A decade ago, when I visited the 41st floor Manhattan office of Morgan Stanley Chief Executive John Mack, he asked me two questions that revealed his feelings about Orange County.
“David, do you guys still have those chocolate covered bananas on Balboa Island there in Newport Beach? And if I came to visit you, would anyone be working in the afternoon, or is everyone at the beach by the time the market closes?”
I can say without a doubt that being a Wall Street professional working in Orange County is not a life at the beach. And I can also say Wall Street is slowly but surely waking up to Orange County’s importance.
I spent fifteen years in the Newport Beach office of UBS and then Morgan Stanley before starting my own firm in 2015.
There is probably no time zone where it is more difficult to work in financial markets than the Pacific, at least for those who actively manage client money.
My day starts at 3:45 a.m., with no exceptions, including weekends and vacations; this habit now relies on no alarm whatsoever. Much of this is a choice and a preference—I like the early mornings when I have my best energy.
The reality is too much “margin” or delay in the morning, and you quickly could see 25%-50% of the market day lost!
The misconception many have is that because our day starts so early, it must end early. But afternoons are often filled with client meetings and projects and I generally find myself scrambling to get home by dinner time.
My company opened an office in New York City three years ago, largely because we had built a sizable client base in the tristate area, but also because all of our asset management partners are based there. We run U.S. equity actively out of our Newport Beach office, often trading millions of shares in a day. We also use outside managers for taxable fixed income, tax-free fixed income, emerging markets and a plethora of alternative strategies.
All of these partners are based in Manhattan, and we found some time ago that there was an unbelievable advantage for our clients when we had our ears to the ground of what was happening in the capital of America’s financial markets. We frequently meet with our portfolio partners face-to-face. Capital markets is a significant part of what we do so a physical presence in New York City simply made sense.
However, Orange County is becoming a more significant player in capital markets, as its highly desirable lifestyle and weather have attracted top-tier investment talent and caused significant companies to pitch their tents here.
Not only are legendary bond companies based here, but many private equity, real estate and middle market investment banks boast an OC address as well.
There is not as large a presence for public equity or high-profile hedge funds; I strongly suspect it is just a matter of time. The biggest barrier for many industries looking at Southern California—a high tax burden—is not necessarily as big of a factor in the financial markets; many of these players are already used to high taxes in their home bases such as New York City, San Francisco, Chicago, Boston, and so on.
Beyond this institutional presence, there is such a significant amount of wealth in Orange County, there will always be a deep need for wealth management services from all the national firms, not to mention the independent fiduciary world in which I now live.
How strong is the market in Orange County? I pay almost the same per square foot for my Newport Center Drive office as I do for my midtown Manhattan space! Newport Center has kept a cachet and visibility off the strength of its tenants that cannot be ignored.
I grew up in Orange County, and my wife and I are raising three kids here. We’ve built our dream house here and helped begin Newport Beach’s Pacifica Christian High School, which we believe in dearly.
Roughly 50% of our firm’s clients are based in Orange County, and we now have 19 people and growing on our team in the Newport Center office. The significance of financial markets in Orange County is going to continue to expand, and the need for greater capital markets, wealth management and institutional asset management will increase as the entrepreneurial and business acumen of the county grows.
A bicoastal approach was the right thing to do for our firm and our clients, and both geographies play a vital role not just for our business, but for the nation’s financial markets as well.
Mr. Mack, those chocolate-covered bananas, sold at the Sugar ‘n Spice store, are still available. And while it’s a short stroll away from my office, I still haven’t found the time to walk there.
(Editor’s Note: David L. Bahnsen is the founder, managing partner and chief investment officer of Newport Beach-based Bahnsen Group, which has $1.5 billion assets under management. His newest book, “The Case for Dividend Growth: Investing in a Post Crisis World,” is scheduled for release April 9.)
