investment Equation

I come from a very strong family, both nuclear and extended, of community-oriented strivers and loving individuals. Both my parents come from big families, so there were lots of cousins and the vast majority were in New York. We would get together for family picnics, and on weekends all the kids got dropped off at an aunt or uncle’s house.

A lot of my extended family were city government workers. My dad for many years was a public defender with the Bronx Legal Aid Society. My mom taught in the New York City school system during my formative years.

My grandfather had a business in the Bronx on 149th Street and Third Avenue. It was one of those multifaceted businesses—travel agency, insurance, and income taxes. One of his clients, Mr. Brown, was the only Black teacher at the Horace Mann School, an elite prep school in the Bronx. My grandfather was very education focused. When Mr. Brown indicated that Horace Mann was the best school in New York, that initiated a family project to have me attend, which I did.

In the 1970s and early ‘80s, the Bronx was a tough place. Much of the area was reduced to rubble; the phrase “The Bronx is burning” came from a common phenomenon in which landlords would burn their buildings for the insurance proceeds rather than rent them out. But the neighborhood I grew up in was different: a mixture of Black, Italian, and Jewish middle-class families. People had jobs, owned houses, owned cars.

When I started at Horace Mann—it’s a little bit facetious but I’d joke that I was dropped onto the set of Dynasty. It definitely was a different world. One that opened my eyes to possibility. Part of the learning experience was realizing I belonged, and I could envision myself in that world. The other part eventually became wondering why more people can’t access that world because I saw no difference in the human potential or core values of the people there and in the broader Bronx community.

I read Robert Caro’s book The Power Broker: Robert Moses and the Fall of New York in high school. I walked away with a sense of how important public works projects are to either building or decimating communities. Building the Cross Bronx Expressway right in the middle of thriving Black and Hispanic neighborhoods killed those communities. Another takeaway was that Robert Moses’ power came from being able to fund his projects.

In college, I was trying to figure out how I could impact society, but also how I could acquire wealth, because I was struggling to pay tuition. My academic advisor at Columbia suggested I look into Wall Street. Wall Street wasn’t part of the everyday vernacular the way it is today. It was still a small club. My advisor said I had the quantitative skill sets and the intellect to thrive, and that some internships paid $500 a week. I landed an internship in public finance investment banking then stayed on Wall Street for nearly 35 years.

Throughout my career, I’ve always had a sense of purpose associated with utilizing the financial markets to fund projects that benefited the common good. At one juncture, the MTA, the agency that operates the New York City public transit system, was a big client of mine. During the Clinton administration there were questions as to whether or not we would be able to access the capital markets for New York City. I felt extreme pride working to demonstrate to investors that the city is worthwhile to invest in and securing the capital required to run the system effectively.

Some of that financing was for subway cars. Every time I get on the subway, I think about that. I’ve seen the city rebound. That gave me confidence, even through the depth of the COVID-19 crisis, that the city will bounce back.

In 1997, I shifted from investment banking to the asset management side of the business. My clients were global institutional investors. I was lucky enough to work with teachers’ pension funds. I considered it a privilege and a responsibility to be working on behalf of the teachers. It was not just a paycheck. I was using my talents and skills to fund pensions for people who have made tremendous contributions to society.

In my case, that includes aunts, uncles, and cousins, so it was always easy for me to remember who I was working for. I also thought it was important to instill that culturally into my organizations, so I strongly urged my staff to volunteer in schools and learn about the people behind the pensions. I always felt that being a bridge to different but similar worlds was something important that I could contribute. In my Horace Mann days, it was important for me to go to my friends’ houses. But it was also important for them to come to see my world. Having that understanding flow back and forth goes to the common good and to community.

It might seem strange: How does volunteering in schools change investing decisions? Well, in difficult moments, investment managers have to make difficult choices. I wanted those choices sharpened. If you have nothing to lose beyond an anonymous person’s money, you’ll go further out on the risk spectrum. Whereas if you’re more vested with your clients, capital preservation becomes a bigger factor.

I believe that approach made a difference for the clients as well. During the financial crisis, in late 2008, a convertible arbitrage manager whom we had seeded came to me with an investment opportunity. He had identified 30 bonds, all of poor credit quality, being thrown out with everything else because the market had tanked. We scrubbed the portfolio with him. Our work suggested the bonds were going to be paid back within two and a half years. But however much we believed in the investment, we had to recognize that, in the middle of a panic, it’s very hard for investors to lock up their capital.

We found a way to structure the transaction to make it comfortable for our clients, given all that was going on. We structured it so we only made our money when we returned their money and then only if they had a 20% return on capital. That’s unusual. We did it to demonstrate that we believed in the investment. Frankly, we also structured it with a higher incentive fee on the back end if we made them more than 50% return which of course they were pleased to give us. We, the investors and the investment managers, all made a ton of money.

I’m proud of the trust our clients showed in us in the midst of such extreme market turmoil. Because we had cultivated a wonderful relationship with our clients—teachers’ pension funds and university endowments—they understood our DNA and knew we had their best interest at heart. There is a satisfaction in knowing that over your career you have gained currency with investors who understand you and your values.