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