A California investment firm went from near ruin to managing over $100 billion: Its turnaround may offer solutions to the ‘Great Resignation’

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WCM Investment Management, based in Laguna Beach, California, almost went out of business a decade ago due to a string of bad stock picks. Here's how it...

In just one decade, a Southern California investment advisory firm went from the brink of ruin to overseeing $100.5 billion in assets as of September, up from $833 million in 2011.

“We were on our knees, but there was absolutely no point in blaming people for mistakes,” said Paul Black, the firm’s co-chief executive and one of four principal owners who bought out WCM’s founder, Darrell Winrich, for $200 million in the late 1990s. “All we did was say, ‘How do we get better?’ and `We’re going to fix our way out of this.’ From there, you create a vibrant culture in which people can thrive.

Word about its success started to spread more broadly in July, when Black wrote a four-page paper called “Why Do Money Managers Fail? It’s Not Why You May Think.” In it, he wrote that money management firms close their doors for one primary reason — “a toxic culture” — and that WCM has survived despite all its mistakes “because caring for each other means we almost didn’t know how to fail.”

Nonetheless, many firms typically have changed fund managers who weren’t performing well relative to peers over time, instead of standing by them as WCM did, according to Baker and Bingham, the author, both of whom learned about WCM through an inquiry from MarketWatch. Most of WCM’s people, he says, have chosen to work at the office instead of from home since May 2020, bucking the prevailing trend among American workers given a choice during the coronavirus pandemic. Though there is no vaccine or mask requirement to be at the office, about 90% of employees got vaccinated and many wore masks, according to Black. On a firmwide trip to a ranch outside of Bozeman, Mont., this past May, WCM’s employees can be seen standing almost shoulder to shoulder.

What WCM’s managers were focusing too much on was a particular company’s competitive advantages, known as “moats,” Black says. They paid too little attention to what mattered even more: the direction the “moats” were headed in. After all, simply owning a company because of a seemingly wide advantage was foolish since businesses were always strengthening or weakening against their peers.

Along with Black, Trigg, now 43, is one of five portfolio managers behind the roughly $27 billion WCM Focused International Growth fund. According to Morningstar, the fund’s 1.05% expense ratio on its institutional share class WCMIX, +1.18% lands in the middle quintile for its category, while its 1.30% expense ratio on retail shares WCMRX, +1.19% is in the second-costliest quintile. Expenses are an important component for investors to evaluate because they come directly out of returns.

Hunkel graduated from San Jose State University in 1995 and from nonprofit Monterey College of Law in Seaside, Calif., nine years later. He once sold strawberry containers for a packaging company. While Hunkel says he had some experience managing portfolios with a WCM-affiliated firm, it wasn’t a whole lot.

 

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