A HISTORY OF BUILDING INVESTMENT STRATEGIES AND COMPANIES

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In 1969, Mr. Lamle began research in the imbedded option characteristics of the newly developed market in U. S. Government backed mortgage-backed securities originally issued by GMNA and later by Fannie Mae and Freddie Mac. This led to the development in 1971 of investment strategies focused on them and several businesses and funds built around these strategies. In 1979, the Journal of Portfolio Management published his ground breaking paper “Age Equals Beauty” on the relationship of mortgage prepayment rates and the age of these securities. These strategies ultimately managed more than $10 billion in strategies, with targeted durations ranging from one year to long durations.

Mr. Lamle developed financial planning computer models and asset allocation computer models which in essence was the first “Robo Advisor” strategy. M.D. Sass then partnered with NASL, a large Canadian Insurance Company that wanted to enter the U.S. retail investment market with a variable annuity and mutual funds. The "robo" strategy automatically allocated and re-allocated between equity, bond and money market funds based on the client inputs regarding prospective returns and risks in each category. Assets were allocated to optimized returns relative to each client’s one year downside risk acceptance level and five year expected return levels. The business was very successful, in part due to the uniqueness of the strategy, and also in part due to the very strong performance during the 1987 market crash. It ultimately grew to 

approximately $7 billion in assets under management by the time M.D. Sass sold its interest in 1994. 

SASS SOUTHMARK MUTUAL FUNDS

Mr. Lamle’s role was developing the financial planning and asset allocation models and adapting them to the variable annuity sales process, training the sales people in the investment strategies and use of the models, and supervising their fixed income and cash management teams in the management of the money. In 1993 and 1994, Mr. Lamle negotiated the sale of M.D. Sass' interest in the joint venture. Mr. Lamle structured a “Robo” mutual fund operation similar to the one he structured for NASL and, ultimately, NASL acquired the mutual fund business.

In the late 1980’s, with very aggressive financing of corporations, Mr. Lamle became concerned about the potential for financial failures and began studying the U.S. corporate restructuring process. He believed that when and as these financially stretched firms encountered a difficult economic period, some would require financial restructuring and others’ securities would decline in prices as investors feared that they might require financial restructurings. Few investment firms existed at that time that invested in the securities of distressed or bankrupt firms, and traditional investors were often sellers at distressed prices because the holding no longer fit their investment objectives or fell within their investment guidelines. Mr. Lamle recruited professionals to staff what became Re-Enterprise Asset Management, one of the leading distressed securities investment hedge funds. He later started Resurgence Asset Management, a private equity fund, to take control of severely distressed companies and resurrect them through the restructuring process. Mr. Lamle was President of both companies and subsequently started Corporate Renaissance Group, a publically traded BDC for distressed securities investment company, which he ultimately took private.

During the real estate recession that started in the late 1980’s, Mr. Lamle formed a joint venture with a very wealthy German family and a team of real estate investment professionals to form Real Estate Capital Partners (RECAP) with M.D. Sass Investors Services, Inc. By 2005, it grew to managing a portfolio of approximately $5.5 billion in assets. In 2005, believing that the overall real estate market was overvalued, Mr. Lamle negotiated the sale of M.D. Sass’ interest in RECAP in a complex transaction to their partner, a large German insurance company that was a client in RECAP, and would invest more with the company if they owned equity in it, and a trust for RECAP employees.

An African-American investment professional approached M.D. Sass with the idea of forming a new equity investment management joint venture between him and M.D. Sass. At that time, numerous public pension funds and some endowment funds established programs to invest with minority and women owned investment firms. After extensive due diligence, we believed that he was an individual we could work with and support. This individual had little financial resources to start the business and support it as an institutional investment management company. A joint venture was structured with him as President and Mr. Lamle on the Board. They believed this joint venture had both investment merit and was socially responsible. They provided administrative, investment and financial support. The business developed slowly with the partner reporting that while he appreciated the resources that were made available, his relationship with them made some potential clients concerned that the company was not sufficiently independent to quality as a minority owned firm, even though he owned a majority interest. In 1994, Mr. Lamle negotiated the sale of their interest to him and took back a non-recourse note in the amount of the money that was advanced to start the business. It ultimately became successful and, after many years, the note was paid off.

In 1970, Mr. Lamle developed a rather unique municipal bond investment strategy (Tax Advantaged Bond Strategies, known as TABS) that invested nationally in AAA bonds of set durations and arbitraged between states and government bonds based on after tax yields. At that time most bond investment strategies focused on timing interest rate changes and investing in a broad range of credit quality from to BBB. In the municipal bond investment management business these strategies often invested in only municipal bonds and, often, only single state issues in order to be “tax free” at both the federal and state level. There were often times when the relationship between the after tax yields of U.S. Treasury securities were favorable relative to municipal bonds, and other times when out of state bond yield were attractive relative to in state bonds for investors in high tax states. The strategy Mr. Lamle developed crossed over from municipal bonds to treasuries and from state to state, depending on relative value models he developed. This business grew to almost $7 billion in assets under management, with some clients among the largest corporations in the U.S. and the wealthiest families and individuals. In 2008, with the belief that interest rates were in a long term cyclical decline which would ultimately put pressure on fees, Mr. Lamle sold the business to Eaton Vance which could use the process and very strong record for both SMA’s and mutual funds, and with its strong retail distribution, grow the business under the leadership of an individual Hugh hired and mentored.

As part of M.D. Sass’ fixed income management strategies developed by Mr. Lamle, Sass offered cash management and had a very strong record and rather unique high quality strategies. As part of their Dividend Capture Strategy, discussed above, they were aware of the needs of corporations to safely manage their excess cash. In 1991, Mr. Lamle brought in a specialist to manage corporate cash. In late 1993, Chase Bank, wanting to better service its major corporate clients cash management needs, contacted Mr. Lamle through an investment bank and engaged in a series of extensive due diligence investigations leading to an offer to buy the cash management and short term bonds management business under the condition that Mr. Lamle go along with the sale and become a Chase executive. Mr. Lamle rejected the offer and proposed a joint venture between Chase and M D Sass to be run by him at M.D. Sass. Chase felt that such an arrangement would be awkward for them and inappropriate because they wanted to invest $10 billion of assets of their fiduciary assets through the entity and market the investment capability to their biggest corporate clients. Mr. Lamle continued the discussions periodically as Chase investigated other firms with seemingly similar investment capabilities. In 1994, failing to find another firm that they had confidence in, Chase reopened the discussions in earnest and over a very intensive six month period, Mr. Lamle negotiated a joint venture agreement to form Chase & MD Sass Partners. Mr. Lamle was President, Chief Investment Officer and CEO. Chase seconded a Chief Administrative Officer and a marketing officer to be sure that the administrative aspects of the business would conform to bank regulations and their internal requirements. Under the agreement, Mr. Lamle could still serve in his capacity as President of M. D. Sass and the business operated out of Sass offices. In 2001, Chase acquired J.P. Morgan (JPM). JPM had extensive investment capabilities and Chase offered to buy out Sass’ interest in the joint venture and transfer the management of the accounts to JPM.

A Norwegian Company that owned a major cruise ship line was a cash management client of M.D. Sass. They had developed internally a fund of hedge funds and had a dedicated investment professional for it that also oversaw the relationship with M.D. Sass. They changed their plans on developing their FoF business but wanted to remain invested in the funds. Mr. Lamle acquired the business for M.D. Sass.

A Private Equity Fund To Start New Investment Management Businesses

In 2003, Mr. Lamle came up with the concept of raising a venture capital fund to start and grow a new investment business. M.D. Sass had been very successful overall with seeding and growing such strategies listed above, but needed more capital to keep up with the supply of alternative asset opportunities. Mr. Lamle developed a financial and operating model for a private equity fund to take the seeding business to the next level and began marketing the fund in late 2004. In 2006, Macquarie Bank (one of the largest Australian financial institutions) wanted to become a large investor in the fund and buy a piece of the management company. After extensive due diligence and negotiation, they invested in the fund and purchased an interest in the management company. Mr. Lamle was President of FinStrat and heads its investment committee. FinStrat has seeded 11 investment business since 2005 and is in the process of winding down by selling the last two. Mr. Lamle remains an investor in the fund and an advisor to it.

Ascent was formed in 2005 as a lender to real estate developers and a real estate developer. FinStrat sold its interest in the company to its operating partners in 2017.

FinStrat formed Waterfall Asset Management (WAM) with two former investment bankers in the Asset Backed Securities (ABS) sector. WAM formed Eden Fund and SMA’s to very successfully invest in Asset Backed Securities, and in the 2008-2009 financial crisis, formed Victoria to buy distressed residential whole loan packages from banks and commercial loan packages. FinStrat sold its interest in WAM to its operating partners and Dyal.

FinStrat partnered with two individuals whose careers involved sourcing and providing infrastructure for oil and distillates. They wanted to start a hedge fund to go long and short oil and distilled oil products based on disparities between the price of a barrel of oil and its components, including kerosene, jet fuel, gasoline, heating oil etc., as well as geographic price discrepancies due to seasonal and weather related issues. After a period of success, the fund struggled to generate sufficient positive returns to make it an attractive offering to investors and FinStrat was instrumental in shutting the fund down, returning the capital to the investors and closing the business.

FinStrat was searching for several foreign and emerging market investments with the view of providing clients and prospective clients with exposure to those fast growing economies. M.D. Sass began discussions with a seasoned investment professional from India who had worked for well-established U.S. investment management companies. M.D. Sass formed Denahi Capital Management with this individual, and two professionals he brought with him, to invest in Asian (excluding Japan) long short equities. The new company was located in California. Emerging market investments performed poorly in the global financial crisis and, while Denahi had a credible record, they deemed it inadequate to offer it to outside investors and shut down the fund, withdrew their capital and gave the business to their partners.

Two portfolio managers of a mutual fund focused on Utilities and Telecommunications companies were introduced to FinStrat. They wanted to start an investment management business with FinStrat and thought the mutual fund that they were managing would become the first client, under a sub-advisory contract with the bank owned fund management company, if the new business was supported and affiliated with FinStrat and M D Sass. The hedge funds’ assets were “prime brokered” at Lehman Brothers and, when it filed for bankruptcy, some of those assets were caught in the Lehman bankruptcy process. They were able to recover most assets very early in the bankruptcy and most of the remaining assets through the sale of the unsecured notes. They deemed the track record of the partnership, while positive, not sufficiently attractive to continue with the business, and ultimately transferred the ownership interest to their partners.

M.D. Sass was introduced to two brothers from China who were western educated and previously worked for large U.S. investment firms. They had a strong track record in managing family money and wanted to partner with FinStrat to start an investment management business focused on Mainland China, Hong Kong and Taiwan investments. The business was located initially in Hong Kong and subsequently moved to Singapore. The fund got off to a strong relative performance start in the global financial crisis, during which Chinese equities performed poorly but failed to invest heavily before the market advanced strongly. One of the brothers died of a brain hemorrhage and they continued their involvement with the other brother and an analyst, but ultimately concluded that the track record and investment process was not good enough to offer the fund to their clients. They shut the fund, returned the capital in it and gave our interest in the company to their partner.

A senior executive of Macquarie Bank introduced Mr. Lamle to an Australian individual who, with two other Australians, had extensive experience in precious metal, industrial materials and coal mining ventures. They wanted to raise money to invest in small public and private mining businesses in Australia, New Zealand, parts of Africa, Indonesia and parts of Latin America. The company was located in Sydney and Perth Australia. The target investments would be companies that had discovered substantial resources but needed capital to develop their mines and bring product to market. Taurus also set up another subsidiary (New Holland) to provide financial advisory services to small mining companies seeking to raise debt and equity capital. In addition to the equity funds, Mr. Lamle was instrumental in Taurus offering a very successful debt fund. His involvement with Taurus continues.

HighTower is a wealth management company that acquires Financial Advisor groups that are typically leaving major brokerage firms and want to establish an independent practice. They become partners in HT and bring their clients into the HT business for a signing bonus and stock in HT. Mr. Lamle had been looking to acquire and or build a wealth management business and use its management to build such when an investment bank introduced us to an individual who was embarking on the same venture but with a different business model than he had in mind. He had already lined up some investors who had industry experience, including the former CEO’s of Morgan Stanley and Charles Schwab, and were seeking additional investors. After a thorough analysis, he judged the firm to be undercapitalized but with good prospects and structure. It would be an investment whereby FinStrat would be the Lead Investor with some special corporate governance rights and that their investment would only close subject to the company raising additional capital that was twice as much as their investment. This capital would only be drawn down when, as and if certain milestones were met. This has been and continues to be very laborious hands on investment that has gone through several capital raises accumulating approximately $200 million. The company has acquired approximately 40 teams and has more than 30 offices around the country.

Arcadia was established with two individuals seeking to build a micro and small cap activist investment business. After months of the usual due diligence and negotiations in which Mr. Lamle was heavily involved, he structured the company and the fund. He was on the Board and the Investment Committee. While the find had strong results during the global financial crisis and continued to have positive results, he concluded that the track record was not sufficient relative to the risks of the investment strategy to justify investment by their clients and withdrew their capital and turned the ownership over to their partner.

Lincoln Square was established as a specialized investment management company focused on financial services. Its initial fund was a long short hedge fund. Mr. Lamle partnered with a key individual and an analyst. He was heavily involved in the due diligence and structuring of the investment management company and fund and was on the Board. While the investment results were quite strong, he came to believe that the individual, while a very capable investor, was not temperamentally cut out to be an owner/manager of a business with them and they shut the business down, even though the investment was profitable.

AMERRA sources and makes direct loan to Mexican and Latin American agricultural commodity producers back by assets including but not limited to crops, pre-crop inputs, land, equipment, accounts receivables, brands, and personal guarantees. Mr. Lamle was looking for another high yield business to compliment WAM. Through his activities as a Board Member of commodities exchanges (discussed below), he was familiar in general with the commodities markets. The senior Latin American commodities bankers in New York of a large French bank were interested in leaving the bank and starting a hedge fund to make loans to agricultural commodity producers. After months of due diligence, Mr. Lamle concluded that the product and team were appropriate for their strategy, but FinStrat did not have sufficient capital to start the company and seed the fund. Mr. Lamle asked Macquarie Bank to participate. They were familiar with the team and considered them to be top professionals that they had previously wanted to hire but were rebuffed. It took many months to structure a complex joint venture between the team, Macquarie (who had a commodities finance business) and needed a Chinese wall between it and AMERRA, who was a potential competitor, and FinStrat. Mr. Lamle also concluded that a hedge fund structure was inappropriate for this business and the first fund was a private equity structure and separate account. The business is now quite successful, with some of the biggest and most prestigious clients in the U.S.  Mr. Lamle helped structure the funds and separate account arrangements, worked with them on raining AUM and is on the Board of the company and its funds and investment committees of the funds.