RiverPark's founders apply the lessons they learned at Baron Capital to their own slate of funds.
This article first appeared in the August/September 2011 issue of Morningstar Advisor magazine. Get your free subscription here.
To get back to your roots, sometimes you have to uproot yourself first.
That is what Morty Schaja and Mitch Rubin did. The Baron Capital expatriates founded RiverPark in 2006 believing that their longtime former employer had become too big for its breeches. By the time they left, Baron had amassed more than $15 billion in assets--a tremendous sum for the small-cap-focused firm.
Baron had become large for good reason. Flagship offering Baron Growth
"What had made Baron special no longer was the case," Schaja says.
In March 2006, both Schaja, now RiverPark's CEO, and Rubin jumped ship. (We asked Baron for a comment, but as of our publication deadline, we hadn't heard from the firm.) Between 2006 and the recent launch of their retail offerings, the pair operated a hedge fund, which they fortuitously shut down before 2008's autumn credit crisis.
Keeping It Lean
Not surprisingly, the pair at RiverPark will seek to avoid Baron's mistakes. RiverPark launched two mutual funds in September 2010, with Rubin taking the lead manager role of RiverPark Large Growth
Baron hired a raft of analysts to accommodate growth, but Rubin emphatically says that he won't ever build a large team of his own. "Baron was at its best when it was me and [firm founder] Ron Baron going out and visiting companies," he says. At RiverPark, Rubin and cohort Conrad van Tienhoven, a former Baron analyst with whom he worked closely, meet with company managements and use a lean supporting cast to back them up. This group includes a former reporter, who provides on-the-ground research, and an accounting specialist, who helps build financial models. An army of analysts with industry specialties, Rubin argues, creates pressure to hold stocks across all sectors to justify its existence. Rubin says that he has the flexibility to direct his Spartan staff toward wherever he and van Tienhoven sniff out opportunities.