S12 BARRON’S September 16, 2019
leading a firm that follows its own convic-
tion, not convention.
Even the company’s talisman—a
tortoise—is viewed through a unique
lens. Sure, Aesop’s moral of slow-but-
steady ultimately winning over flashy
short-term zip is apt. But the firm iden-
tifies with the tortoise’s other traits, too:
its longevity, risk management (the hard
shell), and willingness to stick its neck
out to move forward.
Yet all whimsy is squashed by the
seriousness with which Sethi discusses
these values, and how they’ve helped
the 35-person firm amass $6 billion in
client assets since its founding in 1994.
Barron’s: What sets your firm apart?
Sethi:Douglas C. Lane was founded on
individual securities selection. We do our
own proprietary research. Our team con-
sists of eight research analysts, and we
go out, kick the tires, attend conferences
and trade shows, visit companies and
factories, go to analyst days, and meet
with executives. We aren’t trying to do
any market timing or be tactical, and we
aren’t trying to find investment products.
Meaning you don’t use any funds?
That’s right. We create a 60- to 70-
stock portfolio for each client. I person-
ally buy and sell each stock. It’s impor-
tant for every investor to be aware of
the securities they own and to be able
to talk to the advisor responsible for
making those investments. This is espe-
cially helpful during times when certain
investments are out of favor.
How do you start your stock-picking?
We don’t spend time worrying about
what bucket a client is invested in. We
let our research dictate where we want
to be. Then we look at sector exposure.
Our customized portfolios also allow
us to be extremely tax efficient. We
have just a 15%-to-20% turnover, and
can offset realized gains with realized
losses from individual stocks, thereby
minimizing the client’s taxable gains.
Given where we are in the market cycle
and signs of a global slowdown, have you
changed your risk exposure?
The economy is holding up in a world
that’s slowing down. We have almost
every government cutting rates and
trying to stimulate their economy. So
we’re being mindful of managing risk—
if clients are at the high end of their
equity objective, we may bring it down.
Where are you finding opportunities?
We’re focusing on companies that aren’t
fund allocation so it has as low as possi-
ble a correlation to both fixed income
and equities.
Fund strategies we’ve emphasized
include long/short equity; merger-arbi-
trage; fixed-income relative-value; rein-
surance ; and risk-managed macro.
So you’re bracing—well, for what?
I don’t think we’re on the precipice of
the next Great Depression. We may
eventually fall into a recession, but for
now we have headwinds. The trade war
between the U.S. and China is the tip of
the iceberg, and we’re entering into an
economic cold war. To the extent that
China is under pressure economically,
that is a headwind for the rest of the
world. The implication is slower growth.
Recently you hired Bill McCalpin as head
of impact investing.
We’ve always had a customized, hands-
on approach to working with clients to
incorporate their needs and values. Bill
brought us a wealth of contacts and con-
nections and a depth of history.
You started as an institutional shop. One
of its first milestones was its shift to the
retail market—how did you adapt?
We started working with executives.
When working on a pension plan, they
would ask for help with their own port-
folios. So we pivoted the firm’s model.
There were two adjustments. One,
working with people and their own per-
sonal situation was so much more rela-
tional; I really loved it. The other thing
that was different was that taxes were a
big component. Our work wasn’t just
finding best investments. It became
finding ways to create alpha from taxes.
Our initial clients were often invest-
ment professionals themselves; we were
the investor’s investor. Now, we’re work-
ing with founders of companies and
multigenerational families; 90% of our
clients are families and 10% are institu-
tions. We have 50 employees and three
offices, including in San Francisco and
New York.
Thank you, Lisette.
2019 Firm Rank: 28
Sarat Sethi
Douglas C. Lane & Associates
F
ORGET PREVAILING TRENDS AND
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Sarat Sethi, managing director and
portfolio manager at Douglas C. Lane &
Associates in New York, takes pride in
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