Mr. Herzig: P.R. Herzig & Co. was founded in 1957 by my father, Philip Herzig. We are a broker-dealer and a SEC-registered investment adviser. We have primarily a private client business; accounts are separately managed. We try to construct the portfolios to match the needs and risk profile of the individual investors. We manage accounts predominately on a discretionary basis.
Our clients typically have invested with us for many years. We are a performance-oriented firm rather than a marketing firm. We don't spend a lot of resources and time on marketing. As client accounts grow over the years, our business tends to grow as well.
I would like to note that we do not clear for ourselves; we clear through Pershing LLC, a subsidiary of the Bank or New York Mellon, which is one of the largest clearing firms. They are very good, and we are very happy with what they do for us. It is reassuring to clients to know that that their assets are held by an independent fiduciary. Pershing issues all confirmations of trades as well as statements.
In terms of our philosophy, we are an all-cap manager. We don't want to limit ourselves, we want to be able to invest where opportunities arise at different stages of the investment cycle, whether it be large cap, small cap, mid cap. We are basically looking for attractive investments where we can find them. We tend to be value-oriented. like to buy stocks that are depressed, hopefully temporarily.
TWST: How have the events of the last 12 to 18 months been for your investment strategy? I imagine you found a lot of those value opportunities earlier this year. Would you take us through the last year and say how your portfolio performed?
Mr. Herzig: It has been a really tough couple of years, the toughest that I have experienced in my 35 years on Wall Street. When we spoke at this time last year, I was trying to sound optimistic and assure people that things would turn around. Certainly the mood was very, very negative. Indeed, things did turn around, but it was a struggle to keep clients invested. We had a certain number of clients who made the decision they didn't want to be invested. It was heartbreaking for us, but it's their money, so that was their decision. The preponderance of our clients did stay invested. did make incremental investments all through late 2008 and into 2009, so we had a very good year. We don't claim to be unusually smart, though we are experienced and professional. who was buying stocks in the last year did very, very well.
We find it illustrative to look at the two years, 2008 and 2009 - over that period, the S&P 500, with dividends, was down 20%. Though individual experiences varied, clients in aggregate net of fees were down about 16% over that same period. We do not congratulate ourselves, as we feel our clients' losses acutely - we only prosper if our clients do. But as professionals, we feel somewhat comforted that we have been able to mitigate some of the losses for our clients.
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