King of the Liftout

By Hannah Wallace November 30, 2008

Robert Warren looks like a handsome, lanky surfer of a certain age, complete with graying hair that’s parted down the middle and reaches his shoulders. He wears jeans and an untucked button-down shirt to work, speaks softly, listens to country music and drives a pickup truck from his home on Bird Key to downtown Sarasota, where his business, Warren International, is located in the U.S. Garage, a 100-year-old brick building adjacent to historic

Burns Court

But Warren International is known in New York, London and Tokyo—and all of the other major money centers of the world—as a one-of-a-kind executive search firm, and Warren is considered by many to be the best in his field. He is also the CEO of an $80 million hedge fund that, despite the crisis on Wall Street, is still making money.

Warren is a recruiter, a specialized head hunter, and for the past 15 years, he has made a fortune in a little-known and somewhat controversial niche in the executive search industry. Instead of finding just one top-notch senior executive and placing that person with another large investment firm in need of fresh talent, Warren lifts out entire teams of money managers. It’s a delicate operation that for every placement takes months of work, assurances of secrecy, skilled legal negotiations and detailed organization. The losing firms in the deal are unhappy, to say the least. But the payoffs can be big for his clients, who manage billions, for the teams he lifts out and for his company.

Recruiters in the head hunter industry typically receive about one third of each candidate’s compensation for a year. And the senior money managers Warren deals with make stratospheric seven to eight figures a year. Multiply that by three to 14 (the average team is in the three to five range, but Warren has lifted a team as large as 14), and Warren easily makes millions with each deal. And like many others in the industry, Warren charges a retainer, which is typically in the high six-figure range per deal. In the last couple of months alone, he wooed two teams in the United States from one firm to another.

“King of the liftout” is what one investor publication crowned Warren. Warren more modestly says his company is the only one in the world that has accomplished this type of recruitment—or poaching—depending on what side of the deal you’re on.

In the last 15 years, Warren International has completed 50 liftouts, working mostly with big institutions, such as Bank of Switzerland, Bank of America and Merrill Lynch. When these institutions launch a new product line or want to replace a team of money managers who aren’t performing so well, they call Warren.

“I’m a great middle man,” he says. “I’m great at making things work between groups of people.”

That kind of personality seems at odds in a cutthroat industry filled with Type A masters of the universe. Warren doesn’t come across as aggressive, and he’s not a self-promoter. “I haven’t given an interview in years,” he says. But he is a good listener, with a tendency to turn the tables on an interviewer.

His casual appearance only adds to the disarming impression. “Yes, I’ve got the longest hair in the industry,” he jokes. 

Warren and his wife, Shannon, moved here about three years ago from Palm Beach after staying at The Ritz-Carlton, Sarasota, waiting for one of their grandchildren to be born. (Between the two of them they have six children—two are his from his first marriage and four are from hers—and they’ll soon have eight grandchildren.) Warren was semi-retired then, a little bored, and they immediately fell in love with the area. “It’s laid back, culturally diverse with good food and good people,” he says.

Warren’s office looks more like a den, with its brown leather chair and sofa and noticeable absence of a desk and a computer. “I don’t use e-mail,” he says. “Because of the nature of my business everything has to be done by phone and memory.” (There are plenty of other computers in the office, however.)  Instead of multiple monitors and laptops, Warren’s office is filled with framed stock certificates—“I have the largest collection in the world,” he says—and family photos. Two of his children work for him: Danielle, who used be an options trader, now works as one of Warren International’s researchers and consultants here in Sarasota; and Amos, who used to run a hedge fund, now does consulting for him up in Princeton, N.J.

Warren does not live the life of a semi-retired recruiter now, even though he says he’s not working the hours he once did. He keeps offices in New York and Palm Beach and a couple of times a month flies to New York and other major cities around the world where he has business. He says he’ll also be expanding the business and adding offices around the world.

It’s a jet-setting lifestyle that is far removed from the lower-middle-class upbringing he had in upper Manhattan, where he was the oldest son of a housewife and a father who managed rent-controlled apartment buildings.

Warren’s intelligence was evident early on, and he attended Stuyvesant High School, the prestigious math and science school. He went to Long Island University and for a while considered medical school, but ended up liking business courses best. “A lot of people aren’t entrepreneurial,” he says. “It was natural to me.”

In 1967, right out of college, he was hired by Irving Trust Company, where he specialized in commercial banking and in the securities area. Even at his young age, Irving put him in charge of securities programs and hired him out to stock exchanges, banks and other brokers. As a result, he got to know the key people at all the key institutions. During that time, he also earned his M.B.A. at Long Island University.

It didn’t take Warren long to decide to go out on his own, training other bankers and brokers about securities programs under his company name Warren Inc. At the time he was in his mid-20s.

“When I started my business, I was visiting CEOs of major banks around the country, and I looked even younger than I was, so I sprayed my hair gray every day for two years,” he says.

Eventually he moved into the executive search industry, taking the more traditional approach of finding and placing a single investment professional with a different firm. When his business went global in 1993, he renamed the company Warren International and began to specialize in money managers.

Then, in 1994, he handled his first liftout.

The impetus for lifting teams of people is simple. “Companies want the best performers,” Warren says. And time has shown that the best performers are often teams—the theory that the group will always be stronger no matter how brilliant the individual—and that the most successful teams are those whose members have been together for a long time. These teams usually do not want to break up.

The other reason has to do with the lack of success of acquisitions and mergers, says Warren. Starting back in the ’90s, the big firms often bought a new company or operation when they wanted to add a new product to their lineup, but these mergers cost a bundle and often didn’t work because of culture clashes.

That’s where Warren came in. After his decades in the industry, specializing in money management, he knew almost everyone and had compiled proprietary databases of companies and their performers’ records. He also was willing and skilled enough to manage the tough negotiations required to move a group of thoroughbred money managers to another firm. And if Warren is really successful, the liftout team is allowed to bring its record of performance to the new company—a complicated and tricky legal maneuver and a boost to the new firm’s bottom line.

Warren isn’t flying solo. His company currently employs 15 people, the majority of them researchers. Normally, after a client contacts Warren, one of his researchers does the analysis on the best performers in the business and is the first to contact the lead person of the team and arrange for a meeting between this person and the client. If it feels like a good fit, every other person on the team is approached to see if he or she is willing to make the move. Corporate culture, the feel of a company, is a priority, says Warren, even more important than money. “These people [the star money managers] want to know they won’t be taken for granted, that the client is going to sell their products,” he explains. They also want to make sure that the culture—aggressive silk-stocking conservatives vs. friendly sandal-wearing individualists, for example—is conducive to the way they operate.

Warren smiles when asked if elite money managers ever say “no” when they see him approaching. “Everybody wants to be approached,” he says. “We have a reputation. We deal only with blue-chip global clients. They will make more money.”  

One of his most recent deals was a liftout for UBS Investment Bank, which was looking for a new team to handle international products. He found a five-person team from Nicholas-Applegate in San Diego with good performance, arranged for a meeting with the head of UBS and hammered out the agreement that allowed the team to bring its record.

But the global financial crisis is slowing his business down a bit, he admits. “Everyone’s scared,” he says. “They’re also holding off until the credit markets open up.”

Nonetheless, he’s still fairly upbeat about liftouts. “There’s always a need for good senior talent working on a global basis,” he says. “Even if you’re downsizing in one area, you’re upgrading in another. This continues despite the business climate.”

To back up that belief, Warren also started a hedge fund earlier this year. Warren says the fund is up 5 percent year to date, not bad considering the shakeout in the industry right now, although down from the 12 percent increase in value YTD in August. He stresses that the fund invests only in large cap stocks and doesn’t use any leverage. The minimum investment is $1 million, and like other hedge fund managers, he charges 1.5 percent upfront (between 1 and 2 percent is average) to manage the investment plus 20 percent of performance. The fund also uses a hurdle rate; it will not take a performance fee if the fund doesn’t go above at least 4 percent.

Warren agrees that times are tough right now, and he urges the investing public to take a vacation from their portfolios instead of reacting to every blip in the market, and “diversify and hang in there for the long term”—unless, of course, you’ve lost more than 30 to 40 percent of your investments. “I suggest you might want to consider another manager then,” he says carefully.

But Warren’s nature and his belief system make him look for and talk about the good parts of the economy and life. “Here are the three things I think are important,” he says. “1. Your love life, 2. your business and 3. your home. To be happy you need to change one of these three things every three years. I would never recommend changing your partner, and I’ve been in the same job since I started. So we change houses every three years. We won’t be leaving Sarasota, but we’ll probably be moving to another home.”

He’s been through at least one recession a decade and believes in the market. “Companies and people always need to invest their money,” he says.

Is the king ready to hand over his crown anytime soon? Hardly. He’s tried once to retire and got bored. At the moment he’s planning to open new offices of Warren International around the world—“I have one client on every continent,” he says—so he can be where his clients are. “I have a great job,” he says. “Everyone I meet is happy, powerful and in control.”

Everybody Deserves a Chance

Robert Warren’s foundation serves at-risk youth.

Twelve years ago, Robert Warren started his own foundation focused on at-risk youth based on a simple belief. “Everybody deserves a chance,” he says. “Anyone who has money should give it away. Too many people just take care of themselves and hoard their money. I think that’s a sin.”

Warren is the major contributor, although he has plans to expand the foundation in 2009 and actively raise money. The foundation currently operates in four states—Florida, New York, California and Tennessee—and takes elementary school children, who are recommended by their school principals, and puts them into track and field and other athletic programs financed by the Warren Foundation. The reasoning behind using athletics as a motivator for children is the tried and true formula of teamwork and discipline, Warren says. He’s always been athletic and so were his kids so he knows the power of youth sports to boost self esteem.

Currently the foundation employs four directors, one in every state, and is funding programs in 10 schools in New York, soon to expand to 80; quite a few in California; eight in Tennessee and 20 schools in Florida, including the programs at Booker Elementary in Sarasota and Samoset Elementary, Orange Ridge Elementary and Daughtrey Elementary in Manatee.

In September, the Warren Foundation launched a community kitchen on U.S. 41 near

Myrtle Street
and has joined up with Sarasota’s All Faiths Food Bank to start a backpack program for homeless children in kindergarten through third grade so they can take food home on the weekends. About 200 children are being served every week with a goal of reaching every child bouncing from couch to couch. He’ll also be starting cooking classes on nutrition and for job skills. 

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