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Who Needs New York, Anyway?
Taking Wall Street to the Alaskan Tundra
By Nancy Moffitt
About 10 year ago, Bob Gillam gave Wall
Street the cold shoulder. As in subarctic.
In 1990, Gillam, W'68, founded
McKinley Capital Management Inc. in
Anchorage, Alaska. Gillam had grown up
largely in Alaska, and knew he wouldn't
be happy surrounded by skycrapers and
subway .
Though he initially worried that
McKinley's location might be a liability to
the money management firm, Gillam felt
there was no reason – thanks to technology –
that he couldn't make it work.
Indeed he has. Today, McKinley, with
about $5 billion under management, has
racked up impressive returns year after
year, catching the eye of the Wall Street
Journal and other major media, as well
as a growing cadre of institutional
investors. Even during last year's tumultuous
market climate, all but two of the
firm's investment product outperformed
the benchmark indices: McKinley's
growth-equity portfolio, for instance,
had a one-year return of about 65 percent
as of September 30, outpacing the Russell
3000 Growth and the S&P 500. Its global
growth product gained 21 percent for
the year, versus 8 percent for the Morgan
Stanley All-Country World-Free. A variety
of reporting databases, including Nelson's
Directory of Investment Managers, rank
the firm in the top 1 percent to 5 percent
for all of its investment products.
And Gillam, 54, can trade in the morning –
there's a four-hour time difference
between New York and Alaska – and fly his
float plane or fly fish in the afternoon after
the market has closed. McKinley's
Northern Exposure locale has, surprisingly,
turned into a selling point: the firm
has attracted a core of young investment
gurus who are drawn to the wilderness
lifestyle and low cost of living. It's also
part of a growing trend among money
management firms: Technology has made
it possible for investment companies to
set up camp just about anywhere. Today,
many of the nation's largest investment/
money management companies are far
from Wall Street, from Colorado-based
Janus to Boston's Fidelity.
But it wasn't always so easy for Gillam,
who tackled some unique challenges during
McKinley's infancy.
For one, leasing the high-speed telephone
line necessary for coast-to-coast
data transfer – timely data is the lifeblood
of investment firm – was too costly an
option for the then three-man firm. While
the going rate was $600 to $900 a month
elsewhere in the U.S., McKinley's
Anchorage base meant the line would
cost "several times that amount," Gillam
says. "Since accessing data is so vital to
our business, we were forced to seek out
alternatives. As a result, we were one of
the first asset management firms to use
the satellite for data transfer. We discovered
then what we all know now – that
streaming data from space was a cheaper
and more reliable way to go."
McKinley also faced indifference from
Alaskans, who believed that "you've got to
be from out-of-town to be any good,"
Gillam says. So during its first five years
in business, the firm didn't market its services
in its home state.
"This meant that that our next closest
market, Seattle, was 1,300 miles from our
primary location," Gillam laughs. "But initially,
I looked for clients in Texas or the
West Coast, starting very small. And we
grew, we picked up business across the
U.S., including here in Alaska, and also in
Europe and Asia." Today, about 80 percent
of the firm's business is institutional, with
clients including Bell South and
Volkswagen of America.
As McKinley Capital has
grown, its Alaska base has
become less of a challenge
and more of a way to give
the firm a distinct, memorable
persona of sorts.
The entry page of the
company's website
(www.mckinleycapital.com),
for instance,
shows a suit-clad man
giving
a presentation to an
audience of attentive
brown bears backdropped
by Alaska's snow-topped
mountains. The slogan? "Our
location at the top of the world
means only one thing. A better view."
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