Investment executives tend to stay at Los Angeles' Capital Group Cos., but Dale Harvey is an exception.
Capital Group is known for generous compensation and benefits, and Mr. Harvey said he had no complaints. He made his reputation there over 16 years, managing some $17 billion in equities for several of the American Funds, Capital Group's large mutual fund family with more than $900 billion in assets.
But in 2007, he decided to strike out on his own, investing several million dollars of his own money in setting up Poplar Forest Capital LLC in Pasadena, Calif.
“Virtually no one leaves Capital Group. A lot of people were scratching their heads with my departure,” Mr. Harvey said.
But Mr. Harvey, who bought his first share of stock in the ninth grade, said he wanted to be an entrepreneur and run his own business. He says he also felt frustrated because managing such a large amount of money means investing in 81 different stocks. He said that's too many stocks to track to do the quality job that is necessary.
“The Capital Group got to a size too big for me to follow my dream,” he says.
By running a boutique operation, Mr. Harvey said, he can concentrate on around 30 stocks and give full attention to a fundamental stock-picking process. He said he intends to manage no more than $5 billion, no matter how successful his firm becomes.
“We want to create a boutique firm that does an outstanding job for a select group of clients.”
Mr. Harvey is also hoping that history repeats itself. In 1983, another Capital Group portfolio manager, Howard Schow, opened PRIMECAP Management Co., also in Pasadena. The firm limits clients to 25 and manages money strictly for institutional clients including the Vanguard Group.
Mr. Harvey opened his office in a building on Lake Avenue, about a block down the street from PRIMECAP. It's not a coincidence. Mr. Harvey felt the closeness to PRIMECAP would bring him luck.
So far, Mr. Harvey has not paid himself a salary. Assets under management have grown slowly to $225 million from an initial $17 million, while the client list has grown to about 30 from an initial eight, all invested in a limited partnership. His firm also started a mutual fund in late 2009. He said about half the assets are from institutional clients.
He focuses on value stocks. “We are a contrarian investor. In a world that seems increasingly short term, we invest for the long term,'' Mr. Harvey says. “We only invest in companies that we are willing to hold for at least three years.”