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Thursday, January 15, 2004 - Page updated at 10:09 P.M.
Pioneer in global investments pays tribute to Seattle U prof
By Bradley Meacham
"Once in a while I could see drops of blood on his black boots," said Khalil Dibee, his former finance professor at Seattle University.
The son of a Seattle bus driver and a Sears clerk, Brinson didn't have money for more advanced study. But "he showed the inclination and the desire" for a career in the financial markets. So Dibee took Brinson under his wing and helped him land a teaching job so he could earn an M.B.A.
By the 1990s, Brinson controlled investments worth nearly $1 trillion, and his influence matched that of investor Warren Buffett in financial circles.
At 60, Brinson is repaying those who helped him get his start.
This week he is making a $3.5 million donation to his alma mater to endow a professorship named for Dibee, whom he credits for much of his success.
The donation kicks off a five- to six-year fund-raising drive that Seattle University hopes will elevate its stature.
"I've wanted to do something like this for some time," Brinson said from his home near Palm Springs, Calif., one of three he owns.
"Professor Dibee took an interest in me when I needed it. He was the right person at the right time, and this is a chance to give something back."
The gift will establish the fifth endowed professorship at the Albers School of Business, helping enrich it and the rest of Seattle University, a 6,300-student school that first offered MBAs in 1967.
Brinson compared the university's potential to Georgetown University, another Jesuit school that grew from a small regional college into an international institution.
"You're not going to make that transition unless you get gifts like this," said Joe Phillips, dean of the business school, adding that it will remain focused on part-time MBA and undergraduate programs as it boosts quality. "He knows this is a great gift because an endowed chair is forever."
The best returns
Brinson said he was an unmotivated student dabbling in math and accounting until he took one of Dibee's classes and discovered that finance was an entry point into a bigger world.
To pay for graduate school, he lectured at Washington State University in Pullman. He wanted to pursue academics but in 1970 took an $11,000-a-year job as a portfolio manager for an insurance company in Connecticut. Exposed to the real world of finance, he noticed how markets outside the United States were developing rapidly.
In 1979, he convinced First Chicago, a bank, that his strategy of investing overseas could pay off, and was brought on to start a new fund operation there.
In a 1986 paper in the Financial Analysts Journal, he argued that pension funds get the best returns from allocating assets across a variety of investments, not from picking stocks, a radical idea at the time. He urged clients to buy stocks and bonds of other countries and nontraditional assets, such as private equity, real estate and junk bonds.
When the bank needed capital in 1989, Brinson and colleagues bought out their employer, changing the name to Brinson Partners. By 1994, he had attracted $36 billion in assets and sold the operation to Swiss Bank for $750 million, staying on as top executive.
When Swiss Bank merged with Union Bank of Switzerland in 1997 to form what was then the world's biggest bank, Brinson was named to head the combined asset-management arm, managing more than $910 billion, including $340 billion from pension funds and other institutions he directly controlled.
Brinson's approach "was not obvious when he started doing it," said Rob Woodard, chief investment officer of the $10 billion Kansas Public Employees Retirement System, which invested with him in the 1990s. "It wasn't a marketing ploy but an extension of his thought process. It was a refreshing approach."
Balancing investments in a variety of assets generated profits, but the approach to investing was far out of step with the conventional wisdom of the time.
Brinson's unit at First Chicago launched its first global fund in 1982, when the Cold War was more prominent than global trade and investors were more concerned about the U.S. recession and high interest rates than overseas markets. When the company held its first seminar for investors in 1983, with five employees, Brinson recalled, three clients showed up. "Back then, investors wouldn't touch foreign markets with a stick," said Dibee, who retired in 1995 and lives in Arizona. "He (Brinson) pointed out that portfolio diversification is more efficient if it's done on a global basis" since investments aren't limited by borders.
Despite his success, Brinson's strategy and analysis were sometimes controversial. He drew boos during a speech in Japan in early 1989, where he called the run-up in stock and real-estate values there unsustainable.
"I said to them, 'If ever there was a bubble, you're in the midst of one,' " he said. "I remember people telling me I was silly and didn't understand the miracle of Japan.
"Clients fired us because they said we were nuts."
Months later, Japan's stock market peaked, then began a crash that still hamstrings the world's second-largest economy.
Through the 1990s, Brinson looked for companies with profits and material assets and avoided booming technology stocks. His operation trailed the benchmark market for three years in the late 1990s.
In 1999, the Standard & Poor's index soared 21 percent and anxious investors pulled money from Brinson's company, which saw withdrawals shrink its flagship U.S. fund nearly 4 percent. Brinson was a "pioneer lost in a New Economy," according to a Chicago newspaper article in late 2000, more than six months after the stock market peaked.
"In 1999, we didn't own tech and we looked stupid," Brinson recalled. "Then in 2000 people were scratching their heads wondering how they got suckered."
He seems to understand something about human nature: "People can convince themselves of most anything if they set themselves to it."
Even after rising to the top of the financial industry, he retains an outsider's criticism of it. Recent corporate and mutual-fund scandals showed a "lack of moral discipline" by management, but investors even those without hundreds of millions can profit if they're cautious.
Putting money in exchange-traded funds rather than individual stocks makes more sense than ever, he said, anything to avoid the tendency to follow hoopla and play the market.
He's also cautious about people picking individual stocks. "For the average individual, unless they've got tremendous resources to analyze and plenty of time to really, really do the work, I just don't see how it makes sense. That's playing a loser's game," Brinson said. "To listen to some stockbroker pitch a stock and then buy or sell; well, you get what you deserve."
Bradley Meacham: 206-515-5066 or at email@example.com
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