$4 Billion Illinois Team's Mantra: ‘Stay Invested'

This long-tenured team has a history of success by being a 'sounding board' for its clients and favoring conservative strategies.

$4 Billion Illinois Team's Mantra: ‘Stay Invested'

From left: Charlie Margolis, Ben Leshem, Steve Hefter, Micah Nathan.Courtesty of HLM Capital Management

Team Name: HLM Capital Management Firm: Wells Fargo WFC Advisors Financial Network Senior Members: Steven Hefter, Benjamin Leshem, Charles Margolis, Micah Nathan Team Size: 9 Location: Highland Park, IL

AUM: $3.8 billion

Background: Interested in stocks from an early age, Steven Hefter founded the team in 1983 after starting at Goldman Sachs. Shortly after moving to Merrill in 1995, he teamed up with Margolis and Leshem, while Nathan joined in 2008. All four senior partners were formerly traders at Chicago exchanges. Though they have lots of legacy clients that have been with them for decades—mostly entrepreneurs, the partners also focus on building relationships with younger generations, whether they are new clients or part of existing family relationships. One way they engage with clients is by bringing in investing experts and money managers to speak at dinners or other events. 'We tell clients: Use us as a sounding board, use us as an educational tool,' says Nathan.

Competitive Edge: The team's process revolves around the four senior partners meeting to determine portfolio strategy, which tends to be conservative with asset preservation as a primary goal. Says Hefter, 'we can change emphasis, tactics and asset classes, but in the long run we want clients to stay invested in the market.' Investment Philosophy/Strategy: In 2022, HLM Capital reduced overall exposure to growth, with the four partners now seeing the 'value trade continuing to work' in 2023 as well as more investment opportunities abroad.

Amid the current market uncertainty, his team is adjusting client portfolios to be somewhat more defensive, with a renewed focus on multi-asset and global fund managers in particular. 'The market is emphasizing valuations, which were extremely high,' Hefter says. 'If you look back to what was a boom year for tech right before the dot-com crash, that was followed by several years of people like Buffett doing well in value… I think we're in a similar environment where tech valuations are coming back down.'

Investment Outlook: There are plenty of good investments despite the market uncertainty. 'There are several opportunities in fixed income —you can now get a positive return,' notes Leshem. In terms of equities, the team likes companies with lower price-to-earnings ratios, large cash flows and durable earnings, as well as some international exposure, since that got 'hit first and hardest.'

Best Advice: 'When the market turns, it will be when people least expect—and if you're not invested, it has historically been hard to get back in,' he says. Leshem agrees: 'It's not a cliché—usually the best returns occur in the rebound from a big downturn.'