Rodriguez on Stepping Out of the Spotlight

Christopher Davis: Well Bob, I know you announced I think in January or earlier this year that you would be taking a one year sabbatical beginning in 2010. And then returning to your firm following your sabbatical. And I'm wondering if you can explain to your shareholders why they shouldn't be concerned that you will be away for a year? And maybe Tom you can explain why you think you are worthy successor to Bob?

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Bob Rodriguez: OK, well, first of all for the shareholders out there, this is not something that was just a spur of the action. More than six years ago, I raised the idea that I would probably take a sabbatical sometime between 2009 and 2011. It was for a number of reasons about how it would come together.

I felt that you've heard many managers and executives say they always have high confidence in their employees, etc. Well I'm only leaving millions in our mutual funds and untouched. And my equity value in our firm which is in the tens of million. So, I think I have a few shekels on the table that I'm leaving there, because I have confidence in Dennis and Rick and Tom. They've been with me anywhere from 10 to 17 years out there. We've been operating these teams for so long.

I also feel that by doing it this way, that our shareholders and clients, they know who is going to be the captain of the team for the next 10 and 20 years. So I think this adds stability longer term. Now what I can do is, I come back and I can get some of the fun without some of the pain of everyday. [laughter] And so I hope to be a very good advisor.

I'm not exactly sure what I'm going to do, I will probably be doing research, analytics. I shoot stuff off to Tom all the time about we ought to be taking a look at this or that. Maybe I end up penning a column for FPA, doing something along those lines. And then finally I expect to spend a fair amount of time traveling. I have several people that want me to visit them in business and what not around the world. And I thought that that would not be a bad thing to do, and come back and be a value add for the next 20 years. I'm not retiring though!

Tom Atterbury: Not retiring. If you look at how this is setup in relation to myself and in my involvement in new income. I came to the firm in March of '97, this is when I joined FPA. One of the things that Bob sort of attracted him to me and so he said "OK, this is what I like about you and I think you bring to the table," was the fact you used to be an equity analyst, you've been an equity portfolio manager, you've managed equity analyst and now you are doing fixed income.

So, in some ways where Bob has done equity and fixed, for pretty much all his career, he liked the fact of adding me on the new income side of someone who also had an equity background. In 2002, we developed a separate account business for the fixed income side. While I use the word "we," his participation was almost non-existent. He participated one time after we had been hired in 2002.

The client just kept begging, "Could you have Bob come to the meeting with the retirement committee?" Bob finally goes, yes I'll go. Bob stands up, introduces himself, introduces the firm, turns around, points at me and says Tom Atterbury is the portfolio manager on this account and you need to be asking him on the questions of how it's going to be managed because he's the person that is doing it.

So you would get a couple of questions. I would ask Bob the question, he says, "Oh no, no, Tom used to do that." That was the only time he did that. Then in 2004, I became the co-portfolio manager on the New Income fund. The reason I go through this, we've been at this process of getting to today where Bob makes his announcement on the sabbatical, and it was in March. We've been at the process of creating the situation that makes it work, and makes the transition easy for the shareholder for in essence, close to 10 years.

Bob: And this is part of laying this out, so that we have continuity going through this. I know full well that there have been very few successful transitions in this field. And I'll call it ego. I would like to be one of the very first and one of the most successful transitions because then they're successful and that reflects upon me again about successful judgment, not only securities but people.

So, I'm looking at that in there, and it actually serves our clients and shareholders better longer term. I'm willing to get out of the spotlight to let other people go on center stage, because I think longer term it's better for everyone. And then I can sit back there and you know, poke them and say, "Yeah, you get out there and do it." So far all of our clients on the institutional side have been extremely positively responsive.

And I think one of the reason -- I'll wrap it up -- is because when you are in a period of chaos like what we are in, if it was a good period of performance and everybody is up 20%, then somebody goes for another firm, I say why take this risk because you are both up 20%. But when you are in an environment like this, it comes down to one word: trust. Who do you trust?

And I thought this was the quintessential perfect time to make this transition and we have not seen any impacts on the mutual fund side so far because we are tracking it on a daily basis, as well as on our institutional side.

Christopher: Bob, thanks for your long term perspective and I think it's that perspective that's allowed you to be a successful investor and I think it's allowed you to create a world class culture at FPA.

Bob: I should think so.

Christopher: Well, thank you both for joining us. I'm Christopher Davis, reporting from the Morningstar Investment Conference.

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