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For founders of Clover Capital, redemption

When Michael Jones and Geoffrey Rosenberger started Clover Capital Management, they knew how far they could push each other before backing off.
 
The co-founders started their investment management business in 1984 after working in adjacent offices for five years at Manning & Napier. Rosenberger says knowing each other’s personalities made a partnership more tenable. And although they knew the beginning would be hard, the two never believed they would fail.
 
“We were just praying that we could pay rent and buy groceries at the beginning,” Rosenberger says. “Mike had two young kids; I proposed to my wife, bought a house and quit my job in a matter of three weeks.
 
“We didn’t call on any of our clients from the firm we worked at; we had too much respect for what they’d done for us to do that. So we went out to find a different client base for ourselves, and we were fortunate to get some clients early on.
 
“It took about 18 months to get to an income-producing level and three years to get back to our old incomes,” he says.
 
In the early days, the pair knew they would struggle to build a client base, but there was never a question about whether they would make it. Far tougher times came later.
 
“During the dot-com crazes we refused to buy the ridiculously overvalued Internet stocks, and there were a lot of people who thought we had lost it or didn’t understand the new economy,” Rosenberger says.
 
“People would avoid us at cocktail parties because they didn’t want to be seen with the village idiots. That was a tough time; it went on for about two to three years. We knew we were right, but the question is ‘Would the firm be around by the time we were proven right?’”
 
Clover lost over half its assets during what Jones calls one of the biggest manias the stock market has ever seen. The pair stayed with what they thought was right—ultimately benefiting clients who remained—and rebuilt the business to earlier asset levels about five years later.
 
By the mid-2000s, it was clear that the firm’s face-to-face business model was out of step with the industry’s quickly changing, global distribution model. Rosenberger and Jones started to contemplate what the future might look like for their business.
 
“We looked at that and knew that as the field moved that way we weren’t in a good position to compete. We (had) had people interested for 20 years and hadn’t paid attention, but we started paying attention then, and Federated was one of them,” Jones says.
 
Rosenberger retired in 2004, and Jones continued alone until 2008, when they sold the firm, becoming Federated Clover Investment Advisors. Jones is senior vice president. The firm still employs around 40 people.
 
Jones is confident the firm’s investment discipline will continue, saying it is Clover’s expertise that drew a buyer.
 
“I think we’ve established and very well articulated our investment strategy, which is classic in many senses but needs to be adapted at any time to the contemporaneous situation,” he says. “I think that’s going to be our legacy—that we started and maintained a strong product.”             

9/21/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected].

 

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