FOUNDER AND MANAGING PARTNER
Marc appears in the Top 100
People in Finance Magazine
Amid a homogenous landscape, littered with self-proclaimed financial gurus, there are still a few genuine investment managers who believe in the risk/return profile of individual stock picking. Marc Scharf assesses the WHY behind the market and the HOW in potential investment opportunities. Only then, his astute team of analysts and network of portfolio managers in conjunction with ESG Asset Management share their expansive knowledge with clients. It is what he has become acclaimed for—educating his clients on what they are investing in, and not just making investment decisions for them. In principle, he has taken the traditional linear approach and turned it into a cyclic methodology.
When someone works with ESG Asset Management, Marc wants them to know that they’re working with a firm that’s not just plugging their money into a model or market index and letting it “do its thing.” Unlike many advisors, who just check the box for a mutual fund or ETF, Marc gets to know the individual so that he can create a customized portfolio and then clarifies the nature of the investment—why it’s appropriate for the client, and why it presents the best opportunity for a profitable venture. With 25 years of experience as a portfolio manager working for large hedge funds and banks, he’s learned a thing or two, and he has the client roster to prove it.
Client numbers aside, Marc has accumulated a vast network of talent, from industry experts and analysts at hedge funds to family offices and portfolio managers, all of whom contribute to his investment process and give perspective in the market. These invaluable resources also help Marc to originate ideas and form theses on where the firm should place their focus and how they should advise clients. The model strives to outperform the market over time while showing clients what can be accomplished with a little trust and a modest investment in individual names and appropriate market exposure.
We wanted to learn more about Marc’s business acumen and how he managed to distance himself and his firm from the monotony that plagues the financial industry.
Marc, let’s begin with your entry into finance, a summation of ESG Asset Management, and your roles as founder and managing partner.
Well, I started investing when I was 13. I had twenty thousand dollars from my bar mitzvah and decided to invest in the stock market. I bought mainstream names that I was familiar with—Nike, oil companies, banks. I started to learn more about them by watching their performance. By the time I went to college, that starting capital had grown to several hundred thousand.
After I graduated, I accepted a position at my first asset management firm, where I was advising clients on stocks and commodities. That experience led to multiple positions as a trader and portfolio manager at large hedge funds and international banks. In 2016, I founded Bookmark Advisors, which is now called ESG Asset Management, named for the three principles of corporate responsibility I embrace and want to promote—environment, social, and governance. ESG is part of the RIA, Private Advisor Group, which was a Top 100 RIA in 2020 according to Barron’s. Our focus is on customized portfolios for business owners, entrepreneurs, and high-net-worth individuals, but we also have a particular niche in managing assets for insurance companies. We utilize active management and stock picking as part of our strategy and most of the people who are associated with the firm have a background in investments and finance. At the onset, ESG had less than 20 clients that has now grown to over 200 relationships. My role as CEO is to oversee the operations of ESG Asset Management, aka Bookmark Advisors, but I am also the CIO so in essence, I’m the portfolio manager and I run the company.
How is your approach different from other asset management firms?
I think of the narrative in the market and I’m always asking myself, “what is the market saying?” There are always current themes and I believe in the thematic viewpoints of what’s happening in the world and the long-term, secular growth opportunities. The tailwinds are so powerful with these types of investments that they increase your probability of success. Over the last decade or two, technology, science, and innovation have created so many new companies that are disrupting old industries and antiquated management methods. My style is to look at what themes are working in the market now, why they’re working, and how much runway they have, then approach those themes in a bottoms-up perspective, meaning find companies that have great management, impressive balance sheets, and innovative strategies to stay ahead in their industry. What’s working and what’s not, and how do we capitalize in these areas?
Tell us a bit about your work with captive insurance investment management.
I have always loved the insurance industry from a business point of view. There is a reason why Warren Buffet made a large portion of his fortune in insurance. I learned about private or ‘captive’ insurance from one of the most innovative guys in the field, Joe Tucciarone, who showed business owners how to create their own insurance company and retain most of their non-catastrophic enterprise risk. This relationship led to an alliance with the National Network of Accountants, which is a firm that has been a strategic advisor for many large accounting firms for over 20 years. I started to introduce the concept of forming your own commercial insurance company to CEOs, CFOs, owners, and entrepreneurs which showed them a structure that could save money on property and casualty premiums while creating a revenue source through underwriting profits. Most people go years without ever filing a claim and 100% of their premium is profit for their insurer. I have a designation in captive insurance, so I can help businesses form the company and assist with structuring, advising, and investing the assets in a compliant way. I also advise and invest for Asset Backed Life Insurance (ABLI) programs and Insurance Premium Finance (IPF). Many high-level life insurance producers trust me to manage their client’s long-term collateral accounts.
What were a few of your best investment ideas?
We identify potential ideas based on trends that we’re seeing and then applying our research process and investment criteria to filter out what companies are great candidates for our portfolios. I can tell you that I prefer companies in sectors with long runways of growth such a technology, healthcare, and consumer discretionary. However, we also include cyclical industries such as energy and materials but the weighting of those names is determined based on what part of the business cycle that industry is in. Value ideas present themselves when there is dislocation of the security’s price relative to its intrinsic value. Value investment opportunities occur when a company is being mismanaged, an industry is out of favor, or even if a company is too diversified, which makes it hard to analyze.
Lastly, Marc, what do you enjoy most about your work or what drives you?
What I enjoy most is finding an industry or a company that is completely mispriced for whatever reason or has long term visibility for growth. It’s not work for me—it’s fun. The fact that I can buy into any company, idea, or business model, and be part of that concept and that growth, and do that all day long, it’s the ultimate reward.
Founder and Managing Partner
ESG Asset Management
LinkedIn: Marc Scharf