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Traci Lerner,W'81
Two of Traci Lerner's four children have
asked her, independent of the other,
why she's always running out the door
to go food shopping. Each time she has
looked at them, mystified, and said,
"I'm not going food shopping. What
are you talking about?" Their reply:
"But you always say you have to go
before the market opens."
The market Lerner is running out
the door to, of course, is not the supermarket.
Lerner has worked until the day she
delivered each of her four children and
immediately after their births. So it's not
surprising that the founding partner of
Chesapeake Partners L.P., a Baltimore-based
hedge fund, has delegated the
food shopping. But Lerner, who has
learned to live on very little sleep, also
eats breakfast and dinner each day with
her kids and her husband Mark, W'80/
C'80, and has never missed a play, concert,
or parent/teacher conference.
Somehow she manages her brood —
two girls, Stephanie, 13, and Sara, 4,
and two boys, Coby, 10, and Tyler, 6 —
while also managing a $1 billion fund,
widely regarded as one of the nation's
most successful. In the ten years since
its founding, Chesapeake Partners L.P.,
launched with $4 million under management,
has generated an annual net
return of 22.1 percent. By comparison,
the S&P 500 enjoyed a 10.9-percent
gain during the same time period.
Lerner's story is all about the unusual.
A precocious teen, she went to
college before graduating from high
school, earning her Wharton degree at
age 20. She grew up without her biological
father — he died when she was
three — and with a mind for math. She
didn't go to Wharton because she loved
or was even all that interested in business;
it was more that she was good at
and fascinated by quantitative analysis.
Then there's her day-to-day life.
Lerner, who says she's "focused and
intense," is up at 5, works from 5:30 to
7, gets her kids off to school from 7 to 8,
then heads to the office. She typically
leaves each day by 6:15, is home five
minutes later to have dinner with the
family, supervises homework and gets
the kids to bed, then goes back to work
at her home office, often until 1 a.m.
"I've been known to tell Mark that you
can sleep all you want when you're
dead," laughs Lerner, 41. The Lerners
do have full-time childcare during weekdays
but take over the caretaking when
they come home and handle doctor's
appointments and school activities
themselves. A team approach, with Mark
an equal participant in all aspects of caring
for the couple's four children, is the
only way Traci has been able to carry on
with her successful career, she says.
"There are no lines drawn between
us as partners and no real gender roles,"
she says. "It is highly unusual. There's
nothing Mark or I wouldn't do to help
the other with whatever is on our plates,
and my children are fortunate that they
have two equally involved parents.
Mark and I really share the parenting of
our children, which is why my children
are not hurt by my working."
If one of the kids has an early morning
doctor's appointment, Mark is likely
to take them. Once the market opens
and settles into a pattern, Traci handles
doctor's appointments. For school functions,
the couple often divides up an
event: for a recent middle school open
house, Traci attended the first 90 minutes,
and Mark the last. For assemblies,
plays, and other performances, both
parents generally find a way to be there,
though Lerner admits attending plenty
with cell phone and Blackberry in tow.
"There's nothing more important to us
than our children. The one thing I've
been able to prove to myself is that you
can have kids and somehow have a
real career as well. Mark and my kids
are the world to me. What I hope I've
brought to Chesapeake is the family
nature of who I am."
Chesapeake is similarly orchestrated.
Mark manages operations, while Traci
runs the portfolio. "Part of what's made
it successful is that I haven't had to deal
with the business end of the fund.
Often, the portfolio manager ends up
trying to do everything, and the investment
focus is lost," Lerner says.
Perhaps what's most unusual about
Lerner is her wish to maintain a low
profile. Lerner was very reticent about
being interviewed for this article and
has never sought exposure or publicity
for herself or her firm. "We live very
quietly," she says. Chesapeake doesn't
have a website or even a brochure; its
marketing has been entirely via word of
mouth. "We have opted to stay below
the radar screen. I just don't have the
ego for it and didn't want to call attention
to what we were doing. We had
some very good investors early on, and
this is very much a word-of-mouth
business. We haven't had the need to
go out there and make a lot of noise."
Lerner began her career at Citibank's
analyst training program in New York,
then went to Dillon, Read, where a
man who would become her mentor
hired her to work in the research
department of the risk arbitrage department.
"I didn't even know what risk
arbitrage was," she says.
Risk arbitrage, an example of something
called event investing, involves
trading securities of companies when
they are in the midst of some major
event — a takeover, management shake-up,
or bankruptcy, for instance. This
highly charged investment strategy —
"There's a lot of yelling and screaming," says Lerner — became
her passion. In 1984, two years after joining Dillon, Read, she
was named a vice president. A year later, Lerner was asked to
manage all risk arbitrage research and was named a senior vice
president. In 1990, she was named the head of the risk arbitrage
department, overseeing all research and trading.
But less than a year into her new post, with two toddlers at
home, Traci and Mark Lerner decided it was time to leave New
York. "I didn't want to raise my kids in New York as it was ten
years ago," Lerner says, "and I didn't want to commute."
She decided to start her own hedge fund in Baltimore in
1991 with one other colleague from Dillon, Read, while Mark
worked to complete a leveraged buyout he was immersed in.
About six weeks after starting Chesapeake, she asked Mark to
put his deal on hold and work with her for six months, just
until she'd gotten the business off the ground. "But we starting
working together and said 'Gee, this is everything we wanted.
We've got the quality of life, we get to spend more time together,
and we're having a great time doing it,'" Lerner says. The
upshot: Mark never left the business.
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