🔒Ignoring buyout offers, Hartford investment firm Bradley, Foster & Sargent expands employee ownership stakes to remain independent

Hartford-based investment management firm Bradley, Foster & Sargent (BFS) brought in new leadership and additional staff in the past two years as the portfolios it manages ballooned to more than $6 billion.

A handful of majority shareholders also allowed management and longtime staff to buy greater portions of the company to ensure loyalty and longevity.

Company leaders say the maneuvers are part of a “BFS 2.0” strategy shift, intended to prepare the 27-year-old firm for the coming two decades as founders and other leaders age into retirement.

Not that the company’s founders are ready to entirely let go of the baton.

BFS Chairman Robert Bradley, one of four original founders, said these changes, as well as the company’s continued independence, allow it to retain talent crucial for longevity.

“We needed to walk the line between the best interests of the senior generation and the upcoming generation, and that’s what we’ve done,” said 77-year-old Bradley. “I got a significant dilution [of ownership], but in the end the firm is growing very well. And I hope to work another five or 10 years. So, I think for me in the long run it is just as good as having sold.”

Jeffrey G. Marsted, another BFS founder, continues as executive vice president. Founder Timothy H. Foster continues to manage portfolios. Joseph D. Sargent, the fourth founder, served as chairman until about a month before his death in 2012.

Broadening the C-suite

Rosa Chen, director of research for BFS, said the firm’s continued independence is important for preserving its collaborative culture. That atmosphere drew her to the firm in 2016. Being a shareholder now also provides motivation, she said.

“I think it’s a matter of where you put in the effort,” Chen said. “There are a lot of things we do that might not necessarily benefit me or the firm, except in the long run. As a shareholder, I’m looking at 10 to 15 years, so for me, the long-run works.”

Bradley said the company could have sold for $50 million to $75 million within the last couple years.

And interest hasn’t slacked.

“To this day I get approached by investment bankers on a regular basis, I get approached by private equity professionals,” said Galan G. Daukas, who became president and CEO of Bradley, Foster & Sargent in January.

Daukas was hired in 2019 as a consultant to help design the BFS 2.0 strategy. Among his tasks: determining how to fairly compensate a handful of primary stockholders and more broadly share ownership.

“The founders were generous to share with the emerging leaders and longtime employees,” Daukas said. “They also recognized — having grown from $90 million 20 years ago, to $1 billion 10 years ago, to $3 billion five years ago, to $6 billion today — they needed more business administration expertise.”

In the past two years, BFS has added 17 staff, for a total of 49. About half are shareholders, Daukas said.

In addition to Daukas, BFS in the past two years hired a new chief financial officer (Guergana Rangatcheva), chief operations officer (Joseph A. Walker) and chief compliance officer (Andrew R. Gordon).

BFS also recently added Chicago and Portland, Maine offices to its downtown Hartford headquarters in CityPlace II. It also has locations in Wellesley, Massachusetts, and West Palm Beach, Florida.

Daukas said independence means BFS can keep expenses not common in similarly-sized firms, including a $2 million research department and a three-person trading desk.

Most firms of BFS’ size are owned by private equity firms, banks or insurance companies. The rest are smaller and buy research from outside firms.

Kicking the tires

BFS got its start in 1993 as former banking executives Bradley and Joseph Sargent bought a retail division carved off by Conning & Co., a wealth management firm that evolved to focus on institutional investors. Timothy Foster joined a year later, folding in an investment firm handling about $20 million in assets, Bradley said.

“The idea was to treat our clients really, really well – client-centric and not only service-wise but performance-wise,” Bradley said. “We want to manage your money the way we manage our own money.”

BFS clients typically have at least $1 million invested. But the firm will take on clients with fewer assets if they feel there is a good prospect of further investment.

Daukas said BFS’ investment strategy concentrates on guiding clients to individual company stocks rather than mutual funds, and the firm uses its research department to identify growing businesses with good management and solid financials.

Increasingly, investors are interested in companies’ morals and ethics, Daukas said. Some want to avoid tobacco or armaments. Others might have religious objections to companies involved in birth control.

BFS has options for investors who are environmentally conscious or want to be involved with companies that have diverse leadership and labor-friendly practices.

BFS staff tries to meet with management of companies it recommends. This year, it added a budget of “a couple hundred thousand” to send analysts on road trips to visit companies, Daukas said.

“We like to kick the tires ourselves,” he said.

BFS’ competition includes wirehouse stock brokers, like UBS and Merrill, banks, mutual fund companies and boutique and online money managers, Daukas said.

He advises those investing in the market today to stay diversified; focus on long-term investment and quality; and avoid snap judgments based on the news of the day.

Growing a nest egg

Woodstock Academy became a BFS client four years ago with less than the typical $1 million minimum investment, said Associate Head of School Jonathan Sturdevant.

The 1,150-student private school in northeastern Connecticut had received a “significant” donation and wanted to grow an endowment, Sturdevant said. School leaders hoped to show potential donors their money would be well managed.

Sturdevant said BFS representatives returned his initial call within hours.

“They were genuine and frankly, at the time, we weren’t an attractive client,” Sturdevant said. “We were a very small investment, without going into numbers. We are not a high-net-worth client, but we have very specific goals for our endowment. Today we have more than 10 times the amount we started with due to fundraising and growth. They have been a pretty solid partner for us.”