Many people’s journey to the top of a giant wealth management firm—one serving important institutional investors and the wealthy alike—might seem straightforward, but Lisette Cooper’s was anything but.
A self-described child of the ’60s and ’70s with a bent toward meditation and community activism, her journey through life sounds a bit capricious. She was a fun-loving teen—perhaps too fun loving—and yet a love of math not only fired her ambition but also led her into the go-go 1980s-1990s world of quant investing, at a time that field was undergoing a revolution. She suddenly found herself able to speak the language of algorithms at a time math nerds were reinventing Wall Street.
She took these ideas with her into her own firm, Lincoln, Mass.-based Athena Capital Advisors, where she ministers to the ultra-rich. Her entrepreneurial instincts even led her to try out a prototype robo-advisory years ahead of schedule.
This isn’t the kind of person you’d imagine having skipped a lot of high school classes. … Or having done so, then leapfrogging into a Harvard Ph.D. program as an environmental geologist.
Her amazing resume instead suggests that Cooper has remained intuitive and spiritually open. Besides running her firm, she teaches classes on meditation and sponsors conferences and helps kids with trauma. She’s even turned her love of algorithms into a new form of socially responsible investing.
Privilege And Pressure
Cooper’s parents did not come from poverty, but they quickly found it. They were 16 and 17 when they had their daughter Lisette, and got a taste of the poor life fairly quickly. Peripatetic students, they moved around the country attending colleges such as Vanderbilt and Yale in pursuit of academic careers (her father is a math professor, her mother the chief scientist for Army intelligence). They lived a lot of lean years in poor neighborhoods, one of their first homes being over an auto repair shop in Nashville, Tenn.
“It was hot dogs and beans and spaghetti and tuna casserole,” Cooper says.
When she was 8, they lived in the South Side of Chicago in an extremely dangerous neighborhood where she went to public school. This was shortly after the 1968 riots at the Democratic National Convention, when there was an air of political tension worsened by poverty. There were rapes at her elementary school, she says, and people kept “mugger money” on them in case they got robbed.
After stints in Chicago and New Haven, Conn., eventually, her family relocated to the University of Virginia in Charlottesville. In Chicago, she’d been the only white girl in class, and in her new Southern burg there were no people of color in her class. She said the experience allowed her to see different sides of American economic and racial life and the importance of education in both areas.
In Virginia, as a teenager in the early ’70s, Cooper said that she was in the middle of the rock ’n’ roll generation, and was not immune to its allures. “I was anti-establishment. I thought I was all grown up when I was 14 and I was ready to go off and earn a living then. … I was a bit of a rebel and didn’t want anybody to tell me what to do.”
She describes the town in Virginia at the time as friendly but banal—somewhat repressed and perhaps a little sexist. “I had a great social life but I had to pretend not to be smart.
“I basically never went to high school,” she says. “I hung out with my friends on the corner, which is part of the University of Virginia campus, or played pool. I only showed up at school to take the tests. I could not wait to get out of high school.” She did after three years, going to college at Wesleyan when she was still 16.
Her aptitude tests told her she was bound for better things, and she straightened up for college, getting A’s and accolades.
“My parents said I had to major in science in college because they wanted to make sure I could learn a living.”
She majored in earth and environmental science as an undergrad. The subject captured her imagination and would allow her to travel to places such as Newfoundland, Wales and China to do field work—looking at phosphatic fossils, researching the chemical signature in the oceans and studying the growth of continents. She went from her undergrad program right into the Ph.D. program in geological science at Harvard.
“My specialty was isotope geochemistry,” she says. “It was very mathy and very much working in the lab.”
But while the work was interesting, like many scientists she found the lab life somewhat sterile and lonely. Most of the time she labored over mass spectrometers in windowless rooms, boiling things in acid.
Deciding she needed a humanity bath, she cast about for new things to do.
Curious about finance, she sat in on business classes at the Harvard Kennedy School, and had the kind of epiphany perhaps only available to a numbers person: The Black-Scholes equation popped up in a discussion of stock options. It looked exactly like the heat flow equations she was using on rocks.
“Just imagine something that’s hot and in a particular location—like a lightbulb—and as you move your hand further and further away from the lightbulb … the heat is more and more spread out in the space. … [It] sort of gets there by what’s called a random walk by diffusion.
“Likewise, if you have a stock, if it’s at a certain price, then the next day the price is probably going to be pretty close to what the stock price was the previous day. But as you go further and further out in time, it’s like going further and further away in space from the heat source.”
After school, she went to work in capital markets as a quant specialist in institutional products at Merrill Lynch working directly with institutional investors on unique investment asset allocation and benchmarking products. She later went to Barra where she could be a more objective arbiter of what institutions needed from quantitatively managed risk control investment strategies, working as a consultant for asset managers and banks (at this time she was located in the Bay Area). “I came to run that business to apply those mathematical models to real life client situations that needed to be customized,” she says. “Really taking the kind of work I had done at Merrill Lynch matching up the providers of investment product with the folks who wanted to buy investment products.”
This proliferation of new products and strategies were the fruit of the quant revolution, whose seeds were sown in 1970s research papers. Suddenly there was a new way to approach alpha and models for risk management. It was a heady time to think about new ways of investing for real world problems. It became a big part of institutional investing.
“It’s evolved tremendously,” she says. “When I first got into the business, you could look at a basket of S&P 500 companies and trade that against the S&P 500 futures contract and actually have a real honest-to-God arbitrage, where you’d have two things that really were identical in a different form but were priced differently. This was the puzzle analyzer part of me. There were really nickels and dimes you could pick up that were lying around at that time.”
A New Opportunity
Barra spun off a chunk of its consulting business to Cooper, who used that as the basis of her new, freestanding firm, Athena Capital, in 1993. She went into business advising institutional investors on risk management, investment strategy and asset allocation. Eventually, private clients came calling.
“I ended up working with individual investors in the mid-’90s,” she says. “Many of them had just had a stockbroker before and they were used to getting stories on individual stocks.” The institutional strategies could be used to mitigate risk for private clients and also maximize alpha with things like tax-loss harvesting strategies.
Eventually, a friend asked her to start managing his personal assets directly.
This was the way the firm was evolving when Cooper launched a side business in 2000. She founded an investment technology company called Thinking Investments that aspired to bring these portfolio management concepts to retail investors.
“It was a venture-backed company,” she says. “In the summer of 2001 we won a mandate from Charles Schwab to be the backbone of their investment platform.” She put Athena on pause while she worked on it.
She was in San Francisco to seal the deal with Schwab on September 11, 2001. That morning, the World Trade Center in New York was attacked, and San Francisco went on alert, too. The meeting was canceled and when she got back in touch with Schwab and other possible buyers later, the reception for her software was suddenly very frosty. With the attacks and the bursting of the tech bubble, fintech innovation had become a dead issue for 2002. With no ink on the Schwab deal, a new round of Cooper’s venture funding dried up. (Schwab spokespeople said they couldn’t comment on or verify the story.)
She had to close the company down. Fifteen years later, she says, the technology has become known by its slang name, “robo-advisors.”
Choices
Faced with the failure of her tech venture, Cooper had to choose to keep it afloat or perhaps plunge into a new, more promising direction for Athena: to turn it into an asset manager and multifamily office in 2002. It started because a friend of hers with whom she owned an airplane sold off a chunk of assets in a company and asked her to manage it. “To take it any further, I needed to become a fiduciary,” she says. Impressed by the work of Katie Hall of Hall Capital, Cooper shifted to that multifamily model in 2002 and by the end of 2003, the firm had a billion in AUM, she says.
Many of this first handful of private clients came with an average of more than $100 million, people who were largely also professional money managers, working in private equity, real estate and investment banking. She had become acquainted with this first wave of clients through her close-knit consulting community and didn’t have to cold call. “We became the investor’s investor.
“If you had $100 million and not $5 billion,” she says, “the idea was that you could combine our assets with a few other families and get the services of one of these very large, professionally managed shops,” she says.
That concept (and the idea of “multifamily offices,”) has since evolved. Cooper says that the name today connotes concierge services—“dog walking,” in other words. Today she prefers the term “outsourced CIO.” But at the time, she was again in the right place. Based on her success with one client, others came knocking, interested in her approach.
The growth has been steady, she says. Her troubles with the tech venture, she said, taught her important lessons: one of the biggest being to always have cash on hand.
“The thing I learned from it is to never run out of cash,” she says. “So that meant we were able to weather the crisis in 2008 pretty well. So not only did we do risk management for our clients but risk management for the firm.” She did have to let a couple of people go and cut back salaries by 15% to get through that crisis, she says, but adds that the firm was positioned fairly defensively.
She now has 43 families as clients, 56 employees and some $6 billion in assets under management for families, foundations and endowments. Her typical clients have $50 million to $500 million.
She is still the majority owner of the firm but she is letting other partners in, and though her growth has been organic, she’s considering inorganic ways to get bigger.
Being a quant nerd is different now than it used to be—those nickel and dime arbitrage days are long over, she says. But she still applies her mathematical mind to very specific client needs.
For instance, she’s recently taken the quantitative rigor into new areas of asset allocation, including socially responsible investing. She and her colleagues published a paper in The Journal of Wealth Management called “Social Finance and the Postmodern Portfolio: Theory and Practice,” in which she and her co-authors discuss the idea that the efficient frontier of modern portfolio theory now exists in only two dimensions on an x/y axis and that it could conceivably add a third—social impact—and maximize reward in a field of non-financial impact factors. On this curve, companies could be considered based on whether they also have the highest sustainability rankings.
“I’m really proud of that paper,” she says. “It’s a real breakthrough. … It’s theory and practice. It tells you concretely how you apply it to a real portfolio.”
Cooper’s own spiritual journey has led her to found philanthropic organizations and speak about meditation. She’s been a chairman of the board for the Kripalu Center, a new age yoga retreat. She recently returned from a conference she sponsored on measuring compassion in education. Meditation became important to her after she adopted an 11-year-old daughter in 2009. Her daughter had been in nine different foster homes and had special needs, having had bouts with PTSD and trauma that made her education difficult.
“I got interested in taking my meditation practice and combining it with the [social and emotional learning] community as a way to help give all kids a chance to get an education,” she says. “Cause I saw that personally [that] a way out of poverty or difficult circumstances was through education. … What I didn’t know until I adopted [my daughter] is that kids might be bright, but because of circumstances beyond their control they might end up with behavior and reactions like hypervigilance that would keep them from getting an education.” Her daughter (her third child) is now in college. She has since spoken about compassion as a business practice.
She is also a founding board member of the Boston Youth Sanctuary, a therapeutic after-school program for kids who have had trauma to help them get the support they need for an education. “They have individual therapy, group therapy, art expressive therapy, yoga, mindfulness, physical activity, homework help, all those things.”
Cooper’s journey has seemed unlikely in a lot of ways, but she says that businesses must change to grow. “Today in terms of growth strategy, the other things you find out when you’ve been an entrepreneur for a long time is that businesses do change and evolve.
There are certain things that are interesting and important that are growth areas at one time that become your bread and butter. Then you find something new that’s a big growth area.”