The art of money management.

• Author: Backman, Harald
• Position: Interview with McKinley Capital Management CEO Bob Gillam - Interview

According to Nelson's 1997 Investment Database of money managers who have for five years managed assets in excess of $250 million annually, McKinley Capital is the ninth-best money manager in the world.

Entering the offices of McKinley Capital Management atop the Calais II building you sense the hum and buzz of work on a dizzying array of computer terminals - more than 85 in an office of fewer than 40 employees.

CEO Bob Gillam holds a phone in the crook of his neck while engaging an employee through the window of his modest wide-open office. Five computer terminals surround him, aglow with cryptic information. But he's relaxed, and charming at the same time. Standing about 5 feet 11 inches, his blond hair and open-faced smile belie whatever stress one might expect from a world-class investment Guru.

ABM: Could we start out with a little background?

GILLAM: Yes, my dad was a WW II veteran and a West Pointer. I was born after the war here in Fairbanks where I grew up. Alaska is our home.

The stock market has always fascinated me - ever since I was a teenager. For that reason, I went to the Wharton School and later got a masters in business from UCLA's graduate school of business. Dr. Harry Markowitz who won a Nobel Prize for modem portfolio theory in 1990, had a great influence on me there. We've incorporated a lot of his ideas into what we call "modern portfolio practice."

ABM: Before we get into your investment philosophy and style, and the nuts and bolts behind McKinley's phenomenal success. could you talk a little about flying off to hunt and fish in your plane after work?

GILLAM: That's part of the reason we live here. Because of the lifestyle. Besides the fact that we don't have all the taxes and the rest of the nonsense they have in America. I have a home on Campbell Lake, and property at Lake Clark where I'm presently building a 12,000 square foot fishing lodge. The lodge is exclusively for the enjoyment of our clients and the people we work with at McKinley.

Our clientele is 90 percent non-Alaskan. Of course they like to come and visit us because we take them down to the fishing hole and get out to remote wilderness areas. But the primary reason they've hired us is because we're in the business of delivering excess returns - which means we do better than the market. Today (June 5, 1997) Nelson's Investment Manager Database - The World's Best Money Managers names McKinley Capital as the ninth best money manager in the world for managers with assets over $250 million for the past five years. And that's very rare. It's very difficult to deliver excess returns, especially over the long run. We've been able to do that with some consistency. We're in the delivery business, not in the excuse business. That's why McKinley's been successful.

Almost every investor from Alaska exports management fees-meaning they use the services of Outside investment firms. McKinley imports management fees. This is of enormous significance. In the city of Boston, we are told, more than half the office space is occupied by companies that either work for or are Fidelity Investments. More than $500 billion of managed assets in Boston are managed by Fidelity. And the management fees flow in from people who live here in Alaska and all over the world. So when computer technology made it possible to process information here and we could get our hands on the satellite downloads, it made sense to start McKinley in 1990.

Additionally, at McKinley many of us live within 10 minutes from the office and work on Saturdays - many of the staff members work on Saturdays. We try to out-work everybody else. So if you work six days a week and your competitors work only five days, in the long run you'll likely outperform them.

ABM: McKinley has a very team-oriented personal touch and very open...