University of Pittsburgh

Alumni Spotlight: Money Manager Creates Innovative Hedge Fund

Monday, September 29, 2014

At 27 years old, Patrick Browder (MBA ’11) doesn’t have a million dollars free to invest in a hedge fund.

Neither do most investors.

That’s why Browder and his associate Robert Sunleaf, 25, created a hedge fund more accessible to the average — albeit it still pretty wealthy — investor. Created in 2013, Browder Capital manages more than $6 million in client assets and has generated an average yearly return of over 35 percent .

Most large hedge funds require an initial investment of $1 million or more; in contrast Browder Capital’s minimum investment is only $50,000. The lower point of entry is appealing to savvy investors who want to diversify their portfolio and are willing to take on more risk in order to earn higher returns.

“We’re giving the opportunity to take advantage of the same strategies for hedge funds but for the everyday investor,” says Browder, the company president and chief compliance officer.

A favorite of the super-rich, hedge funds are private investment partnerships open to a limited number of investors. The investor’s funds are pooled together, much like as in a mutual fund. The investment strategy is highly aggressive and uses advanced investment strategies such as derivatives.

The low client buy-in is only one way Browder Capital differs from a traditional hedge fund. Another is that their clients may deposit and withdraw their money at any time, without a penalty, which is in contrast to traditional hedge funds that require a one year investment timeframe.

“We tell them if they don’t like what they see after two weeks or two months, they can go online and withdraw their money,” Browder says.

Browder’s fund is more transparent than the traditional hedge fund because it is structured as a separately managed account. That means investors can go online at any time and see exactly what they invested in and every trade that has ever been made on their behalf.

“It’s a completely open book to them,” Browder says.

Another difference is that Browder’s fund charges lower fees. Most hedge funds charge both a management fee and a performance fee, typically between 2 percent and 20 percent or 3 percent and 15 percent, respectively. But Browder’s fund only charges a flat management fee based on the size of the investment.

“We understand that the people who invest with us are taking a risk. We don’t have a long track record,” Browder says.

The hedge fund’s performance, however, has demonstrated that youth is not holding them back. Browder Capital uses a propriety algorithm to guide its trading in the securities market.

Browder sees the Dallas area, their home base, as a growing financial hub. However, he also sees opportunity in Florida and is planning to move to the Tampa/St. Petersburg area to open the company’s second office.

A year ago, both Browder and Sunleaf’s friends and family thought them crazy to start the company. At the time, both were rising stars at Texas Instruments (TI). Browder, for example, had managed projects within a $100 million automotive segment and $400 million chip processing segment, and oversaw the restructuring of a wireless unit.

“We both liked TI because they gave us a lot of opportunities. But there is only so much they could give a 25 year old. So we just decided to make the leap,” Browder says.

Browder’s career progression can be traced back to the Joseph M. Katz Graduate School of Business at the University of Pittsburgh. His MBA concentration was in finance and operations, and he completed a co-op at Texas Instruments before graduating.

Browder credits his finance professor, the late Kuldeep Shastri, for teaching him the sophisticated investment tools that are built into his hedge fund’s propriety algorithm. 

“A lot of the work I do today is because he taught it to me. He had a huge impact on my life and my career,” Browder says.

The average day for Browder consists of trading decisions from 8:30 in the morning to 3 in the afternoon. But instead of calling it quits for the day, Browder then researches companies and meets with clients. It’s a 24/7 commitment, but Browder wouldn’t have it any other way.

“I knew from the time I started Katz that I wanted to be involved in a hedge fund. Hedge funds give me the freedom to trade the way I want to trade,” Browder says.

Now Browder is bringing the benefits of this investment vehicle to a broader group of investors.