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Fletcher, Alfonso Jr. 1965–

Alfonso Fletcher, Jr. 1965

Stock trader and investor, entrepreneur

At a Glance

Sources

A lot of people talk about making their first million dollars by the time they are 30. Alphonso Fletcher made his first million before he was even 25. By his thirtieth birthday, Fletcher, known to acquaintances as Buddy, had made many more millions of dollarsboth for himself and for clients whose money he managedand had earned a reputation as one of the shrewdest stock traders on Wall Street.

Fletcher was born on December 19, 1965, in New London, Connecticut. The eldest of three brothers, he grew up in nearby Waterford, where his mother worked as an elementary school principal and part-time real estate broker. His father was a technician at General Dynamics, but also dabbled in a number of business ventures, ranging from operating a chicken restaurant to owning apartment buildings to running a moving business. Fletcher gives his parents credit for instilling in him the drive to succeed in business. They were very motivated, very busy, very entrepreneurial and creative, he was quoted as saying in a 1996 New Yorker article.

Even as a youth, Fletcher exhibited two of the characteristics that have made him wildly successful at his tradea head for numbers and an aversion to risk. At age 11, he designed a computer program that was 80 percent accurate at predicting the results of dog races. He decided that the payoff was not worth the risk, however, and quickly lost interest in the system. A top public school student, Fletcher went on to Harvard, where he majored in applied math and was voted class marshal by his classmates. He got his first taste of business while still in college, when he and his roommate, Stephen Cass now a research director at Fletcher Asset Managementstarted a T-Shirt selling operation. Again, Fletchers aversion to risk led him to sell out his share to Cass, who ended up making a tidy profit on the venture.

Initially, Fletcher was an Air Force R.O.T.C, cadet at Harvard, with plans to serve in the military for at least four years after graduation. During his senior year, however, he decided that he would rather enter the world of finance right away. The Air Force, facing budget cuts, gave Fletcher the option of going into the Reserves upon graduation, and he took them up on the offer.

After graduating from Harvard in 1987, Fletcher joined the Wall Street investment firm of Bear, Stearns & Co., where his talents stood out almost immediately. At Bear, Stearns, Fletcher was involved in the development of sophisticated stock trading strategies based on high-level math and computer models. With his career underway, he was now in a position to help his two younger brothers attend private high schools and then Harvard, from which both eventually graduated. In 1989 Fletcher was lured away from Bear, Stearns by Kidder, Peabody & Co., a giant in the Wall-Street-based investment industry.

At a Glance

Born Alphonse Fletcher, Jr., on December 19,1965, in New London, CN; son of a technician and an elementary school principal. Education: Harvard University, AB, 1987.

Career: Bear, Stearns & Co., investment manager, 1987-89; Kidder, Peabody & Co., senior vice-president, 1989-91; Fletcher Asset Management, founder, chairman, and CEO, 1991-.

Addresses: HomeCentral Park West, New York, NY; OfficeFletcher Asset Management, Inc., 767 5th Avenue, 48th Floor, New York, NY 10153.

Because several of his friends and former classmates were already working for Kidder, Peabody, Fletcher was delighted to make the move. Even more enticing was the financial package he claims to have been offereda base salary of $100,000, plus 20 to 25 percent of any profits he generated for the firm. The terms of this agreement would later become a matter of bitter dispute between Fletcher and the management of Kidder, Peabody. One thing is not in dispute: Fletcher made a ton of profit$25 million by his own estimatefor Kidder, Peabody in 1990, for which he received a bonus of $1.7 million in February of 1991.

Although the company informed him that he was entitled to another $2.1 million, Fletcher believed that the total still fell short of what he was owed. He also claimed that Kidder was attempting to minimize his compensation in other ways, such as making him responsible for 100 percent of the losses created by his trades. In this way, Fletcher complained, he was being treated as a partner when it came to losses, but a mere employee when it came to profits. He quickly resigned from his position at Kidder, Peabody as senior vice president after only one year at the company and filed two law suits: one for breach of contract and one for race discrimination.

In 1992 a New York Stock Exchange arbitration panel ruled that Kidder, Peabody must pay Fletcher $1.26 million in back compensation. The race discrimination suit was another story. The process dragged on through nearly 40 hearings over five years, before an arbitration panel finally announced that it had found no evidence of discrimination in the way Fletcher was treated.

Meanwhile, Fletcher wasted no time in getting on with his career. The very day he gave notice of his resignation at Kidder, Peabody, he went shopping for office space and computer equipment. By the end of the week, his new company, Fletcher Asset Management, was open for business. Initially investing only on behalf of his own personal account, Fletcher continued to wield the magical touch that had served him well as an employee at Bear, Stearns and then at Kidder, Peabody. As always, his chief strategy was to invest with as little risk as possible. Throughout his career, Fletchers special talent has been in devising complicated hedges that minimize losses when stocks decline, but still allow for healthy profits when the stocks rise.

Fletcher soon began to focus on purchasing large equity stakes directly from the companies themselves. His strategy involved finding companies that had solid foundations, but were struggling for cash. A perfect example was his investment in Zenith Electronics Corp., of which he bought seven percent in 1993. Within a year or so, he had doubled his money on the deal. By the middle of the 1990s, Fletcher had begun managing the assets of client investors in addition to his own money.

During its first five years of operation, Fletcher Asset Managements annual returns averaged well over 300 percent, a phenomenal figure even in light of the stock markets healthy condition in recent years. As his own personal wealth grewit has been estimated at about $50 millionFletcher became an active philanthropist. Among the recipients of his generosity have been the NAACP, to which he pledged a million dollars in 1993; and his alma mater Harvard, to which he handed over his companys broker-dealer division, valued at about $4 million, in 1994. He has since made further large gifts to Harvard, including the creation of a professorship. Other institutions that Fletcher has supported include the Alvin Ailey American Dance Theater, the New School for Social Research, and the Joseph Papp Public Theater/New York Shakespeare Festival. Fletcher is not bashful about demonstrating his wealth in his lifestyle choices either. He rides to work in a chauffeur-driven Mercedes, and his office is a lavish suite, complete with private chef, on the 48th floor of Manhattans General Motors Building.

By 1996 Fletcher was ready to expand. He did it in two ways. The company opened offices in San Francisco and Chicago. Fletcher also began entertaining the notion of acquiring other capital management companies. The company by this time had about 25 employees, and there had been days when Fletcher Asset Management, a tiny company by Wall Street standards, accounted for more that five percent of the New York Stock Exchanges trading volume. At an age when most people are just getting started in their professions, Fletcher is clearly approaching the very top of his. Colleagues and clients understand why. As Fletcher himself put it in a 1996 New Yorker article, We have a reputation of being obsessive about doing things right. I dont want to sound arrogant, but I think youd have to say were pretty smart at what we do.

Sources

Black Enterprise, August 1995.

Business Week, October 24, 1994, p. 84.

New Yorker, April 29, 1996, pp. 82-86.

Pensions & Investments, September 2, 1996, p. 1.

Private Asset Management, March 25, 1996, p. 4; May 6, 1996, p. 8.

Wall Street Journal, July 30, 1991, p. C1; December 15, 1992, p. C21; January 16, 1996, p. A2.

Robert R. Jacobson

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