On a steamy morning in mid-June 2000, money manager Frank Husic walked into San Francisco’s elegant Park Hyatt hotel for a 7:30 a.m. breakfast meeting with his lawyer Michael Kahn to discuss new business, including the final details of a pending $100 million deal with the Girl Scouts of the U.S.A. Then Husic’s cell phone rang. It was his head trader calling to report shocking news: Husic’s chief investment strategist and trusted deputy, William Stephens, had been arrested in a Federal Bureau of Investigation sting aimed at uncovering a widespread Mafia-linked conspiracy to defraud investors and bilk union pension funds. More than 100 people, including Stephens, had been indicted.
A stunned Husic relayed the news to his lawyer, who instinctively braced him for the worst.
“We have to prepare for the fact that you could be charged,” Kahn said.
“But I haven’t done anything wrong!” Husic exclaimed.
“Of course you didn’t do anything wrong, and we’ll be able to prove that,” Kahn assured him. “But in the meantime, Frank, this could very well cost you your business.”
It nearly did.
Husic, 62, was never implicated in any wrongdoing, and Stephens, 52, was subsequently acquitted of all charges, but the damage was done. Husic Capital Management, an institutional growth stock shop founded in 1986, was soon in free fall. A planned sale of the company for upwards of $100 million collapsed; his firm’s reputation in tatters, Husic was fired by clients and abandoned by consultants. The timing couldn’t have been worse: The troubles hit just as the technology stock bubble burst, triggering a grim bear market. From $5 billion in assets under management in early 2000, his firm hit a low of $350 million in October 2002.
“Here I was, a few weeks from selling the firm for millions,” Husic recalls, “and then, just like that, I was nearly out of business.”
But even as his firm spiraled out of control, the hyperfit, barrel-chested Husic reached inside to find the will to fight back. Stephens’ acquittal helped, as did the market rebound and Husic’s stubborn refusal to be stymied by rejection. Today Husic’s 19-person firm -- halved since January 2000 -- boasts assets of around $650 million, thanks largely to the strength of a recent run of exceptional investment performance. Last year eight of Husic Capital’s 12 portfolios registered returns of better than 80 percent.
Many consultants and plan sponsors remain leery of the scandal-tarred asset manager. Husic’s performance record has sometimes been quite volatile. But with a trickle of new accounts and high-profile hires such as chief marketer Miriam Ballert, recruited from Mellon Institutional Asset Management in April, Husic has begun to restore his firm’s name. It bolsters Husic’s case that his flagship small-cap growth fund can report a strong average annual five-year return -- a key data point for institutions -- of 6 percent through March 31, versus 2.3 percent for the Russell 2000 growth index.
“We’re not there yet,” Husic says, “but we have turned a corner. It’s been one tough road, let me tell you.”
The son of a steelworker, Husic knows all about tough roads, having seen his share of ups and downs -- as well as several bruising scandals -- during a three-decade career in finance. As an Alliance Capital Management portfolio manager in the early 1980s, Husic emerged as an early star of technology investing, touting such first-generation gems as Dell and Intel Corp. Fortune magazine rated him the No. 1 fund manager in the summer of 1983. But then his hand cooled. Even as the stock market rallied, his fund’s returns plunged and assets fell.
Years later, running his own firm, Husic came under harsh criticism from industry executives for changing an entry on his résumé on a Securities and Exchange Commission form, sparking suspicion that he had deliberately misrepresented his educational credentials. Some consultants saw the résumé change as a red flag, and at least one client terminated its relationship with Husic Capital. But nothing in his past had prepared Husic for his most recent crisis.
Husic’s attempted comeback is a tale of tenacity, hard work -- and the power of a most improbable partnership with another down-on-his-luck investment pro, Tom Wyman Jr., 42. A once-high-flying Internet analyst, Wyman had been laid off twice in the span of 18 months, first in late fall 2000 by J.P. Morgan Chase & Co. and then a year later by Dresdner Kleinwort Wasserstein. In spring 2002, Wyman approached Husic, whom he knew slightly, with a proposition. Wyman would join Husic Capital Management as a portfolio manager and research chief and help get the firm back on track. In exchange, Wyman would get a chance to write his own second act.
Husic, who respected Wyman’s experience and appreciated his enthusiasm, bit. He and Wyman proceeded to overhaul the firm’s scattershot research process to make it more cohesive, combining quantitative screening with bottom-up investigation. Their love of technology stocks -- and belief in the power of momentum growth investing -- made Husic and Wyman fast friends and strong partners. “We hit it off,” says Wyman, “because we have this shared passion for finding the next big thing.”
First, they must find clients. Together the two men are battling to persuade plan sponsors of the firm’s prospects -- and integrity. They can cite the strong long-term track record of Husic’s flagship small-cap growth portfolio. Before the 2000 market crash, Husic’s 13-year-old small-cap fund produced negative returns in only two years, 1990 and 1994. In 2001, following Stephens’ arrest and the onset of the bear market, the fund fell 18.8 percent, compared with a drop of 9.1 for the Russell 2000; in 2002 the portfolio declined 38.5 percent, compared with 30.2 percent for the benchmark.
“With everything going on it was difficult to stay focused on investing during that period,” Husic says. “To say that I was distracted would be an understatement.”
Husic and Wyman have made some progress, signing up a few small accounts, but they have yet to get back into the good graces of the consultants who control access to trillions in pension assets and who flee from controversy.
Husic has his loyal supporters. Coca-Cola has remained a client since 1990. Says Carol Kontor, investment officer for the $9 billion-in-assets Nebraska Investment Council, which has invested with Husic since 1994 and stuck with him through his recent debacle, “Regardless of what happened in the past, the man is a great stock picker.”
BORN IN YOUNGSTOWN, OHIO, HUSIC GREW UP in the heart of the Rust Belt, the only child of a steel-mill foreman and his secretary wife. Husic was raised largely by his Croatian-born grandmother, who encouraged him to work hard and get a college education. With income from odd jobs, he made his way through Youngstown State University. A course in computer science his sophomore year sparked his lifelong fascination with technology. His computer science professor helped him land a summer job working in the Yorktown Heights, New York, office of IBM Corp., which was developing a mainframe computer system for the steel industry.
After receiving his BS in mathematics in 1964, Husic attended Carnegie Mellon University in Pittsburgh, where he earned an MS in industrial administration. In 1968 he took an entry-level research job at a McLean, Virginia, think tank, Research Analysis Corp. Two years later RAC paid his tuition to the University of Pennsylvania’s Wharton School of Business.
It was there that he wandered into the investment business through the back door. While pursuing his Ph.D. at Wharton, Husic met an employee of Donaldson, Lufkin & Jenrette who recommended him to Thomas Jones, the firm’s head of information technology. Jones had his hands full developing a computer-based performance measurement system for the firm’s institutional money management group, Alliance Capital Management, and was looking for help. He hired Husic as an independent consultant; the graduate student began commuting a few days a week from Philadelphia to New York and got hooked on the business. Husic never got his Ph.D., but he did receive an MA in economics from Wharton in 1972. That year he was recruited to work as a capital goods analyst at Alliance Capital’s Minneapolis office, which had just been opened by Philip Von Blon, a former chief financial officer for the Minneapolis Star Tribune Co., which used DLJ for pension management.
“Husic was as hungry as they come,” Von Blon recalls. “He wanted to have a hand in everything, and no matter what it was, he always did a hell of a job.”
Though he enjoyed his work, Husic was looking to get ahead. When Robertson, Colman, Seibel & Weisel, the hotshot San Francisco banking boutique, offered him a position as its top machinery analyst, he grabbed it. But a few months after he arrived, a battle between the partners broke up the firm. Thomas Weisel remained at the downsized brokerage, which he renamed Montgomery Securities.
“I could see back then that Husic was destined for greatness,” Weisel recalls. But not at Montgomery.
Put off by the upheaval and disarray that followed the breakup of the firm, Husic decided to move on. “I didn’t want to leave San Francisco, but I couldn’t stay at the firm,” Husic says.
He called Von Blon, who told him that Alliance was looking for someone to help build up its San Francisco office. Might Husic be interested in becoming a portfolio manager? In December 1978 Husic rejoined Alliance as a portfolio manager for several high-net-worth accounts.
It didn’t take long for the onetime computer science whiz to sense the enormous promise of what would become Silicon Valley. “Remember, this was the dawning of the personal computer,” Husic recalls. “Also, in talking to investment bankers, I could see all these IPO deals coming through the pipeline.” In March 1982, five months before the start of the great bull market, Alliance Capital launched a technology fund and assigned Husic as co-manager.
As the aggressive portfolio manager of the Alliance Technology Fund, Husic rode the booms and busts of tech stocks over the next few years. In its first year the tech fund returned more than 200 percent. But many of the early personal-computer makers and fledgling telecommunications stocks that won Husic the No. 1 ranking from Fortune magazine in 1983 later went belly-up, wiping out much of his fund’s earlier gains. Husic’s Alliance Technology fund dropped 40 percent from its peak in the summer of 1983 through the end of 1984, when assets fell to $150 million.
He was building the fund back up when Equitable Life Assurance Society bought Alliance in 1985. When Alliance CEO Dave Williams asked him to move to London to help build the firm’s U.K. presence, Husic decided to strike out on his own.
On the strength of his reputation as a tech stock seer, Husic persuaded four Alliance clients with a combined $50 million in assets to sign up with his new firm. In 1988 and 1989 the funds delivered sizzling performance and Husic pulled in a raft of new accounts, including mandates from the Los Angeles Fire & Police Pension System and Halliburton Co. By 1990 the firm had crossed the $1 billion mark.
Three years later, in July 1993, Vanguard Group hired Husic Capital Management as subadviser to its $1.1 billion Vanguard Morgan Growth Fund, a large-cap offering. Husic, who ran 15 percent of assets, or $165 million, found himself in good company -- his co-managers were Franklin Portfolio Associates, Wellington Management Co. and Vanguard portfolio manager Gus Sauter.
In 1995, Vanguard hired Husic for another subadvisory assignment, running the newly launched Capital Opportunity Fund, a small-cap aggressive growth stock portfolio.
But Husic’s hot hand went cold. Between its inception, on August 31, 1995, and November 30, 1997, Husic’s Capital Opportunity returned just 0.66 percent, compared with 12.4 percent for the Russell 2000 growth index. Husic made one especially ill-fated move in April 1997 when he shorted tech stocks and lost $1 million covering his positions. “It did not work out well at all,” Vanguard chairman John Bogle told Bloomberg News at the time.
Meanwhile, the Vanguard Morgan Growth Fund had trailed the Standard & Poor’s 500 index by about 250 basis points over five years on an annualized basis. So in December 1997, Vanguard released Husic from both assignments. By the end of the following year, total assets at Husic Capital Management had fallen to $2.7 billion, from close to $4 billion at the end of 1997. “The Vanguard decision hurt us, but we overcame it,” Husic says.
Looking for an executive to serve as the public face of his firm and to help bolster its risk management, Husic in May 1998 recruited William Stephens from Chicago-based Ameritech Corp., where he had been the chief investment officer, overseeing $21.5 billion in assets. Respected and well liked in the pension industry, Stephens had been a client of Husic’s since the former’s days as a plan sponsor at the Teachers’ Retirement System of the State of Illinois in the late 1980s, and at the Southern Company, a power company, in the early 1990s. Husic brought him on as chief investment strategist, but Stephens essentially served as the firm’s chief marketer.
Stephens had been on the job for only a few months when Husic faced a distressing setback: Bloomberg reported that he had amended the academic credentials on his Form ADV, first filed with the SEC in 1986. The original, as well as subsequent ADVs filed before 1998, stated that Husic had earned a Ph.D. in economics from the Wharton School at the University of Pennsylvania in 1972. He revised the representation of his academic credentials in August 1998, deleting the reference to a Ph.D. and replacing it with a master’s degree in economics.
Husic endured a brief bout of bad publicity. One client, the $4 billion Orange County Employees’ Retirement System, fired Husic Capital from a $170 million account, partially as a result of the news about Husic’s résumé change, although the money manager was already on the pension fund’s watch list for performance issues, according to an informed source.
Husic has always contended that the original misrepresentation was an administrative error, not a deliberate distortion. “We won a lot of new business after that happened,” he says. “It was a nonissue for us.”
Amid the controversy about the credentials, Stephens, as the firm’s chief marketer, emerged as his boss’s staunchest advocate.
In February 2000, with the Nasdaq Stock Market flirting with 5,000 and Husic Capital’s assets approaching $5 billion, Husic thought perhaps the time had come to sell his firm. His Goldman, Sachs & Co. bankers planned to start the bidding at $100 million.
But not for long.
The Nasdaq peaked on March 10 and then began its swoon -- eating away at Husic’s assets and the value of his firm. In June, Husic learned of the FBI sting, dubbed Operation Uptick.
The government charged that in March 2000 Stephens had agreed to help corrupt union officials and organized crime figures skim union pension fund assets. But before the alleged scheme could be carried out, the government said, the FBI swooped in and arrested 100 people. Stephens, who declines to comment, vigorously maintained his innocence throughout his ordeal.
Much of the prosecution’s case relied on the testimony of Jeffrey Pokross, a government informant who was a principal at DMN Capital Investments, which prosecutors described as a corrupt New Yorkbased investment bank and brokerage. Mary Jo White, U.S. Attorney for the Southern District of New York, alleged that DMN had been infiltrated by members of the Bonanno, Colombo, Gambino, Genovese and Luchese crime families and used for various pump-and-dump schemes. Between December 1, 1999, and May 4, 2000, the FBI obtained 1,000 hours of audio from a wiretap at DMN’s lower Manhattan headquarters.
According to Stephens’ lawyer, Gerald Shargel, his client knew Steven Kanaval, a former Husic trader who had left in August 1999 to become a marketer for TradeVentureFund, a Chicago-based hedge fund. TradeVenture was run by Glenn Laken, a commodities trader whom Stephens also knew. As a favor, Kanaval, who was never charged with wrongdoing, had asked Stephens to attend a dinner meeting at Joseph’s, a restaurant around the corner from DMN’s office in Hanover Square, to make a presentation to a group of roughly 40 investors assembled by a New York stockbroker. The goal: to persuade the group to invest in TradeVentureFund.
Pokross, wearing a wire, attended the dinner. He recorded Stephens’ 15-minute testimonial about Laken’s abilities as a trader.
Prosecutors later charged that in one of three pension-skimming plots involving DMN, Laken had agreed to allow TradeVentureFund to be used as a vehicle through which Frank Persico, an alleged associate of the Colombo crime family and a trustee of the Production Workers Local 400 retirement plan, could skim assets from the fund.
According to the government, the Local 400 plot, which never came to fruition, involved Persico’s ensuring that the pension fund would invest a portion of its assets with Husic Capital, which would in turn invest in the TradeVentureFund. TradeVentureFund would then agree to generate inflated commissions, a portion of which would be kicked back to Persico. Laken was convicted and sentenced to 37 months in prison on multiple counts of racketeering and fraud. Persico pled guilty to racketeering and fraud charges and was sentenced to 63 months in prison.
Pokross, prosecutors charged, had convinced Persico that the highly regarded Stephens would be the perfect front man to lend a veneer of respectability to help steer union money into Laken’s fund. Through Laken, Pokross offered to arrange for Stephens to meet with some pension fund executives when Stephens came to New York. Stephens, according to attorney Shargel, told Pokross that he was open to meeting with the pension fund officials, and that if any of the introductions led to any business deals, Pokross would be entitled to a standard third-party marketing finder’s fee. Shargel says that his client never agreed to anything beyond that. The government charged that Stephens conspired with Pokross to bribe union officials.
One of the potential clients that Pokross introduced to Stephens was Stephen Gardell, then a recently retired New York City police detective and the former treasurer of the New York Detectives Endowment Association. Stephens later testified that if he in any way appeared to go along with Pokross, it was only to gain the introduction to Gardell and other pension officials. The former police detective subsequently pled guilty to a single count of wire fraud and was sentenced to one year in prison. Gardell could not be reached for comment; his attorney, Edward McDonald, says Gardell “did his time and is getting on with his life.”
On June 12, 2000, prosecutors handed down their indictments. Two days later, at dawn, six FBI agents appeared with a warrant at Stephens’ Marin County home. News of the sting broke over the wires within the hour, the culmination of a major investigation into organized crime and Wall Street that was widely covered by the media.
The government charged Stephens with several counts of racketeering, conspiring to pay illegal kickbacks and wire fraud. He was charged as an individual; neither Husic nor Husic Capital was ever targeted by prosecutors.
About an hour after Husic’s hotel breakfast was interrupted by his trader telling him of Stephens’ arrest, Stephens himself called Husic from a pay phone at the federal courthouse in San Francisco. He told his boss it was all a terrible mistake.
“I’ll have this cleared up and be back in the office by noon,” he said.
When Husic repeated the comment to Kahn, his lawyer, Kahn said, “Frank, the prisons are full of people who say it’s all just a big mistake.”
That same day, at Kahn’s suggestion, Husic hired Gary Naftalis, a high-powered white-collar criminal defense attorney at New Yorkbased Kramer Levin Naftalis & Frankel. He also placed Stephens on paid administrative leave. Says Husic, “I didn’t feel we could let him go, because we didn’t have all the facts in, but his having been arrested by the FBI was enough for us to put him on a leave of absence.”
Within hours of the arrest, Husic Capital Management began to unravel. Husic was expecting to receive -- that very day -- a signed contract from the Girl Scouts finalizing the $100 million assignment that he and the nonprofit had agreed on. But the day after Stephens’ arrest, Girl Scouts executives told Husic that they were “reconsidering” their commitment. Soon after, the nonprofit pulled out of the deal. That same day Bear, Stearns & Co. backed away from a nearly final agreement to hire Husic as small-cap manager for its wrap business.
Several days after that, Naftalis contacted prosecutors and volunteered Husic’s cooperation. The government’s reply: Thanks, but no thanks.
Within weeks, Husic Capital lost one of its largest accounts, SBC Communications; then Roadway Express fell off the tracks. After a few months many more clients had disappeared.
Initially, Stephens remained on paid leave. But in September 2000, Husic accepted his resignation. For the rest of the year, he flew around the country, pleading his case to clients and consultants -- to no avail. Later Husic closed his small New York office and laid off 15 of his 40 staffers.
Stephens, meanwhile, had been released on $1 million bail, his majestic Tiburon house overlooking San Francisco Bay put up as surety. He hunkered down. Some 30 money management executives set up a legal defense fund for the embattled Stephens, raising nearly $500,000. But Stephens eventually had to sell his house and move with his wife and three sons into an apartment in nearby Larkspur. The marriage became strained; in 2001 the couple separated and later divorced. For two years Stephens was a stay-at-home dad, coaching one son’s football team; the ordeal, say friends, brought Stephens closer to his youngest son, now ten, who has Down’s syndrome.
As the Stephens trial got under way in New York in November 2001, the government subpoenaed Husic as a witness for the prosecution. During the trial Patrick Smith, the lead prosecutor, put Husic on the stand to testify against Stephens.
Husic testified that his former CIO had once violated the firm’s policy by joining a corporate board without telling him; Stephens had indeed joined the board of a company called Nhancement Technologies, and without Husic’s permission. But under questioning by Stephens’ attorney, Husic conceded that the policy was actually that employees were required to get permission from Husic Capital’s CFO, not Husic himself, and that Husic didn’t know if Stephens had done that (Shargel says that his client had).
According to court records, Husic also stated under oath that Stephens had never made any investment decisions that were not in his client’s best interests.
“We got more mileage out of Husic on the stand than the government did,” says Shargel.
In February 2002 the trial ended and Stephens was acquitted on all counts. Of the seven people tried in connection with the pension fraud schemes, three were acquitted (Stephens and Dallas real estate moguls Gene Phillips and Cal Rossi), two were found guilty (Laken and stock promoter John Black), and two pleaded guilty (Gardell and Persico).
“Bill never once doubted during the entire ordeal that the truth would eventually come out and that he would be cleared,” says a close friend of Stephens. Soon after the acquittal, Stephens moved to Chicago.
HUSIC HAD BEEN FIGHTING FOR THE BETTER PART of two years when the phone rang one day in March 2002. A professional acquaintance, Tom Wyman Jr., son of exCBS president Tom Wyman, was calling. Wyman kept it simple: “Frank, I want to help you rebuild your business.” Husic was intrigued.
A graduate of Deerfield Academy and Amherst College (he was the seventh-generation Wyman to attend the prestigious liberal arts college), Wyman had received his MBA from Harvard Business School in 1988. After working as a Morgan Stanley & Co. analyst trainee and as a junior banker at San Franciscobased Eastdil Realty, Wyman connected with the late Daniel Case, then the CEO of tech shop Hambrecht & Quist Capital Management, who hired Wyman to start a consumer stock group for the firm. “Basically, he gave me a phone and a desk,” Wyman recalls. Along with two other staffers, Wyman recruited analysts and helped take such companies as Cannondale Bicycle Corp. and Rollerblade public.
In the spring of 1999, Wyman jumped to J.P. Morgan & Co. to become a consumer Internet stock analyst. He picked up coverage of Amazon and EToys and began to share television time with star Internet analysts Henry Blodget of Merrill Lynch & Co. and Mary Meeker of Morgan Stanley.
When Chase Manhattan Corp. merged with J.P. Morgan in October 2000, Wyman found himself out of a job; by this time Chase owned H&Q, and the newly merged bank kept on Chase’s Internet analyst. Wyman lost his next job, as a consumer Internet analyst at Dresdner Kleinwort Wasserstein, when Allianz bought Dresdner Bank in 2001 and jettisoned DKW’s U.S. equities business, which included the research division. “It was my worst nightmare come true,” he recalls.
Looking for work at a money management firm, Wyman remembered hearing about Husic’s plight. He contacted a friend, a consultant who had worked with one of Husic’s clients. The consultant, it turned out, had hired a private detective to investigate the Stephens scandal. Husic was clean, the detective’s report concluded. By this time, too, Stephens’ trial had ended with an acquittal. A few days after learning about the report, Wyman called Husic. The two men met several times, and in April 2002 they joined forces. With a depleted staff, Husic needed all the help he could get.
Wyman felt immediately comfortable with the stock-picking process at Husic Capital, which begins with a daily 7 a.m. meeting, attended by Husic, Wyman and the firm’s two analysts, Thomas Judson and Max Allman. The four debate buying or selling one or two stocks across the firm’s ten portfolios. Before those names can come up for discussion, they have to have survived what Husic calls “the gauntlet.” This begins with a software-driven front-end system customized to a set of parameters -- led by the price-earnings growth ratio. Every day six of the stocks from the front-end screen list are put through a standard fundamental analysis scrub-down, producing data that Wyman and his analysts use to prepare concise two-page reports on the companies’ financials.
Says Wyman, “Our stock ideas tend to cluster around a half dozen investment themes where the firm wants to be early in anticipating changing perceptions of a sector and leading companies within that high-growth sector.” For example, Husic and Wyman thought investors were unduly bearish on Internet companies and zeroed in on United Online, a low-cost Internet access provider. “UO is like the Southwest Airlines of the Internet,” says Wyman. “They offer $9.99 access against AOL’s $24.99. We started buying at around $2, and it went up to $32 or so.”
When a stock idea passes muster with Wyman and his analysts, it appears on the agenda of the morning meeting, where the question becomes, “Is it time to buy?” Head trader Paul Sabo, a veteran principal Nasdaq trader at Robertson Stephens who joined in April 2003 from hedge fund Weir Capital Management, often joins the debate. “I look for ideas, for entry points,” Sabo says. “My role is to provide the technical analysis to complement strong fundamental work.”
Once a stock is added to the portfolio, Husic will begin to build up a position representing 1.5 to 2 percent of any one portfolio. If over the next 90 days the company fails to clear a preset hurdle, such as mounting a successful new product launch or meeting an earnings target, Husic will scale back; after two missed hurdles he will usually cut his losses.
To identify promising growth stocks, Husic Capital focuses first on the PEG ratio, which measures the ratio of forward price-earnings multiples to earnings growth rates. For example, if a company is selling at 20 times next year’s earnings and reports annual profit growth of 40 percent, its PEG ratio is 0.5. Investors consider a ratio of less than 1 an attractive valuation. “We’re not looking for growth at a reasonable price,” Husic says. “We’re looking for remarkable growth at a justified price.”
Both Husic and Wyman see opportunity in today’s mixed markets. They argue that the recent bear market and the Wall Street research scandal have combined to strand hundreds of valuable companies, many of them former IPO darlings, without any research coverage, thus depressing their valuations. “It’s the best time in a generation to be an investor,” says Husic.
Last year, Husic and Wyman hit a home run with one such orphan, Autobytel, which uses the Internet to link potential car buyers with a network of 5,000 car dealers. After going public in 1999 at $40 a share, Autobytel fell to $2 in September 2002. Between April 2003, when Husic Capital bought the stock, and April 2004, the share price more than doubled. It recently traded at 10.
But smart stock picks can only go so far. Returns at Husic Capital have been phenomenal, but winning new clients has not been easy.
So far this year, despite its track record, Husic Capital has snared only two modest mandates. Roulston Financial Group, a Mississauga, Ontario, high-net-worth money manager, signed up Husic’s small-cap growth fund for its managed account program. The other victory came courtesy of Husic’s longtime friend, auto legend Roger Penske, whose former company, Detroit Diesel Corp., is a client of Husic Capital. Husic asked Penske Transportation to recommend his firm to another Penske subsidiary, UnitedAuto Group, a Bloomfield Hills, Michiganbased auto dealership franchise with a large 401(k). Penske obliged, and Husic Capital joined the roster of money managers in the UAG 401(k).
“These are small deals,” Husic notes, “but they all matter.”
Husic and Wyman are hoping for more victories now that they’ve filled the post of chief marketer, a position that had been vacant since Stephens’ arrest in 2000.
When she heard about the opening from a friend of Wyman’s, Miriam Ballert, a 20-year industry veteran who had worked at both MFS Investment Management and Mellon, was intrigued by the possibilities of Husic Capital. She saw Frank Husic as a talented institutional small-cap manager with plenty of excess capacity at a time when many of the top small-cap stock managers are closed to new accounts. “Husic’s in a rare position, because all the best small-cap stock pickers are filled up,” says Ballert, who joined the firm in late April.
Still, Husic Capital remains a tough sell. When prospective clients ask Husic to explain how his firm’s assets fell from $5 billion to $700 million in four years, there is no getting around the saga of the Stephens arrest. Recently, a pension fund executive told Husic, “I’d never be able to get you past my board.”
Husic has heard it before, and he’ll hear it again. All he wants is a chance.
