Leaning against the wall of John Osterweis’ corner office at One Maritime Plaza—the landmark X-braced San Francisco skyscraper that affords the distinguished financier and philanthropist primo bay and city views—is a big framed photograph of him with his close friend and colleague, the late Warren Hellman. It was shot at the finish of the rugged Ride & Tie World Championship, a mix of trail running and endurance horse riding billed as “two people, a horse and one tough race,” in Sun Valley, Idaho, in 1994. Osterweis is on the horse, shaking hands with the lean compadre smiling up at him.
It was Hellman’s passion for long-distance running and his preference for doing it with Osterweis that led the latter to leave E. F. Hutton 11 years earlier to start Osterweis Capital Management, a consistently solid firm that manages $7.4 billion in assets for families, endowments, individuals and institutions. It was named to Forbes’ Honor Roll for 2008, in the wake of the crash, as one of the down-market standouts and long-term investing stars.
“I had worked for Warren’s dad at J. Barth, and when Warren came out here we reconnected and became running partners,” says Osterweis, a vigorous man of 75 with an easy, direct manner.
“I was at Hutton at the time. He would want to do long runs on Saturday and I’d say, ‘No, gotta do it Sunday.’ This went on for a few months and he finally got frustrated and asked me why. I said it’s simple: ‘I’m working in the Hutton research department and running a book of accounts. And during the week, something doesn’t get done. So I come in on Saturday and write that research report that didn’t get written, or I haven’t looked at my portfolio. So I need that extra day.’
“And he said, ‘Well, look, if we start a money management firm, and all you have to do is manage the portfolios, could we do the runs every Saturday?’ And I said of course, and that’s how it started. We started with very little in terms of firm capital, and he brought over some of the Hellman family portfolios for us to run, and invest in the firm, and he was on the board of directors. He and Tully Friedman [Hellman’s private equity firm partner] were my two outside directors.”
Hellman, who died in 2011, also invited Osterweis onto the board of San Francisco Ballet, where Hellman’s wife Chris served as board president and Osterweis was a regular.
“I loved it. I was a season subscriber, and my daughter is a dancer,” says Osterweis, referring to Ariel Osterweis, a dancer and dance scholar. His son is fashion designer Max Osterweis.
He’s been on the board of the Ballet—one of many nonprofits he supports and serves as a director, among them the San Francisco Free Clinic and Mt. Zion Hospital—for three decades, and is its past chair.
“He’s a fantastic guy who has been a terrific mentor to me,” says longtime Ballet Executive Director Glenn McCoy, who calls Osterweis “a really smart guy, who’s passionate about what we do. He’s very calm and centered. You need that kind of energy, right?
He has been incredibly generous. He was always someone I could pick up the phone and call, and he always gave really sound advice. He’s a straight-shooter. What you see is what you get.”
As a philanthropist, Osterweis puts his money and time into things that matter to him.
“I try to be fairly selective,” he explains. “The things I tend to support are the arts, education, health care to some extent, social needs and, very selectively, the environment or conservation.”
Man’s effect on nature is a theme of a wry mixed-media work by Osterweis’s wife, artist Barbara Ravizza, that riffs on the iconic “The Peaceable Kingdom” by Quaker folk painter Edward Hicks. Ravizza crossed out “Peaceable” and scribbled in “Endangered.”
The picture hangs on a wall in the eighth-floor offices of Osterweis Capital Management, an employee-owned firm whose stated philosophy sounds wise: “We believe our clients’ financial goals are best achieved by the avoidance of major losses in falling markets and the compounding of reasonable gains in rising markets.”
Osterweis puts it this way: “We’re looking long-term. We’re neither pure value nor pure growth investors. We ideally like to find companies that have some kind of cloud over them, or are selling well below what we think they should be. Then, out of that universe of value-like stocks, finding ones that have great growth potential.”
A lot of firms worry about matching benchmarks or not lagging far behind, Osterweis continues. “Our view is that we’re in the absolute return business. When you’re dealing with high-net-worth individuals or most individuals, what they’re interested in is No. 1, making sure you don’t lose money and 2, that you earn a decent return, presumably at least [equal] to inflation and maybe more.”
Many years ago, when the market was up 30 percent, Osterweis had lunch with a client and was “a little bit apologetic” that they were up only 20 percent.
“He said, ‘You have to be kidding. I’m up 20 percent right now. Thank you.’ He knew I wasn’t going to blow it. If you’re hugging the benchmark, what that means is when the market rolls over and goes down, you’re hugging the benchmark. We can play much more defense.”
During the post-dot-com-bubble bear market of 2002, when the S&P was down 45 percent and the Nasdaq fell 75 percent, “we were down 10 or 11,” he recalls. “We were not trying to hug the benchmark. You had this crazy tech mania and we just said, ‘It’s too crazy, we’re not playing.’”
Osterweis, who grew up on Long Island and moved to Pittsburgh at 16 when his father became manager of the Gimbels department store there, studied philosophy at historic Bowdoin College in Maine before getting his MBA at Stanford. The abstract reasoning developed studying philosophy has served him well in finance, he says.
“There’s a long history of philosophy majors ending up on Wall Street. At one point, three of the partners at this firm had philosophy majors, one a graduate degree. If you look at philosophy, it’s really a way of stripping out the nonsense, and demonstrating what a person doesn’t know, as opposed to perhaps what he does know. A lot of the art of investing is figuring out what you don’t know.”
Osterweis still loves “the puzzle nature” of analyzing companies. “It is abstract, and it’s numeric, but there’s also a very creative element to it where you often have to figure things out that haven’t happened and look at what a company will look like in two or three years.”
He approaches his work with the same energy and curiosity that fueled him when he was younger, but Ride & Tie is a pleasure of the past.
“I was a distance runner my whole life—up until I needed a couple of new knees,” he says. “My running days are over.”