I shared this article with Raye on the youngest Bush brother, Marvin, that "Q" said was one to watch in the future and she asked that I post it for everyone to read. He certainly is an interesting fellow...
~tuatha

MAKE ROOM FOR MARVIN
by Blake, Rich
Content provided by Institutional Investor Magazine
Published on May 1, 2000

Money man Marvin Bush is no stranger to the limelight. And when your father is a former president, one brother is running for president and another is the governor of Florida, the limelight can get pretty bright.

But as a co-founder of Winston Partners Group, which manages $300 million in hedge fund and private equity investments for high-net-worth individuals and nonprofits, Bush diligently steers clear of center stage. "I learned a long time ago that it's best to keep a low profile."

Though Bush's partner, Scott Andrews, is married to the daughter of former congressman Jack Kemp, neither partner tries to exploit family connections. "With the exception of a few pictures of my family on the wall of my office, there's nothing political about the firm," says Bush, 43. "I think it's unusual that my brothers -- or anybody else for that matter -- would ever want to get into politics. I'd rather spend time finding good investments."

Founded in 1994, McLean, Virginia-based Winston consists of a group of long-short equity hedge funds-of-funds, with about $220 million in total assets and $100 million in private equity investments. Winston Partners (the firm is named after Winston Churchill, a hero to both partners) looks for solid returns with low volatility. It typically underperforms its peers in up markets but outperforms them in down markets. Recently, the fund's short positions and value stakes have offered some shelter when Nasdaq falls. Through April the fund's returns are basically flat, a better showing than the Standard & Poor's 500 index. "We've always felt you don't need to squeeze every last bit of juice out of the radish," Bush says.

Over the past five years, the flagship Winston Growth fund-of-funds produced average annual returns of 22 percent, net of fees. Though that trails the 26.5 percent return for the S&P, Winston achieved its returns with a standard deviation from its mean return of 9.2 percent, compared with a 14.48 percent standard deviation for the S&P during the same period.

In 1999 the fund gained an impressive 40 percent, versus 22 percent for the S&P 500. Winston's stable of managers found plenty of opportunities for successful short-selling. Bush notes that excluding the 66 technology and telecommunications companies in the S&P 500, the remaining 434 issues declined at least 5 percent last year.

Says Curtis Macnguyen, founder of Ivory Capital, a long-short hedge fund that is part of the Winston stable, "Winston is one of the most well-informed, diligent, research-intensive fund-of-funds managers I have ever dealt with."

Adds Brad Freeman, a founding partner of Freeman Spogli & Co., a Los Angeles-based LBO firm, who personally invests in both the flagship Winston Growth Fund and the private equity funds: "This isn't someone trying to ride his family name. Marvin Bush knows his stuff, and he's always right on top of things before it becomes a problem."

In 1997, for example, Bush dismissed hedge fund manager SC Fundamental Value when he worried that the fund had grown too large and was losing focus. The following year, the fund finished the year with a negative 6 percent return. By the end of 1999, a year of flat performance, clients had bailed our and assets fell from $650 million at the start of 1998 to less than $100 million.

Born in Midland, Texas, Bush was two years old when his family moved to Houston in 1959. As the youngest of four sons, Bush fought hard to keep up with older brothers George, 53, Jeb, 47, and Neil, 45. (Sister Dorothy is 40.) "I got a lot of screen doors slammed in my face," Bush recalls. "Eventually, though, I realized that I didn't have to compete with my brothers. You don't have anything to prove to anybody but yourself."

When Bush was 11, his family moved to Washington after his father was elected to Congress. During his teenage years, while his father served as ambassador to China, Bush attended the Woodberry Forest boarding school in Charlottesville, Virginia. Here Bush first crossed paths -- and bumped elbows -- with Scott Andrews. They met on the basketball court: Bush played forward for Woodberry, and Andrews was a center at St. Christopher's High School in nearby Richmond. They later met up again at the University of Virginia and became best friends. "I consider him to be a fourth brother," says Bush.

(As it happened, college gave Marvin Bush a life partner as well. He met his wife, Margaret, on the UVA campus. They married in 1981.)

When Bush decided, upon graduation, to enter the money management business, he was following the family's nonpolitical path. Prescott Bush, Marvin's late grandfather, had spent the bulk of his career as a partner at Brown Brothers Harriman & Co. before he served as U.S. senator from Connecticut from 1952 to 1963. Bush's uncles Jonathan and William own their own money management boutiques: J. Bush & Co. in New Haven and Bush & O'Donnell in St. Louis, respectively. A less illustrious chapter in the family's financial history: Neil Bush's tenure in the late 1980s as a director of Silverado Savings and Loan in Colorado, which was bailed our by the government in 1988.

"I'm not surprised he's forged a path in the investment world," says former First Lady Barbara Bush. "He's always been very centered, very bright. Besides, he's always hated politics. We could never get him to come to the White House."

In May 1981, degree in hand, Marvin Bush went to work as an entry-level trainee at a regional, Boston-based brokerage firm, Moseley, Hallgarten, Estabrook & Weeden. "It was a great way for me to get my feet wet and learn about the industry," he says.

Two years later Bush moved to Shearson/American Express in Washington, consulting to wealthy individuals and small institutions. In 1987, at the age of 29, Bush was struck by a serious case of colitis. "It was six months of hell," recalls Bush, who later served as a national spokesman for the Crohn's & Colitis Foundation of America.

When he recovered, he did a brief stint in sales and marketing at John Stewart Darrell, a Charlottesville-based investment boutique. After watching several friends make small fortunes in private equity, he decided to follow in their footsteps.

Bush soon received a phone call from a business contact, Mercer Reynolds, cofounder of a Cincinnati-based brokerage firm. Reynolds was rounding up investors for Mid-American Waste Systems, a Cincinnati waste management company. Recalls Bush: "I saw that this could be a way for me to break into the private equity business."

He called his old friend Scott Andrews, who was then CFO of World-corp., an electronic banking business based in Herndon, Virginia, and proposed that they become partners, investing their own capital in a handful of private equity deals. Bush suggested that they begin with Mid-American Waste. "We wanted to get started in private equity and also to see how we would work together," Andrews recalls.

They liked what they saw. Bush and Andrews, along with a handful of co-investors, invested $600,000 in Mid-American Waste. Three years later they pocketed a net return of roughly 15 times their original capital. By 1994 Bush and Andrews set up shop as Winston Partners.

A year later the partners decided to expand into the hedge fund business. "We knew we needed a second, more liquid product to complement the private equity business," Bush says. "Investment management has always been a way to deliver a predictable revenue stream." From the beginning, Bush handled the hedge funds, while Andrews concentrated on private equity.

In 1997 Winston struck an alliance with a private equity firm launched by Christopher Brady, son of former Treasury secretary Nicholas Brady. Winston was to manage a fund-of-funds for Brady's firm. Less than nine months later, Brady's firm decided to manage the fund itself, and the alliance ended.

These days, Winston deploys 13 hedge fund managers. Among them: Ivory Capital and Dallas-based Maverick Capital. Maverick was co-founded by Sam Wyly, a major financial backer of George W. Bush. Wyly hasn't managed money at Maverick since 1995, but he remains an investor in the firm.

All of Winston's hedge fund managers use the classic Alfred Jones hedging model, combining long and short selling. This year, Winston's value managers, laggards in 1999, helped the fund hit a first quarter return of roughly 4 percent, versus 2.8 percent for the S&P.

In its private equity business, Winston invests in a mix of New and Old Economy plays. Only a small percentage is invested in tech deals. A stake in a waste management company sits in the same portfolio as an e-commerce consulting and software business. Most of the deals are financings of between $5 million and $10 million, pocket money for most large private equity funds.

Case in point: Hobart West, a Florham Park, New Jersey--based buyer of regional temporary staffing companies. Bush's firm just gave the four-year-old firm $6.5 million in second-round financing.

Given the recent skittishness of the IPO market and the plummeting values of so many tech stocks, Bush is happy to stick with boring businesses that actually make money. "We want to see a strong management team. We have some investments where the key players have what it takes to go public, but this isn't about chasing the next hot IPO."

Still, he wouldn't mind running a hot firm. Over the next five years, Bush says, "I can see us growing to $1 billion." Though it has taken him six years to get to $300 million, the goal doesn't seem too far-fetched. After all, the Bush boys do tend to be overachievers.

Copyright (c) 2000 Institutional Investor