Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 25)

acquisition. Richards likes to compare the concept to the overlapping circles in a Venn diagram. In the U.S. the real estate and private equity groups teamed up two years ago to do a management buyout of Quick Park, which owned 30 parking garages in New York City. (The number is now 45.) The private equity team helped to underwrite and evaluate the business, while the real estate group contributed its knowledge of the New York real estate industry and its property management expertise. Halpern says Quick Park was an attractive target because of its afﬂuent customer base, the shrinking supply of parking garages that has resulted from commercial development and New York City’s strong economy and commercial sector. The real estate fund’s return was in the high teens last year, following a 25.5 percent rise in 2006. Halpern’s team is also working closely with the emerging-markets group, led by Scott Gordon, to take advantage of opportunities in Brazil, China and Eastern Europe, including Russia. The two groups recently coinvested in one of the leading development ﬁrms in Istanbul to build ofﬁces, retail space and multifamily homes in and around the city. “Real estate is less picked over in places like Poland, Turkey and Russia,” European investment head Phillips explains. “These markets have huge potential since they are underbrokered.” AT FIRST GLANCE, Lou Hanover and Bruce Richards are an improbable pair. Richards wears expensive suits, dines with clients at upscale restaurants and relies on a small circle of top lieutenants. Hanover wears khakis to the ofﬁce (jeans on Fridays), eats lunch at his desk and solicits input from a wide circle at Marathon before making a decision. They met in 1995 at Smith Barney in New York when Hanover was brought in to run the emergingmarkets derivatives group. Richards had joined the ﬁrm, then part of Travelers Group, the previous year to head up global securitization, including mortgages, asset-backed securities, derivatives and commercial real estate. “We were like-minded guys when it came to taking risks and the markets,” says Hanover. “We gravitated to people with similar backgrounds.” “They complement each other,” says Steven Black, who was vice chairman and head of Smith Barney’s capital markets group at the time and is now co-CEO of the investment bank at JPMorgan Chase & Co. “I’ve never seen the two have a cross word or an ego contest. They really enjoy working together. That may be the heart of their success.” Their paths to Wall Street, however, were distinctly different. Richards was born in Brooklyn, where his father worked two jobs — construction during the day and driving a New York Daily News truck in the middle of the night. When Richards was seven, his family moved to Prince George’s County, Maryland, a working-class suburb of Washington. His father opened a hardware store, and his mother ran a decorating business next door. “They became big-time small-town merchants,” recalls Richards, who graduated from Tulane University with a BA in economics in 1982. He took a job as a trader’s assistant at PaineWebber, eventually becoming a trader. Two years later he joined Lehman Brothers as a senior trader, before moving to Donaldson, Lufkin & Jenrette, where he headed up mortgage-backed-securities trading, the collateralized mortgage obligation desk and asset-backeds. Hanover grew up in Baltimore, the sixth of nine children; his father died from cancer in 1975, when Hanover was nine. A year later his mother was in a horriﬁc car accident. She survived but, unable to raise her children, split up the family. Hanover, then ten, moved in with his aunt in Baltimore. (His mother never completely recovered and died 25 years after her accident.) Hanover was the f irst in his immediate family to ﬁ nish college. In 1986 he graduated — ART NEWMAN, SENIOR from the University of ChiPARTNER, BLACKSTONE GROUP cago after just three years with a BA in social sciences, with a concentration in economics. After graduation a friend helped him land a job trading Treasury bond options at the Chicago Board of Trade. He worked there on and off until he earned an MBA from the University of Chicago in 1989, after which he joined First Chicago Capital Markets’ arbitrage interest rate desk, primarily trading interest rate futures. In 1991 he moved to New York to join the equity derivatives group that former Kidder Peabody president Max Chapman Jr. was building at Nomura Securities International. In 1993 he jumped to Merrill Lynch & Co. as director of the ﬁrm’s global emerging-markets debt and foreign exchange derivatives trading group. Eighteen months later Martin Loat, his former boss at Merrill, recruited Hanover to join Smith Barney. The differences between the easygoing Hanover and the hyperdemanding Richards were obvious to their bosses at Smith Barney. Richards’s personality led him to clash repeatedly with his staff, so Black asked him to attend a management training program at Wake Forest University. “We helped put controls around his intensity,” says Black. The program lasted for several weeks and included exercises in classroom settings with the CEOs and COOs of real-life companies. “Bruce took feedback from Black, and it helped smooth the rough edges,” says Steven Bowman, who as co-head of bond sales and trading at Smith Barney was Richards’s direct boss and today runs Citigroup’s new hedge fund services unit. “He has not lost all of his ag- “Marathon didn’t get carried away with the moment in the Refco bidding. I saw that as a sign of a smart investor.” DECEMBER 2007/JANUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 25

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008

Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative

Institutional Investor's Alpha Magazine - December 2007/January 2008

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