Jordan Wruble never really had a choice: He was destined to work in investment.
He learned to read income statements at age 12 and was – jokingly – threatened with economic discussions if he misbehaved. Weekends were spent learning analysis from his father.
‘I used to sit in the library in his office and he’d give me binders of Value Line reports,’ he recalls. ‘I’d sit there and kind of educate myself and he would teach me.’
Wruble quickly applied this knowledge to the cut-throat world of baseball card collecting – a move which hooked him on investing once and for all.
‘I’d go to shows as a kid and participate in price discovery,’ he says. ‘You’d see what different people were selling and buying things for. You could use your own insights into how good a player they might be, and that would have some relationship to the value of their card.’
Wruble jokingly refers to those times as the most enjoyable period of his investing tenure. A fully fledged finance career then took him from investment banking to Harvard Business School, before finally progressing to hedge funds.
Today he is a portfolio manager and head of manager research at Brown Advisory – which manages a total of $62 billion for clients around the world, including a small group of individuals, families, endowments, foundations and nonprofits.
Eye on the ball
Wruble oversees the firm’s investment platform, which accounts for $37 billion in assets, with 70 managers offering 90 strategies. Of those strategies, 20 are managed internally. His team also runs four funds of funds: the Global Select Hedged Managers strategy, the Hedged Emerging Markets Equity Managers strategy, the Hedged US Equity Managers strategy and the Long Equity Managers strategy.
Wruble says that while the team works to select a wide array of options – including separately managed accounts, mutual funds, Ucits and hedge fund strategies – each private client portfolio is tailored to specific individual needs, goals and risk profiles.
‘Our discipline is to come up with the single best idea for a given strategy,’ he says. ‘I think about making a recommendation, not a menu. We are not looking to put everything out there and have everybody choosing between a bunch of equally good selections.’
This focused and tailored approach stems from the type of clients that Brown serves, who average out at around $20 million apiece.
‘Some of the clients are on the buy side. They run their own investment firms, real estate and private equity, and we work with family offices in some cases where they have their own investment team. We partner with them and sort of become an extension of their family office,’ he says.
‘The clients bring a good amount of sophistication, so it’s a tribute to the team to be chosen by other people who are excellent in their field.’
To work with clients of this caliber, Wruble sets the bar high when recruiting for the 14-person team spread across New York, London and Baltimore.
‘It’s never finished. It’s always a work in progress. We’re working to find somebody who’s better than what we have or somebody who has the capability. The bar is going to be quite high,’ he says. ‘We don’t approve many new managers in a given year. And I think that’s good – it should be hard to find somebody. A big element of this is that it’s really hard to be excellent, so you have to work hard on our side.’
Swinging for the fences
These high standards also shape the team’s investment philosophy and process. ‘The recipe is pretty simple and the execution is quite hard,’ Wruble says.
‘Our philosophy is that markets are generally pretty efficient. There are selective opportunities to buy something that is substantially below in terms of value for a number of reasons. What great investors do is find opportunities to take advantage of the disconnect between the present and the future.’
He emphasizes that the key to executing this philosophy is being able to invest for the long term in a consistent and well-managed way.
‘We don’t believe in buying things that are “fairly priced.” We really want to say “The market has gotten this wrong by a substantial amount.” That’s where the opportunity lies,’ he adds. ‘But doing that is actually incredibly challenging, right? So how do you actually do that?’
Wruble and his team answer this question by staying process-oriented. The team spends a good amount of time examining portfolio managers’ investment processes as well as what’s inside their funds.
‘We value a manager with a robust process because one of our tenets is that you invest for the future,’ he says. He explains that managers who incorporate informational, temporal, behavioral and activism components in their processes are particularly highly valued.
‘Informational’ means the team checks to see whether managers have done something to gain better insight into the drivers of their invested businesses. ‘Temporal’ implies looking further into the future than where the market is today. ‘Behavioral’ means standing with conviction behind every decision, and ‘activism’ refers to achieving value and change through your investments.
‘It sounds obvious, but the information you have is about the past. You have track record data, you have biography, but you’re investing in the future. You want to be able to see that somebody’s past successes can be repeated,’ Wruble says.
To scour the universe for what he believes to be the best managers, Wruble does not start with data. Instead, he prefers face-to-face meetings.
‘I think the real added insight comes from the fact that we do a thousand manager meetings every year, and we have a certain philosophy about what we are looking for.’
He says these meetings aim to establish how a manager is positioned for the future. Every manager is scrutinized, receiving coverage from a lead analyst, a back-up analyst and usually a third too.
‘We write these very, very detailed reports each quarter, and part of the process is making sure that we’re in regular touch with the manager about business updates. That could be personnel changes, asset flows, strategy launches – anything that can give us an insight into whether the future is likely to be similar to the past,’ Wruble says.
With eyes on the future and a highly disciplined investment process, the team tends to gravitate toward concentrated portfolios.
‘We focus on the idea that investing is really hard,’ Wruble says. ‘You’re not going to find a lot of great ideas and the market is not going to give you a lot of great opportunities, so what you want to see is a certain level of concentration in a portfolio.
‘We have managers who run super concentrated portfolios with large positions of 15% or more and with names that have been up 100% in a given year. They are able to stay the course,’ he says. ‘They are managing the risk of the position, but they are not changing their views of what the thesis is. They are appropriately dispassionate, they are selling when appropriate, but they are also able to capitalize on those things.’
While many investors who specialize in hedge funds are not fans of liquid alternatives, Wruble sees things rather differently.
‘You’re getting great talent within hedge funds,’ he says. ‘Sometimes their performance can be obscured by both the lower beta and the fees, but with the long-only version of hedge funds, the fees are generally much lower. Long/short equity hedge funds can scale their long book more than their short book for any number of reasons. A number of them have recognized that and have opened up.’
Wruble has also found some hidden gems in managers who run hybrid strategies investing in both the public and private markets.
‘It gives them great insight into the company and industries – not only who’s coming up that might disrupt the public companies, but also who’s going to be the key decision makers, the large players in the market where they’re seeing the trends, where they’re understanding the value and pace of investments,’ he explains.
This appreciation for a manager’s flexibility also applies to thematic approaches.
‘Another type of interesting manager that we are seeing is in the convergence of life sciences and technology,’ Wruble says. ‘It’s something only the managers who have that particular skill set can take advantage of. A lot of biology has become code – it’s like software in a sense. DNA is broken down into code, and that is key to personalized medicine, the latest breakthroughs and new therapeutics.
‘I think this is a really important idea – not just for investments, but for the world. These are the cures for a lot of terrible diseases. It is sufficiently hard to analyze, but that kind of selective expertise can give a lot of insight to our managers in both public and private markets.’
Meanwhile, one private market that has really knocked it out of the park is Wruble’s first love: baseball cards. Over the past decade, as the S&P 500 has rallied from the depths of the financial crisis, one index that tracks the price of the top 500 baseball cards has performed even more impressively, doubling the US stock market. Perhaps Wruble’s most enjoyable investing days might also prove to have been his most profitable.