William Manning: An entrepreneur who lives for innovations

William Manning’s first job was selling candy novelties door-to-door as an 8-year-old.
“At 10, I was making as much as my father made as a policeman,” says Manning, president and CEO of Manning & Napier Advisors Inc., one of the larger independent money management firms in the country with $7 billion in assets.
“I’ve always found jobs. I always took a lot of pride in making my own money,” the Elmira native says. “I liked the idea of being independent.”
At one job he dug graves. At another, he unloaded a boxcar filled with watermelons.
“We got paid in watermelons,” Manning says. Half the profits of that venture were lost, however, when Manning could not balance two melons plus his co-worker on the back of his bike.
“As far as financial success, I’m not driven by that,” he says. “It’s pride.”
Before reaching his teen years, Manning was organizing and managing neighborhood sports teams.
“I wanted to have the nicest uniforms, as good as the professionals,” Manning says.
He would get sponsors to pay for the uniforms, and the efforts always ensured him a spot on the team.
Manning always has had a desire to do things better. He calls himself an “improvement bug.” That passion was the catalyst for forming Manning & Napier 31 years ago. Today the firm has clients in more than 40 states and employs 240 staffers.
Seeing an opportunity to improve things also led to launching at least eight other ventures in the past decade-totaling some $80 million in investments.
Manning came to Rochester in 1970 after working on Wall Street for a decade as an account executive, research liaison and partner at the former Merrill Lynch, Pierce Fenner and Smith Inc.
When he came to upstate, he wanted to run his own company, and to focus on three areas he thought would be a major part of the future: computers, software and health care.
Manning met the late William Napier, a municipal bond specialist in Rochester, who also was interested in starting a company.
At the time, money management was an extremely low-profit business, and only one other firm here concentrated on it, he says. Trust departments at banks did money management, mainly to keep loan clients happy, and were losing money on it.
But Manning had confidence. He thought the business could be done better.
“I believed with all of my heart that if it was done right, it could be profitable,” Manning says. “I told (Napier), ‘I believe we can break even in six months. If not, we can leave it.'”
The main challenge: The money management field was in its infancy, and people didn’t understand it. He constantly had to explain the company was not a bank and not a broker.
“We manage money. We take discretion. We make decisions for you. We do what we think is best for you,” he says. “We’d sit in people’s living rooms till 1 in the morning (trying to drum up business) and be back on the road at 6 that same morning going on another call.”
Weekends were filled with figuring out the financials.
Persistence paid off in time to meet Manning’s projection. At the end of the fifth month, Manning & Napier brought in its first seven-figure account. The company grew from just over $1 million in assets under management in its first year to $120 million in the late 1970s to $7 billion today.
Its products include pension and annuity funds, endowment funds, profit-sharing plans and 401(k) benefit plans. Half of the firm’s clients are institutional investors, and half are individuals.
Most of Manning & Napier’s 240 employees are located in Rochester. Sixteen staffers have ownership in the company.
One of Manning & Napier’s biggest strengths is a low turnover rate of key people. The executive committee and core investment review group, which totals roughly a dozen employees, has an average tenure of more than a decade. Manning attributes that retention success to going to great lengths when hiring the right people.
Those employees seemed to have the right stuff when it came to picking stocks in a volatile 2000. Last year, Manning & Napier posted positive returns for all of its performance composites, including a 14 percent gain in its All-Equity composite.
Those results were far better than most of the leading benchmarks: the Standard & Poor’s 500 stock index dropped 9 percent, the Nasdaq dropped 39 percent, and the Dow Jones Industrial Average dropped 6 percent.
Manning & Napier adhered to two key strategies: not giving up on international stocks as many other investors focused domestically; and investing in less-popular sectors, including energy utilities, defense stocks and health care when others flocked to tech stocks.
Manning & Napier generally does not follow the masses, Manning says. In the early 1970s, investors flocked to the “nifty 50” stocks. But Manning & Napier avoided the group because the firm figured it would take roughly 14 years to break even if it invested in those hot stocks.
One 1970s stock Manning & Napier rode was Bausch & Lomb Inc. Many other investors avoided it because it seemed mired in legal wrangling. Manning, however, pored over the legal contracts and found the company was not at fault.
“It was a no-brainer if you took the time to read the contracts,” he says.
Learning from mistakes is another Manning & Napier strategy. One mistake led to a rule at the firm: Sell a stock when a company makes an acquisition outside of its core business.
That was something the firm did not do when pharmaceutical company MedPartners Inc.-now Caremark Rx Inc.-started buying physician practices. A short time later, MedPartners almost went bankrupt.
“It was embarrassing,” he says.
Manning & Napier held the stock long enough for it to recover, but learned a valuable lesson. Statistics show only one in 10 acquisitions becomes profitable-unless it is within the same core business, he says. When a company starts to acquire non-core firms, it is making a statement that it is not confident in its core business.
Manning & Napier holds mixed views on Rochester’s two largest firms, and currently has a large holding in Eastman Kodak Co.
“When you look at what Kodak has done, I’d say they’re moving as fast as the market has let them. They can’t get too far ahead of the market,” Manning says.
He is waiting to see how the latest technology will affect Kodak when wireless phones are equipped with cameras.
“No Kodak moment will ever go unnoticed,” he says.
Xerox Corp., however, does not fit any of the investment firm’s strategies. It has a lot of unattractive debt to pay down, plus it is centered in a price-sensitive, capital equipment market where it is hard to make money, Manning says.
“They will recover. They know what they have to do,” he adds.
Manning describes his style as having an owner’s approach to buying other businesses.
“I have a critical eye toward things,” he says.
That attitude is admired by Gene Foster, who has been Manning’s personal broker for more than 20 years at Merrill Lynch & Co.’s local office.
Foster describes Manning as a relaxed, patient and detached investor, quite unusual especially in the high-risk futures market.
“Bill did very well (on futures), the best that I’ve seen,” Foster says. “He is a position trader … he holds positions longer than most … sometimes more than a year.”
One day in winter 1995, Manning called from the Florida beaches to find out how things looked. Foster was not happy to report it was a big day against him, mainly because of the large position Manning held in the Japanese yen.
“When people start to lose a lot of money, they tend to get spooked. He’s not that way,” Foster says.
As it turned out, a couple weeks later the yen turned around, and it turned out wonderfully for him, Foster says.
One thing that convinced Manning to build up his position in the yen was a shoe shopping trip in Hawaii. He tried to buy a pair of size 91/2 loafers only to find the store did not carry his size because it was too big. The store was catering to Japanese clients.
From that experience, Manning deducted that the yen was too high and that it was cheaper for the Japanese to buy things in Hawaii than in Tokyo.
Manning constantly gathers information and uses it as a tool when evaluating what is happening in a certain company or market.
Foster recalls receiving a call asking about cotton because Manning just had been shopping and could not find a cotton sweater. Foster discovered cotton was at an all-time low.
“(Manning) bought some. It went up 20 cents,” Foster says. “He’s remarkably accurate.
“I feel fortunate to work with him. It’s an education on my part.”
Another of Manning’s acquaintances is similarly impressed with his style.
“He lives on what we call Manning Standard Time,” says Michael Harkins, president of New York City-based Levy, Harkins & Co. Inc., an investment advisor.
“He is patient beyond belief on holding stocks, on how long it takes for things to play out, on changing trends,” Harkins says. “(Manning) has a longer perspective than anyone else and is way in front of the investing community-not by a week or a month but a couple of years.”
Harkins and Manning have been friends for 25 years. They are competitors in some lines of work and allies in others. Harkins describes Manning as a hard worker who melds 40 years of experience with a lot of energy.
There are few people on Wall Street whom Manning talks to, Harkins says. It is more likely he will think about the demographic trends in Germany than the Federal Reserve moving interest rates this week.
“It’s a nature of his intellect. He’s always been such an independent thinker,” Harkins says.
Manning travels a lot and makes it a habit to buy neckties on trips, especially when vacationing with his wife. During a hectic day at the office, the necktie tends to remind him of better times, he says.
A fitness enthusiast, he also packs a jumprope in his suitcase to stay fit on the road and often visits the gym to play pick-up basketball. He played lacrosse, rugby and some football in college.
Manning has used his observations of processes and trends to launch more than eight additional companies. Those firms employ 140 staffers.
“With the venture capital stuff, I’m stretching myself and doing something maybe someone else would not take on,” he says.
These companies incorporate what Manning sees as better ways of doing things, mainly through software and technology.
“The software industry we obviously think is important for us to know more about, and there is no way to know more about it than to get in there and run a business,” Manning says.
In 1992, he founded Manning Ventures Inc. A year later he began KSDS Inc., the general partner of Kent Display Inc. Kent Display uses technology to produce reflective liquid crystal displays for pagers, portable phones and hand-held computers.
Manning has three business ventures in China in lightweight, high-powered magnets and flat-panel displays. In Germany, he sponsors a flat-panel display program with the University of Stuttgart.
Manning also founded Manning & Napier Associates, a company that owns a majority share of Manning & Napier Information Services. One development in this company includes technology used by the U.S. Patent and Trademark office for pending patent applications.
In 1993, Manning founded Synmatix Corp., a company specializing in nanoparticle technology research. It collaborates with Los Alamos National Labs to develop high-strength biomechanical components. This company also has an office in Moscow at the Academy of Science’s Institute of Physical Chemistry with 12 scientists and consultants.
In 1994, Manning founded Manning Leasing Inc. It does business as Williams International Air, an aircraft leasing company. A year later, he founded and later sold CimSoft Corp., a software firm focused on large, complex engineering drawings.
Not every venture has turned out a huge success yet, but Manning is confident about the progress being made.
“I’m a little stubborn about giving up on something,” he says.
Manning’s effort earned him Upstate New York’s Financial Services Entrepreneur of the Year in 1996 from Ernst & Young LLP.
Many of these start-up companies have offices in places where Manning & Napier Advisor clients are located, including Rochester, Buffalo and Syracuse; Southfield and Plymouth, Mich., north of Detroit; and Kent, Ohio, south of Cleveland.
“I focused on where do we get money from, and I’ve invested back in those areas. It’s my style of philanthropy to give money back at the same area it’s come from,” Manning says.
Another form of philanthropy is a college scholarship Manning set up after picking a winning stock in the early 1980s. He bought Telefonos de Mexico SA for 8 cents a share and sold it at $4 a share-a 4,900 percent gain.
The Henry Van Dyne Memorial Scholarship by William Manning covers tuition, room and board for a student within a 90-mile radius of Rochester.
It is named after the man whose scholarship gave Manning the opportunity to pursue a higher education. Manning was a Van Dyne Scholar at Dartmouth College in New Hampshire and graduated with a bachelor of arts degree in economics in 1958.
Manning recalls two richly rewarding experiences from that time.
During several of his college years, he worked nights deliberately so he could coach Little League baseball.
He always was proud when he would get 4- and 5-year-old beginners over their fear of a hard, fast ball coming right at them.
Manning focused on the basics so the youths could step up to the plate and hit the ball. To build this confidence, he would start by pitching them tennis balls because they were softer and less intimidating. It worked.
He still loves the sport and recently took in a Little League game that a friend was coaching in Boston.
Another experience came after Manning graduated from college. The superintendent at his old high school was in a pinch and asked Manning to teach math. Manning was reluctant because he had no training, but he took the job anyway.
In this case, he helped turn around a failing algebra class. The students feared the subject and had no confidence they could do math. Manning stepped back to figure out why. He realized the basics had not sunk in and algebra feeds off of those basic building blocks. He took the class through the basics step by step.
“Success cannot be judged by someone else. It is something only an individual can know by how far they have been stretched and by how much sacrifice they have made,” Manning says.

05/18/01 (C) Rochester Business Journal