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Rating:This New-Old Boutique Is In the 8th or 9th Inning of Its Reboot Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, April 21, 2015

This New-Old Boutique Is In the 8th or 9th Inning of Its Reboot

Reported by Neil Anderson, Managing Editor

"We feel like we are in the eighth to ninth innings of getting the house in order."

That's how Rudolph-Riad Younes, co-founder and CEO of R Squared Capital Management, explains where the new-old boutique's reboot stands. Later this year, he adds, they'll finally be "on auto-pilot."

R Squared is new, and it isn't. The New York City-based, international equity shop launched in May 2013, and its sole mutual fund (the RSQ International Equity Fund), debuted six months later. Yet the team started about 20 years ago at what was then Julius Baer Investment Management, and the average team tenure is 15 years.

JBIM rebranded as Artio Global Investors in 2008 and IPOed in 2009. After a rough 2012, Artio sold to Aberdeen in 2013, and Younes and his colleagues left and started R Squared.

At R Squared, Younes says, the team is going "back to the old formula" of managing money and looking at markets and technology. The first year or two, he says, is about "trying to get the product right." He outlined three things that mutual fund investors are looking for.

"They want good alpha, and they want consistent alpha, and a process that's easy to understand," Younes, who is one of three co-PMs on R Squared's fund, tells MFWire. "We want to build products that fit the client's attributes, and the risk tolerance of the clients."

"We try to have a plane that has 12 engines, not just one or two," Younes adds. "You should be able to withstand all weather."

The most important challenge for the R Squared team, Younes says, is "eliminating the mistakes ... [from when Artio] got too big organizationally."

"How can we do well again, get the assets up again, and attract talent in the future?" Younes asks rhetorically, while noting that things could go quicker than when the team first started out, as this time they're more of a "known quantity."

"From the business point of view, it's almost like Groundhog Day in a sense," Younes says. He recalls that the team started at Julius Baer with $8 million in assets under management, Artio eventually rose to more than $70 billion before its fall, and now the R Squared is starting fresh. (The R Squared mutual fund had $51.8 million in AUM as of March 31, 2015.)

One key piece of the R Squared puzzle, Younes says, is that "everybody on the team has equity stakes." The firm is "100-percent owned by employees," with no outside private equity or venture capital involvement.

Another key piece is getting R Squared's brand out there. Younes says that the R Squared team "tends to be a bit more contrarian" than other PMs, and they're doing media and conference appearances to talk about their ideas. They've also hired someone to focus on the RIA channel for them, a historical area of initial adoption strength for the team's strategies. And they know gatekeepers, consultants, and their own rolodex of investors.

Once R Squared finishes its initial groundwork buildout and gets into that "auto-pilot" mode Younes mentioned, he anticipates becoming "more aggressive in terms of trying to address clients," traveling to conferences and making media appearances. He says that PMs have to both "act smart" by producing alpha and "look smart" by "explaining something complicated in layman's terms."

"If you master a subject, you should be able to explain it to a 14- or 15-year-old," Younes says. "Getting the money, views, or eyeballs, it's not that difficult once you have something that the consumer or the investor wants." 

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