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Going Long: Former NFLer Tackles Wall Street

Former NFL cornerback Eugene Profit has grown his firm, Profit Asset Management, from a $100,000 start-up into a multi-billion dollar asset manager boasting a wide range of institutional clients.

As former professional football players go, Eugene Profit is a bit of an outlier. While statistics show the vast majority of retired football players are under financial duress once their playing days come to an end, Profit -- who graduated from Yale with an economics degree before joining the National Football League -- is thriving, managing billions of dollars for institutional investors at his namesake firm, Profit Investment Management.

During his five-year career as a defensive back for the Washington Redskins and New England Patriots, Profit says, he always kept one eye on what his former Ivy League classmates were doing, since he knew the odds of his football career lasting long were slim. "Some were at McKenzie & Co. or Bain & Co. and then going onto business school," Profit says. "So I knew I was doing something a little bit differently. All you have to do is look at the average age of football players and you know you're going to have a lot of life left after your career."

Sports Illustrated points out that within two years of retirement, 78 percent of former NFL players have either gone bankrupt or are struggling financially because of joblessness or divorce. Many also grapple psychologically with the transition from on-field stardom to sideline "has-been," according to GamesOver.org, a web-based nonprofit organization that helps retired athletes build new lives.

But after his on-field career came to an end in 1991, due to a torn hamstring, Profit would face no such challenge. His second career began with a job as a retail broker with asset manager Legg Mason. And while Profit says he enjoyed his time as an athlete, his days at Legg Mason gave him an opportunity to dive into a passion he unearthed during his days at Yale: managing money.

A 'Real-World' Education

Profit's path to finance began during his days growing up in South Central Los Angeles, a predominantly black, working-class neighborhood. Although he was a stellar athlete in high school -- starring in football and track and field -- one of his coaches took notice of his academic strength and steered him toward Yale.

"Economics was probably the closest degree to real-world applicability, as far as I knew then," Profit says of his undergraduate studies. "I liked the idea of supply and demand and how the markets worked. I did an internship on Wall Street between my junior and senior years and wrote my college thesis on strategy and economic analysis."

As a retail broker at Legg Mason, Profit says, he was tasked with gathering assets from clients that were then packaged into mutual funds. But he didn't manage the money. So after a few years with the investment management giant, Profit decided it was time to launch his own business.

In 1996, armed with $100,000 in start-up capital that his family helped raise, he began Profit Investment Management, which is based in Silver Spring, Md. "I knew I could do registered investment advisory work with high-net-worth individuals," Profit recalls. "But in order to have a mutual fund, you have to have $100,000, and that's what we wanted to do." To help raise the funds, he designed the business to enable small investors to buy in for as little as $50 a month.

But like most start-up ventures, success did not come easily. According to Profit, margins were razor-thin over the first seven years while the firm functioned mainly as a retail operation. "It was a very expensive way to do it," he says of relying on retail investors to get his business off the ground. "But I didn't grow up with access into the stock markets, and so I thought it was important that I provided a forum where everyone could have access."

A Play for Institutional Clients

But as the firm's reputation grew, institutional investors began to take notice. In March 2000, Profit scored his first institutional client when the Los Angeles County Employees Retirement Association invested $10 million with the firm. "We were still sub-$50 million in assets under management at that point in time," Profit relates. "By 2004 we had gotten to $400 million. By then it started picking up exponentially as our reputation and performance track record grew."

For its institutional clients, Profit says, his firm deploys a long-only strategy. "It's long domestic equity with a growth bias," he notes. "So we are sort of a conservative growth manager -- we buy securities that are out of favor for a transitory reason that are growing faster than the benchmark, which in our case is generally the Russell 2000."

That strategy proved to be popular among large investors, and before long Profit Asset Management found itself managing money for a wide range of institutional clients, including the New York City Employees Retirement System (NYCERS), the San Francisco City & County Employee Retirement System, and the Illinois Municipal Retirement Fund. Today, the firm boasts $2 billion in assets under management and an expansive client list that also includes Boeing and the city of Baltimore.

In order to acquire such prominent investors, Profit says, his firm had to go through an arduous vetting process just to be considered. And for the most part, clients' portfolios are strikingly similar, he reveals.

"We basically run look-a-like portfolios with very small tweaks around individual client guidelines," Profit explains. "You might have one client that may not want to back something, or they might want restrictions on other things, and we do that. But that's how we assure our clients that we're getting them pretty similar returns."

These days, Profit says, the bulk of his business comes from managing institutional funds, although the firm still includes a retail segment. The firm's trading platform, which he declines to identify, handles both types of customers essentially the same way, he adds.

"We block trade positions and allocate fills on executions in proportion across all involved accounts," Profit says. "We have a coordinated client recordkeeping platform that is seamlessly integrated with our trading and portfolio management system."

Game Day Pressure

Meanwhile, the pressure of lining up at cornerback in the NFL pales in comparison to the burden of generating returns for investors in today's rocky economic environment, Profit says. "If you're underperforming and you're sitting before a client that you manage a couple hundred million dollars for, that's harder than an NFL game because they're going to slice and dice every part of your portfolio performance," he comments. "If you can't explain what's going on and keep them comfortable, you're going to lose a significant part of your assets under management."

But Profit acknowledges one big similarity between the pressurized worlds of high finance and professional football: "Whether it's raining on Sunday or snowing, whether oil prices are high or interest rates are low, you're expected to perform," he says. "So playing cornerback in the NFL prepared me well for one aspect of the business -- that there's really no place to hide."

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio

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