Tony Sutton, SM '95, has a history of close calls. As a U.S. Marine in Beirut in 1983, he missed by six inches the flying shrapnel of a suicide bomber. Five years later, he flew home to the States from an internship in London on Pan Am Flight 103, the day before that flight's fatal crash.
Sutton's business acumen may prove as breathtaking as his luck. The financial management firm he launched with John McDonald two years ago, McDonald-Sutton Asset Management, LLC, now handles more than $30 million in long client investments. In quarter one of 2000 — the first quarter that its portfolio size qualified the firm to be ranked — McDonald-Sutton earned the top spot in Nelson's domestic mid-capitalization equity category, and its funds continue to hold top slots on the Nelsons lists.
Geared toward high net-worth clients with a minimum of $250,000 to invest, Sutton believes his firm is better oriented toward servicing his customers than brokers who represent particular investment instruments. “I've long thought that the service wealthy customers get from a broker is not always in their best interest,” he said.
Unlike a broker who collects sales commissions on client trades, McDonald-Sutton takes its fee as a set percentage (around 1%) of each client's portfolio value. Therefore, the firm has nothing to gain from frequent trades, high sales commissions, or undue risk, and much to gain from careful stock selection and steady growth. Sutton favors a strategy that balances each client's money between an aggressive portfolio and a core growth portfolio, while keeping a ceiling on portfolio management costs.
The Marine Corps may seem an unlikely starting place for a entrepreneurial career catering to the investment needs of wealthy clients, but Sutton has shown the discipline and drive to succeed in both arenas. He recalls a moment in Lebanon in 1983 that presaged his current venture. “When Marine headquarters were being bombed, we were holed up for quite a while. I remember reading a paperback book about the stock market, and looking up to see the tracers flying over my head,” he says. Obviously, something clicked in that moment.
After he left the Marines in 1985, the U.S. Armed Services supported Sutton's undergraduate study at Monmouth University in New Jersey, where he majored in international finance. His London internship at Lehman Brothers began his exposure to the all-important research that firms must do to make beneficial investment decisions on behalf of their clients.
Graduating from Monmouth, Sutton was selected to join Fidelity Management and Research's highly competitive Associate Program. There he honed his research skills, specializing in energy and utility stocks, the food wholesale business and the volatile biotech industry. At Fidelity, Sutton was inspired by the opportunity to provide stock recommendations to managers of high-profile mutual funds like Peter Lynch of Magellan.
Completing the Fidelity Associate Program, Sutton opted to return to school for a business degree. His Sloan education introduced the element of technical stock analysis into Sutton's skill set. “The research approach I learned at Fidelity is based on fundamental analysis of a company,” he explains. “You look at a company's nuts and bolts, the industry they're in, their strategy, their operations and profits to make an investment decision. At Sloan, I was exposed to technical analysis, where investment decisions are based on a company's stock performance and investor psychology. As a result, I'm able to use and balance both approaches with confidence.”
While no style or amount of research can completely shield investors from the vagaries of the market, Sutton sees his devotion to research as the edge he brings to his business. “It is almost an addiction with me. As I look into a company we're thinking about, I am always asking, ‘Would I want to be the owner of this company?’ I am very serious about using the technical tools to research a company.”
With his Sloan MBA, Sutton took a position with a small North Shore financial management firm, where he met future partner John McDonald. “We had similar ideas about the kind of firm we wanted to start, and the way we wanted to service a particular kind of client,” Sutton says.
With the company's 1998 launch, the partners began working out of a room in Sutton's home, but have since moved to a more businesslike setting in downtown Boston. A trader, two analysts, and a salesperson have joined the McDonald-Sutton staff. Currently, the firm is launching two new hedge funds, one for domestically held assets and one for international customers.
Any special reason for naming the company after the two firm principals? “I have the philosophy that if you can't put your name on your own business, you shouldn't be managing other people's money,” says Sutton. “Besides, all the really cool company names and domain sites were taken.”
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