Abernathy Group

The Abernathy Group is an asset management firm run by Steven Abernathy. Nelson’s Financial Information 1 has ranked Abernathy as one of the nation’s top money managers every year since 1994.

In articles and press appearances ranging from CNNfn, Barron’s, Journal of Retirement Planning, and the cover story of Money Magazine, Abernathy has stressed several keys to choosing a money manager:

  • A properly incentivized relationship between money manager and investor. For instance, Abernathy has been critical of the concept of management fees – or fees that help a money manager profit even if the manager is not making money for the investor. Abernathy charges 0% management fee in his hedge funds – he refunds investors any money above his basic operating expenses. He would then rely only on the 20% performance fee for profit. Physicians News Digest, October 2003
  • A money manager who invests heavily alongside investors. Abernathy warns investors that money managers who do not have significant percentages of their net worth in the funds that they manage may be willing to take risks with investors’ money that they would not take with their own. Abernathy claims to have over 70% of his own net worth in the funds that he manages, and claims that the charter of his funds requires even low level analysts conducting research for his funds to have 25% of their net worth in the funds that they work with. Physicians News Digest, October 2003

*# Return: the likely growth of the investment.

*# Correlation: how much of the money manager’s success is simply due to following the market and how much is independent of the market’s swings up and down.

*# Risk: The percentage of capital put at risk in order to generate returns.

Most investors, Abernathy argues, hurt themselves by only looking at returns and ignoring the other two dimensions which – over the long term – can drastically affect total returns and the availability of capital.

Abernathy believes that there are four ways to reduce risk in specific investments. Interview in Money Manager Review, Spring 2002:

  • Diversification – “the least effective.”
  • Hedging – “if executed correctly…can dramatically reduce risk with a minimal effect on expected returns.”
  • Matching your time horizon to that of the investment.
  • Knowledge – an “informational edge” which is only possible through deep research about both the intrinsic value of the company.

The Abernathy Group’s offices are at 17 State Street in the Financial District of Manhattan.

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