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Transition puts him on the first line

Daniel Loughran knew early on that he wanted a career in finance. He did not think it would be in Rochester.

His interest in playing hockey-and his wife-steered him to Western New York.

Loughran, 45, is senior vice president, senior portfolio manager and chief investment strategist at OppenheimerFunds Inc.’s Rochester Division at Linden Oaks. He oversees 35 Rochester employees, including 16 investment professionals, and some $28 billion in assets under local management.

A native of northern New Jersey, Loughran enrolled at SUNY College at Geneseo to study finance but also to play on the school’s NCAA Division III hockey program.

There he met his future wife, Nancy, a resident of the Charlotte neighborhood in Rochester. They married in 1988, and after the birth of their first daughter in 1993, Nancy persuaded Daniel to leave New York City.

"My wife didn’t really like New York (City) very much," Loughran says. "We thought this would be a better place to do it. There’s a nice quality of life here. Things are easier in terms of raising a family."

Loughran, who had worked for one year at Morgan Stanley as a fund accountant after seven years with Security Pacific National Bank, quit his job. Nancy, who worked in the banking industry in Manhattan, also quit her job. They and their infant daughter, Anna, moved in with Nancy’s family while her husband looked for a job.

Four months later, Loughran was hired by Ronald Fielding, founder of Fielding Management Co. Inc. and co-founder of Rochester Capital Advisors L.P., advisers to the Rochester Funds started by Fielding in 1983.

"I sent my resume out to a bunch of different places," Loughran says. "Luckily, Ron was hiring at the time.

"Their business had been growing dramatically. They were basically doubling their assets under management every year in the late 1980s and early 1990s. There was massive growth, and they needed the bodies to help grow."

It was an ideal fit for Loughran, who wanted to be a portfolio manager. His Wall Street jobs primarily involved the back office and operations.

"This ultimately was what I had sought," he says.

"I was basically an analyst at first, an analyst but portfolio manager in training. After just a few months I was executing trades and making investment decisions."

Fielding sold his companies to OppenheimerFunds in 1996. Loughran moved up to assistant portfolio manager in 1999. He became portfolio manager in 2001, and it is a role he maintains after replacing Fielding in May as head of Rochester Division.

"Sometimes good things don’t happen to nice people," says Douglas Fuess, a long-time friend. "In Dan’s case, he is truly a nice person that’s very successful. He’s a trusted friend.

"He’s a quiet guy but has a steadfastness and competitiveness that drives him in everything he does."

Scott Cottier has moved up to No. 2 on the investment staff behind Loughran. Richard Stein is the Rochester Division’s chief credit analyst, overseeing seven credit analysts.

"We’ve been working on the transition for three years now, so it wasn’t like a light switch in terms of dramatic change overnight," says Loughran, a resident of Fairport. "It had been a gradual process.

"For instance, all the administrative responsibilities of leading the division basically were in my lap three years ago. Ron, though, had always been chief investment strategist here. Now I’m also filling that role."

An athlete

Loughran was born and raised in Ridgewood, N.J., 20 miles from New York City. He played hockey, baseball and soccer in high school. Hockey was his favorite, and best, sport.

"The town I grew up in had a program one year, and that got me started," he says. "I was around 12 years old. I always played a lot of sports when I was a kid, though."

He wanted to play college hockey, and SUNY Geneseo accommodated him.

"They invited me to play there," Loughran says. "I had a great experience there, both from the hockey experience and also the academics."

Loughran and his wife remain involved with the college. He serves as chairman of the Roundtable Athletic Association, which supports the college’s athletic programs. In memory of his father, the couple established the George L. Loughran Jr. RAA Endowed Fund in support of the school’s student-athletes, with a commitment of $250,000.

"His time commitment to the Roundtable is something that shows his leadership abilities have been extended from his hockey-playing days to now," says Marilyn Moore, Geneseo’s director of intercollegiate athletics and recreation.

"He’s a wonderful role model for our student-athletes, who know what his abilities were as a player and how he is giving back to his university."

Loughran says he was an average hockey player at SUNY Geneseo. But he finished his career with 41 goals and 72 assists, and he ranks 20th among Geneseo’s all-time scorers. He was co-captain as a senior on the 1986 SUNY Athletic Conference championship team.

Loughran won the Ira S. Wilson Award, presented annually to a senior male athlete for career achievement in SUNY Geneseo athletics.

"He was a great player, a great leader," says Moore, who joined the school’s athletic department in 1979 as head trainer and became assistant director of athletics in 1985. "He was the kind of player that led totally by example."

Loughran was graduated in 1986 with a bachelor’s degree in management science and a concentration in finance.

Career start

He took the job with Security Pacific National Bank doing back-office and operational accounting work in the firm’s investment business.

"I always knew I wanted to be in business, specifically finance," Loughran says. "I went to Wall Street and got a job as a clerk, a lowly clerk, an entry-level position. I learned the ins and outs of Wall Street and the investment business and spent many years on operational, back-office types of jobs, learning how things work."

While doing that, he enrolled at Pace University and earned his MBA in finance in 1993. He also became a chartered financial analyst.

"It was a great experience," Loughran says of his Wall Street days. "I did a lot of grunt work in the early years, but I had to start somewhere. It was hard work and long hours, but it was necessary in developing my skills and knowledge base and climbing the ladder."

Though he did not have a job waiting for him when he left New York City, Loughran was confident that he would find something soon.

"Western New York does have a fair amount of investment managers," he says. "It’s certainly nothing like New York or Greenwich, Conn., but if you have the resume, there’s a good chance you’ll get an opportunity."

Loughran’s investment philosophy does not differ from Fielding’s, he says.

"Ron was my investment mentor," Loughran says. "In the municipal bond space, I’ve experienced how successful this approach and philosophy can be. Last (year) was difficult for us, but none of us here ever lost the faith or conviction in the way we manage tax-exempt money."

The Rochester Division manages 18 tax-exempt bond funds. The philosophy is value-driven, Loughran says, using a bottom-up approach in which investors look at individual borrowers and individual credits rather than specific sectors.

"Securities selection is ultimately the main thrust of our investment thesis, as opposed to top-down macroeconomic analysis and forecasts," Loughran says.

"It’s really become engrained in the culture here, so it’s another thing that has led to a smooth transition from Ron’s leadership to mine."

The division

The Rochester Division’s 18 funds include eight state-specific municipal funds launched in 2006. None has been launched since then because of the reeling economy. Loughran declines to say if or when additional funds are coming, but he says the municipal bond market is healing.

"There are a couple of ways you can grow," he says. "You can just keep adding assets to your existing funds and/or create new funds and add assets to them. Presumably, we’ll do both as we go forward."

The Rochester Division manages 15 state-specific funds altogether. It manages three national funds: the Oppenheimer Rochester National Municipals, the Oppenheimer AMT-Free Municipals and the Oppenheimer Limited Term Municipal Fund.

The average account in the national funds is $50,000.

The Rochester Division is a satellite office for OppenheimerFunds, whose headquarters and most of its investment teams are in New York City. Operations and shareholder services, and a small investment team, are in Denver. A second satellite office is in Boston. Total employment is some 2,300.

Loughran expects the Rochester Division to add one employee in 2010.

"In the money management business, firms can scale up without really adding much to head count," he says. "That’s good from a business perspective, because it helps grow profits for the firm.

"However, our bottom-up approach is labor-intensive, so we still will need to add investment professionals as we grow assets under management."

The Rochester Division acts autonomously from New York City in its investment approach, Loughran says. However, his boss-Arthur Steinmetz, the firm’s chief investment officer for fixed income-is in New York City. Digby Clements, who runs the product marketing team in Rochester, also reports to New York City.

"Digby’s input into product lineup, deciding when to launch new funds or what funds to launch, falls largely under (Clements’) responsibility," Loughran says. "All of that stuff has to go through the proper channels at headquarters. But the portfolio managers in Rochester are the portfolio managers for the funds."

Market rebound

Those portfolio managers are seeing better opportunities this year than last year, Loughran says.

"Market conditions, in the muni market as in most credit markets, are dramatically improved," he says. "It’s completely night and day from where we were in late 2008.

"We have lending occurring again. We have, in the muni market, new issues coming to market and getting done. We have vibrant secondary market trading. And we have much firmer prices, with yields actually considerably lower, especially in the high-grade part of the muni market."

Last year was the worst for municipal bonds since the Great Depression, Loughran says. The Rochester National Municipals, for example, lost 48.9 percent of their value.

"For those folks involved in it," he says of the Rochester Division, "it was the worst experience of our careers. One reason why we did stick to our guns was that it did appear to us to be irrational.

"The fear and panic really swung the pendulum far greater than what the fundamentals suggested. Even though we don’t do a lot of top-down forecasting, since the downside seemed way overcooked, we knew it was just a matter of time for the recovery and upside in the muni market to take place."

The bond market is brighter now for several reasons, Loughran says.

"In 2008, we had a massive imbalance of supply and demand," he says. "We had massive selling of muni bonds. We had shareholder redemptions of their muni mutual funds, so mutual funds had to sell bonds to fund those. The dealer firms that owned munis were selling, trying to reduce their balance, to basically de-lever their balance sheets. Munis were a great asset for them to sell."

Insurance companies were selling municipal bonds to raise capital, Loughran says, and managers of hedge funds also were selling.

"Hedge funds entered the muni market five to eight years ago and became a relatively large player," he says. "So you had all these different parties selling their munis, and nobody to buy them. That caused prices to drop precipitously."

With the stock market on the rise, investors are getting back into the market.

"The mutual funds are getting money into their funds," Loughran says. "That means they have to go out and buy bonds. The Wall Street dealer firms that were de-levering their balance sheets completed that process, then saw munis as an attractive investment. So they’ve been buying.

"Insurance companies and, to a lesser extent, hedge funds also are now buying munis because the yields got so high relative to other fixed-income assets that they became attractive. To us, they obviously became attractive to start the year. That attracted a lot of capital back into the asset class, which pushed yields down and bond prices higher."

The 2008 problems in the bond market were driven by fear of widespread credit losses, Loughran says.

"But the muni market has such a great history of credit performance," he says. "Most of the borrowers pay back the lenders. Once this fear abated and the market became comfortable with the actual credit performance, munis didn’t start defaulting en masse. Borrowers kept paying back the lenders. The market regained confidence."

Loughran thinks the worst of the current crisis is past.

"I think we are out of the woods," he says. "Risky assets, for many of the same reasons that we talked about in the muni market, are performing well. Investors are taking on risk again. They’re buying the risky assets for the prospect of greater return in the future.

"Again, I think it’s just a matter of overall confidence returning to the financial system, which was at a low level that none of us have ever experienced. It was financial panic."

On the ice

Away from work, Loughran continues to be passionate about hockey. He plays in a men’s league twice a week during hockey season. He also plays golf, is an avid fan of the New York Yankees and the New York Giants, and has coached in his daughters’ youth sports leagues.

"He’s a big sports guy," Fuess says. "We’ve played a lot of golf together. We talk a lot of Yankees baseball. I’ve watched him raise his children and have never seen him raise his voice, ever.

"There isn’t a piece of him that has anything bad to say about anybody. There may be something that he may not particularly care for, but he’ll not ever go down that path. That’s a unique trait."

Fuess, sales manager for Hanson Aggregates of New York Inc., moved to Fairport with his family in 1994 at the same time Loughran did with his.

"When I first met him, he didn’t play a lot of golf. He’s made himself into a tremendous player, just out of sheer work. And he’s a good athlete to begin with."

Loughran spends much of his time with his family when he is not working.

"My wife is busy running around with the kids and doing all sorts of stuff," he says.

Nancy is involved with the Girl Scouts and with the local Parent Teacher Association. Anna, 16, plays the French horn and is involved in equestrian sports. Siobhan, 13, plays the saxophone as well as softball and volleyball.

"He’s had great professional success, he has a wonderful family, and that really stems from who he is," Fuess says of Loughran. "He’s a good, balanced individual."

Loughran is a member of the Geneseo Foundation board of directors and the business school’s advisory council.

"I travel occasionally," he says. "I travel for two reasons, mainly, to go to New York headquarters just to visit with my boss, then also to accompany the sales force to support the marketing effort."

Open-end load mutual funds are sold through brokers and financial planners, who ultimately sell them to the individual investors, Loughran says.

"I occasionally accompany our mutual fund wholesalers on visits to the investment professionals that actually sell their funds," he says.

The change in leadership to Loughran from Fielding has been fairly imperceptible, Loughran says.

"We really are not doing much differently, and that’s what we’ve hoped for," he says. "We’ve hoped for a smooth transition. We’ve all seen how successful this process can be.

"Theoretically, there could’ve been some temptation to change, given the market conditions of 2008 and how it affected our fund performance. But we stuck to our convictions and are actually starting to see it bearing fruit in 2009, because our recovery has been dramatic."

Daniel Loughran
Title: Senior vice president, senior portfolio manager, OppenheimerFunds Inc., Rochester Division
Age: 45
Home: Fairport
Education: B.S., management science, SUNY College at Geneseo, 1986; MBA, finance, Pace University, 1993
Family: Wife, Nancy; daughters, Anna, 16, and Siobhan, 13
Hobbies: Golf, hockey
Quote: "This is a great spot. We really have something good going on here. We have great people, great talent. To think that we have investment management talent like we do in Rochester is really exciting."

10/09/09 (c) 2009 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303.

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