Skip navigation

I Want To Be Like Julian (Robertson)

Until this past September, Jeffrey Glusman was a financial advisor at Merrill Lynch, a rising star sharing a book worth more than $250 million with a partner, a book truly to be envied. But after five successful years as an advisor, he's calling it quits leaving his clients with his partner to start a hedge fund with a longtime friend. Whether you envy him or think he's foolish another late arrival

Until this past September, Jeffrey Glusman was a financial advisor at Merrill Lynch, a rising star sharing a book worth more than $250 million with a partner, a book truly to be envied. But after five successful years as an advisor, he's calling it quits — leaving his clients with his partner to start a hedge fund with a longtime friend.

Whether you envy him or think he's foolish — another late arrival to the hedge fund feeding frenzy — he's putting it all on the line. In order to start Mogul Capital Advisors and the Mogul Venture Fund, a registered (in Delaware and Florida) domestic long/short equity fund, he's tossed his financial advisory career, converted his assets to cash and asked his wife, at home with a 6-month-old son, to trust him.

Unfortunately, there aren't many footsteps for him to follow. Retail financial advisors turned hedge fund titans aren't well represented in the hedge fund business. There are some notable exceptions, like fund manager Julian Robertson, the founder of Tiger Management, one of the best-known hedge fund complexes ever. Robertson, who closed the funds in 2000, was a 48-year-old broker at Kidder Peabody when he started Tiger in 1980. At its peak in 1998 it had $22.8 billion in assets and, over its 18-year life span, had compound annual returns of 32 percent. That said, it seems like everyone is doing it these days. John “Launny” Steffens, former head of Merrill Lynch's private client group, started Spring Mountain Capital after being pushed out by Stan O'Neal in 2001. Mario Gabelli is another example of a retail broker turned asset manager.

To be sure, running a hedge fund is a popular gig: The number of funds worldwide has exploded from 2,000 in 1990 to more than 9,000 in 2005, according to Van Hedge Fund Advisors International, a global hedge fund advisory firm in Nashville, Tenn. And consider recent asset growth: Estimated assets under management have doubled in the last five years, to $1.3 trillion in 2005 from $600 billion in 2000. TowerGroup, a Needham, Mass.-based consulting firm to the financial services industry, projects assets will nearly double again, reaching $2.1 trillion by 2008.

But according to at least one industry report, time is of the essence for guys like Glusman and his partner David Ratner. Titled The Young Ones and written by CrossBorderCapital, a London-based research firm, the report says return rates — and thus survival — for hedge funds drop steadily with each passing year of operation. “There is well-established constant erosion of performance with time and maturity,” says the report. The report finds that fund failures peak at 28 months, so “investors should buy ‘young funds’ in the first three years of existence,” which is when performance tends to be best.

On the subject of Glusman's inexperience, one skeptical hedge fund attorney says the hedge fund world “is an open world and anyone can enter — not that anyone should — but they can.”

But Glusman, 32, says he's not driven by greed to cash in on a profitable fad. After all, he's leaving a good job behind. “I was making a nice six-figure income at Merrill,” says Glusman, who is the COO and primary fundraiser for Mogul. “Now I have to suck it up for at least a year while I raise money before I can get back to profitability.”

Fortunately, he's got a partner who will actually run the portfolio, a partner with an actual investing strategy and real-world experience. David Ratner, 30, Mogul's CFO, whom Glusman has known for 12 years, has an MBA in Finance from the University of Miami. Before co-founding Mogul, Ratner was an equity research analyst at May Davis Group, where he covered telecom, wireless, high-tech investments and handled some private placements. He also traded personal and firm assets at Carlin Equities, a New York-based market maker, and has also privately managed the portfolio of a high-net-worth family. Additionally, he worked as a retail financial advisor at Morgan Stanley for a year-and-a-half.

The Mogul Venture Fund invests in growth stocks, and intends to keep its positions concentrated, probably containing no more than 20 stocks of all market caps “in those industries, sectors and securities which the managers believe hold the greatest potential,” according to the Mogul Web site, Using quantitative research, the fund selects securities that meet specific criteria. Stocks are added or subtracted based on technical signals, proprietary volume analysis and the security's relative strength among other factors. The portfolio will be 80 percent long and 20 percent short.

Financial Planning Hell

Most FAs would give their first-born to be on a team that grossed $2 million. Not Glusman. For him, the financial advisory business was tedium; he described “the monotony of financial planning” as a reason for leaving. It wasn't like he grew up dreaming of being a rep. He first worked as a commercial real estate broker for eight-and-a-half years before arriving at Merrill. The excitement of closing real estate deals never left him, he says. “I was a sophomore at the University of Florida when I closed my first real estate deal and made $100,000 — that hooked me,” he says. He learned fast at Merrill: With his partner, David Rodkin, a 35-year veteran at Merrill, Rodkin-Glusman Wealth Management brought in roughly $2 million in revenues last year, of which Glusman was responsible for between $500,000 and $600,000. “I learned a lot from being at Merrill, it was a great experience, but, in the end, retail just wasn't for me,” he says.

Like others in the hedge fund game, the names can be quirky, but usually resonate a personal goal. The name “Mogul” refers to the Mogul Dynasty that reinged over southern Asia for nearly 350 years. “We want to reflect that staying power, the resilience of the Moguls,” says Glusman. “But the name also reflects who we want as investors, today's moguls if you will, investors with a net worth of $10 million and more,” he says.

Interested potential limited partners for the fund must have at least $5 million in investable assets, twice the amount the SEC requires of accredited investors. Mogul requires an initial investment minimum of $1 million, and subsequent investments must be at least $500,000. Glusman says the profile of potential limited partners is similar to his old Merrill customer base. “The clients aren't that different, it's the pitch that's very different — it's not financial planning and advice we're offering, we're telling them what returns they can expect and the risks involved.”

So far, the fund has raised nearly $5 million towards a short-term goal of $12 million, which he expects to meet by the end of November. “But to start trading, we need $3.5 million,” says Glusman, enough overhead to cover all their costs for the first year.

Glusman's first solid commitments to the fund are three clients from his Merrill practice, but he says he first made sure to clear his intentions with his former partner. “He was actually quite complementary,” recalls Glusman. Since they were only removing a small portion from his book, his partner doesn't mind.

Anyone Can Do It

Glusman says the biggest surprise in starting up has been how cheap it is. In a package provided by, the consulting arm of HedgeCo Networks, an industry information source, he got everything he needed to start Mogul — including legal and accounting services, auditors, prime broker introductions, Web site construction, database membership with and hedge fund software. And all that for $35,000. “If you go a la carte it's very expensive — buffet-style is cheap,” he says. [One hedge fund attorney, who wished to remain anonymous, groused that, “You get what you pay for.”]

As you would expect, Glusman has big expectations; the limited partners do too, since they're going to pay a 2 percent management fee and 20 percent of profits. Investors can expect to get (net of fees) 20 percent returns. Those projections are based on four years of success using a model, developed by Ratner, that he has used over that time to manage personal assets, assets at his former employer Carlin and the portfolio of a high-net-worth family. “In 2004, returns, net of fees, were 32 percent. In 2003 they were 34 percent,” says Glusman of the model's success. “Obviously, a jarring geo-political event or a big bear market would change that, but even then we think we can achieve returns in the mid-teens,” he says.

As for the risk, Glusman says that's just part of it. If you're disciplined, follow the plan and the program — “sell when all indicators say sell, buy when they say buy” — the fund will succeed, he says. “In order to do well in this business you need to take the risks,” he says. “Sure, there will be small collisions, but with discipline we're not going to blow up.”

TAGS: Archive
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.