Richard Bernstein has an eye for trouble. In March 2000 he published “Attention Venture Capitalists: Leave Silicon Valley for West Texas,” a report declaring that technology stocks were overpriced and predicting that the real money over the next decade would be in energy and commodities. Within six months the tech-heavy Nasdaq composite index plunged some 40 percent. In August 2005, Bernstein published a report highlighting the rising number of insider sales by top executives at homebuilding companies — despite the fact that those execs were telling Wall Street the industry was extremely healthy. Seven months later home prices peaked in the U.S. — and over the past three years have plummeted more than 30 percent, on average.
Whatever the market spin, Bernstein can and does see through it — a talent that money managers recognized long ago. Bernstein joined Merrill Lynch, Pierce, Fenner & Smith from E.F. Hutton & Co. in 1988 and debuted in third place in Quantitative Research on the All-America Research Team in 1991. He went on to appear in the ranking 24 more times — including ten times at No. 1 — in Equity Derivatives, Portfolio Strategy and Quantitative Research, through 2008. He left the firm the following year (by then it had been acquired by Bank of America Corp.) to launch his own, Richard Bernstein Advisors.
“I loved working for Merrill Lynch, but after 20 years I was looking to do something a little different,” says Bernstein, 53. “The problem with working on the sell side is the amount of travel necessary — the demands on your time and energy are unbelievable. People wonder if I left Merrill because of some deep dark secret, but I was just worn out. I needed to do other things.”
RBA has 12 employees, seven of whom are on the investment side. “It’s hard for a small firm in a volatile market, but we’re here to stay,” he says. “I love having more control over my own destiny and more flexibility. Corporate has procedures, and I understand why they do — indeed, we will too one day — but for the time being I enjoy being free of those restraints.”
Bernstein earned an MBA at New York University’s Stern School of Business; these days he’s an adjunct associate professor of finance at the school. He is also manager of the Eaton Vance Richard Bernstein Multi-Market Equity Strategy Fund. Although it has been accepting money for only 14 months, the fund has already attracted $470 million — much of that from Merrill Lynch financial advisers and from his own firm. “Senior partners have money invested,” Bernstein says. “It’s important to have skin in the game.”
He is pleased to be working with investors on his own terms. “I have street rep for being client-centric. Merrill Lynch might not have been happy with me on occasion,” Bernstein says with a laugh, “but that is how I was then, and how I am now.”
