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Transcript
G R E AT E R L O U I S V I L L E ’ S D E F I N I T I V E S O U R C E O F L O C A L B U S I N E S S N E W S Vol. 19 l No. 15 4 fast FIFTY November 15, 2002 Parthenon Capital Management Personal service, research are key to growth of investment services business BY SUSAN REED LAMBERT BUSINESS FIRST CORRESPONDENT Like its famed Creek namesake, the strength behind Parthenon Capital Management LLC lies in its foundation. Built from the ground up by four principals, the investment firm is all employee-owned. Each of the seven employees, including three who are vice presidents and administrative officers, owns equity in the business. “Parthenon was formed with an eye toward putting together the right team of people who would fulfill our needs while creating an environment in which we would be pleased to come to work each day,” said company president Todd Lowe, 43, who started the company in March 1999. Parthenon provides investment advisory services to several types of clientele, including high net worth families, trusts, foundations, endowments and retirement plans. The staff of Parthenon had previously worked at J.J.B. Hilliard, W.L. Lyons Inc., for periods ranging from five to 19 years. Six of the seven worked together there during a large part of the 1990s. When it became apparent the company would be sold to PNC Bank Corp., each member of the team decided to explore other career options, Lowe said. Lowe formed Parthenon with the other founding principals, J. McFerran “Mac” Barr II, Thomas A. Corea and Tony H. Coffey. Barr serves as company chairman. Corea is CEO, and Coffey is executive vice president. Together, the quartet has multi-faceted investment experience, including fixed income, institutional equity, law and accounting, trust and estate planning, as well as marketing and advertising. Vice presidents Dianna Saylor, Beverly Clark and Panayiota “Pixy” Jones round out the Parthenon team. Each of the vice presidents RON BATH BUSINESS FIRST l Four principals in Parthenon Capital Management — Todd Lowe, left, Thomas Corea, J. McFerran Barr II and Tony Coffey — once worked at J.J.B Hilliard, W.L. Lyons Inc. has at least 15 years experience in portfolio and trust administration. Providing an alternative Lowe said he saw a need for Parthenon’s services in the Louisville area since there were few investment options outside of the local banks and brokerage firms. “The opportunity seemed ideal to build an advisory business that would provide a high degree of personalized service while performing original research in order to offer competitive investment results,” Lowe said. “Further, with the sale of our previous firm to a large non-Louisville bank, we felt it was critical to create an environment where we could control the investment process and the quality of service our clients expected. The only way to do that was to create our own environment at Parthenon.” Presently, Parthenon serves about 130 clients, with a minimum account size of $1 million and minimum annual fee of $10,000. Fees are based on account size. “We currently have clients who pay us well into six figures,” Lowe said. Lowe said average accounts are from $4 million to $5 million. Company officials declined to give specific figures, but did say Parthenon earns several million dollars each year in fees, the company’s sole revenue source. From its inception in March 1999, Parthenon began attracting clients and had a base of business by the fourth quarter of that year. Consequently, the company was profitable within two quarters, some two years ahead of its projections. Lowe said the partners had considered outside investors to get the business started. But instead they initially funded the firm with capital from the operating members supplemented by a line of credit, which they used for about six PARTHENON: Company follows a disciplined formula for purchasing securities months. Since then, the firm has had the needed “As we continue to develop our performance cash flow to operate. record, we anticipate that we will attract more Personal service and original research are key institutional clients, who typically need at least a to Parthenon’s growth, Lowe said. And the three-year record to consider an investment mancompany’s clients agree. ager,” Lowe said. Richard Lennon, senior business adviser to management of the Port Authority of Seattle, Relying on original research Wash., holds four personal accounts with Parthenon’s investment philosophy includes a Parthenon, including IRAs. Lennon said he heavy focus on research into “high-quality selected the firm because of his trust and companies with superior financial characteristics confidence in Lowe, who and enduring economic advanserved on the board of tages,” Lowe said. The comPARTHENON LOGO directors for Actors Theatre of pany is not afraid to veer away Louisville where his wife, from the investment firm pack HERE Jennifer Lennon, had worked and go its own way to success, as director of development. Lowe said. A former Louisville resident, Richard Lennon Parthenon performs original research for each was chief technology officer for Brown-Forman company. The process involves extensive Corp. for about 12 years. historical research using documents obtained from Lennon said his wife was impressed with various sources, including company filings Lowe’s insight into the financial matters at required by the U.S. Securities and Exchange Actors, along with his steady influence on the Commission. “While we do have access to board and management. He also said he sees his purchased research, we find that it is best used relationship with Parthenon as a personal one for providing background data, and we do not with Todd Lowe. implement any buy or sell recommendations from “I see him as a friend who I trust in taking care outside sources,” Lowe said. of my money the way I would — if I had the time Lowe is committed to fundamentals, said and knowledge to do it,” Lennon said. “Todd and Dr. Frank Loudermilk, of Winchester, Ky., who I speak regularly. We exchange views as to invests with Parthenon. “Despite the heat he specific recommendations, and I never feel I am received from many, including me, as the Nasdaq being steam-rolled nor overlooked in favor of spiraled upward, he resisted the dot-com mania, larger clients. saying it didn’t make sense. “Our portfolio has done reasonably well in a “They aren’t producing anything substantive, tough period for investing,” Lennon said, adding and they aren’t making money. He predicted a that Lowe continues to take a “very long-term few would make it but most would fall by the view, and he’s been right.” wayside,” said Loudermilk. He added that Lowe talked him out of investing in dot-com stocks Tailoring objectives for each client and tech stocks when they were peaking. Lowe said Parthenon’s clients recognize the “I have enjoyed the explanations of why a role that the protection of and growth in their particular company is bought or sold — and the assets plays in their future. Each client — whether occasional hand-holding when the market has a family or an institution — has specific invest- struggled,” Loudermilk said. “This availability has ment objectives and relies on the firm to help been outstanding, and I am by no means one of achieve those objectives through a high level of their larger clients.” investment expertise, he said. Specific needs depend on the type of client. Purchasing sound securities at low prices For example, a high net worth family may need Parthenon avoids funds and only will buy advice regarding tax planning, estate planning and individual securities at certain prices. other personal financial activities. The prices must be significantly below For other types of institutional clients, such as Parthenon’s estimate of a company’s intrinsic endowments, foundations and retirement plans, value and also must include some margin of safety Lowe said, the needs are very different, with a to account for unknown events, Lowe said. much heavier emphasis on competitive investHe said he thinks this approach combined with ment results and protection of assets for the ben- the firm’s original research process gives eficiaries. Parthenon a distinct competitive advantage. Parthenon’s typical client is a high net-worth “We follow our investment philosophy with family, although about one-fourth of the firm’s consistent discipline, concentrate our holdings in clients are institutional, which includes retirement our best ideas, conduct extensive internal funds, endowments, family partnerships, and research, and we only buy if we can understand charitable organizations, Lowe said. the business model,” he said. above 150 % About the company Chairman: J. McFerran Barr II CEO: Thomas A. Corea President: Todd Lowe Executive vice president: Tony H. Coffey Address: 9900 Corporate Campus Drive, Suite 2100, Louisville, Ky. 40223 Phone: 327-5660 Founded: 1990 Employees: 7 Description: Parthenon Capital Management provides investment advisory services for high net worth families, trusts, foundations, endowments and retirement plans Looking ahead, Lowe said, the team at Parthenon is more optimistic about its business than ever before. “Having successfully navigated the worst bear market in over 40 years, we have attracted new clients in recent months who have been made aware of our record,” he said. While the company’s quick growth and profitability have scored Parthenon a spot in the area’s Fast Fifty, Lowe said the company will show “restrained but significant” growth in the coming years. “It is important for our level of service to each client to remain very consistent,” he said, “and for that reason we will only grow in a manner that does not diminish the importance of each relationship.” SUSAN REED LAMBERT is a free-lance writer for Business First. E-mail comments on this article to [email protected]. Reprinted with permission from the Business First. ©2003, all rights reserved. Reprinted by Scoop ReprintSource 1-800-767-3263