Rick Fuscone is betting that you can do well by investing in listed companies that do good.
The former Merrill Lynch executive set up Dover Management LLC in Greenwich, Conn., three years ago to pursue the thesis that the best corporate citizens, in terms of transparency and philanthropy, are also among the likeliest to deliver superior returns.
Mr. Fuscone, an insulin-dependent diabetic, said his epiphany came at breakfast one morning, while reading a peanut-butter jar label. Fifty 50 Foods, Mendham, N.J. — a maker of products aimed at diabetics — explained that it funnels 50% of its profits to diabetes research, making more than $8 million in contributions since 1992.
Mr. Fuscone was intrigued by the premise, now outlined on Dover's website, that "exceptional returns are not only compatible with, but often inextricably linked to, exemplary corporate responsibility." He founded Dover in March 2001, bringing his September 2000 retirement as a managing director and senior vice president of Merrill Lynch & Co. to a quick end.
Along with colleagues Michael Castine, Charles Clough and Frank Ahimaz, Mr. Fuscone developed a proprietary screen ranking S&P 500 companies for corporate governance and factors such as contributions to the community. Dover then back-tested an initial universe of just more than 80 companies, assisted by consultants such as Casey, Quirk & Acito LLC, Darien, Conn.
The results support the thesis that investors that focus on the "best" companies will be rewarded over the long term, said Mr. Castine, Dover's president. He declined to provide specific numbers. Dover is in the process of registering with the Securities and Exchange Commission as an investment advisor.
Dover is now discussing its strategy with consultants and institutional investors, and the new company is also looking to fund-of-funds providers.
Mr. Fuscone and his colleagues are putting their own money where their corporate mouth is, and they expect to net their first mandate from a financial institution soon. The company hopes to be managing more than $100 million within six months, Mr. Castine said.
Dover recently hired Philip Propper De Callejon away from Trust Company of the West, Los Angeles, Calif., where he helped manage large-cap growth, to oversee the company's strategy.