This Boutique Father-Son Investment Firm Thrives By Ignoring Conventional Wisdom
Martin "Marty'' Sass and Ari Sass are a father-son team of an investment management firm in Manhattan. Marty started M.D. Sass in his basement apartment over 40 years ago, and now Marty and affiliates employ more than 80 people and manage $7.5 billion for Fortune 500 companies and wealthy individuals. Marty takes an unconventional approach to investing, pursuing targeted opportunities versus broad diversification of assets. Here are some insights that Marty and Ari shared about their success:
Being a contrarian pays off.
How do you go from zero clients 43 years ago to an investment firm that garners top-tier investment performance? Be yourself, even if it means being a contrarian.
Marty referred to "the herd instinct" that many investment managers follow, which is to invest in index funds, exchange traded funds and government bonds. He believes these investments are the wrong direction if you want to achieve superior results, but that that many investment management companies are satisfied with producing mediocre results. Marty believes that his forensic research experience of companies is what sets him apart.
"I have learned over all these years that focusing on companies that you really know well with strong management, buying them at a significant discount from their intrinsic value, and focusing on only a few companies that meet that stringent criteria, is actually safer and produces superior returns with less risk,'' he said. "It's safer than wide diversification."
Marty did not build the business based on the conventional wisdom and has achieved results well above market benchmarks. It's his secret for going from a start-up with no money and no contacts on Wall Street, to achieving success. Ari is fully on board with his dad's approach to being a contrarian in this industry.
"The firm and its investment strategies have weathered many different economic cycles and that experience sets us apart from many peers," Ari explained.
Pursue entrepreneurial philanthropy.
Marty extends his unconventional methods to the world of philanthropy. He is committed to what he and others refer to as "entrepreneurial philanthropy." Donations directly support the cause, and not to cover overhead expenses. For example, he started the M.D. Sass Investment Academy, an undergraduate student run hedge fund, at Brooklyn College.
Through the program, students have the potential to earn money and gain experience through investing and co-managing the program's hedge fund portfolio of securities. It's Marty's way to give back to economically disadvantaged students at his alma mater, some of whom have difficulty meeting tuition costs and live in public housing projects. All monies go directly to the fund.
Marty and Ari also apply that philosophy to The SASS Foundation for Medical Research, ensuring that the monies they provide to organizations directly support the work, and not overhead costs.
Experience building a business helps.
Ari did not start out working for Marty in the family business. He launched entertainment and media companies that focused on online marketing and music distribution. He became a successful entrepreneur in his own right, and eventually sold one of his companies to Warner Music.
Today, Ari is the executive vice president of the business started by his father. When he entered the business he took a humble approach to gain the trust of both his father and the clients. Ari explained, "Investment management is a people business. It was important for me to get the proper training, on the job, and really learn the business first. I spent a lot of time learning the business and the investment management process."
Marty couldn't be more pleased to have his son work alongside him.
"It's taken years of working together, to develop confidence in each other and in ourselves,'' Marty said. "Ari has contributed in many ways. He is a superb analyst/money manager, a positive influence with clients and employees, and supervises various aspect of our business."
Marty views Ari's entrepreneurial experiences as a great asset to the business today. Ari believes that running his own companies helped him become a better analyst.
Marty and Ari have no doubts that this is a business that can be transferred to future generations. Ari shared, "This is a business that has long-term sustainability and a long-term future that can transcend generations."
Their advice to others building a family business is persevere, have the right motivation, and never, ever, ever, give up.