Shortly after I took the pension job, Joe Abely arrived to become RJR’s CFO. Joe was Boston Irish, a Boston College graduate, with both an MBA and an LLB from Harvard. It was obvious that we would now report to a boss who definitely was not an RJR “good ole boy.” RJR management was beginning to change, but the Winston-Salem style was still dominant. We had to adjust to the way he did things – and the way he wanted us to perform.

This was certainly true for me. He wanted a review of existing managers and a search for new managers. I was thrust into this situation with no experience. To make me more uneasy, the contrast in backgrounds was pronounced, at least in my mind. A rural southerner, I had little in common with a New England Ivy League graduate. Later, I would joke that with my southern drawl, he, a Bostonian, could not understand what I was saying. And I desperately needed an interpreter.

I soon learned that the RJR pension challenge was far from unique in the corporate world and in public funds and endowments. Assets were growing rapidly from new contributions, and funds needed an examination of their investment managers. As a result, a whole sub-industry had developed to serve this need – the fund “consultant.” The consultants’ role was, and is, to maintain a data base of investment advisors. Their files include, asset specialty (such as stocks, bonds, or real estate), historical performance going back at least ten years, profiles of the firm’s key management, changes in investment philosophy, and finally a judgment about the overall ability of the firm.

Their role is not taken lightly by fund sponsors like RJR who have a fiduciary duty to manage the fund well. The company would be obligated to make up any shortfall from investments over the long run. Boards believed they needed outside “expert” advice. It goes without saying that my “expert” opinion alone would count for nothing.

I soon discovered that to find managers, I needed to hire a consultant. I talked to several, and their responses ran from enthusiastic to uninterested. With trillions of dollars at stake, the number of consultants grew. They ranged in size from large organizations to solo practitioners. [i]

One recommendation was Jim Hamilton. I can’t remember who made the referral. It seemed like a long shot, but we set up a meeting at his New York office. His background was unusual, but impressive. He was a graduate of West Point and served in the 101st Airborne Division. Following his army service, he attended Harvard Law School. After graduation, he joined Milbank, Tweed, Hadley and Mc Cloy, a major New York law firm. He left in 1967 and joined Wertheim & Co. Wertheim was a major Wall Street firm engaged in security research and underwriting, where he learned about financial business. One of Wertheim’s founding families, the Klingensteins, generously encouraged his work in portfolio performance measurement, finally leading to his starting his own company. [Link to Hamilton & Co.]

At a second meeting in Winston-Salem, my bosses, John Dowdle and Joe Abely, were impressed with Jim’s presentation, and so R.J. Reynolds hired him to help with, actually lead, a search for new investment advisors.

I joked that he was an interpreter for Joe Abely. With his Harvard law degree, he had credibility with Abely, while I had none, as a slow talking Tar Heel. After the fact, I learned that, early on, Abely had talked with Jim about whether I was up to the challenge in my job. Jim persuaded Abely to “give me a chance.” In the course of his work, his clear writing and discussions for management were always more persuasive than mine would have been.

Jim Hamilton was to play a key role in my professional life until I left RJR nine years later. His team did an outstanding job for us. But he went beyond that. He was a source of personal counsel and support for me.

From time to time, I would ask if he thought I should look for a job elsewhere. I had no experience with any other company, except a couple of years at Dupont. He had broad exposure to many companies. Jim always said, “You have supportive bosses. You get to do your job with no corporate politics or interference. Why would you leave when you have the best job in the world?” Only after the merger with Nabisco Brands brought a change in corporate culture did I realized how right Jim had been. He was far from the stereotype of the consultant who “interviews you and then repeats what you said in a long and expensive report.”

Decades have slipped by, and he and I are octogenarians. We still stay in touch, although Covid has limited my trips to New York City to visit him. But he shaped my career as much as anyone ever did. For that I am most grateful.

[Later we will give details of the extensive work that Jim did for RJR and for me.]

[i] I contacted the Frank Russell Company in Tacoma, WA. George Russell who ran this firm had a good reputation. I called him and experienced a bit of ego deflation. I thought with the prestige of the RJR name, anyone would want to be our consultant. But George said that his company limited its client base to twenty, and RJR was not big enough with only about $400 million in assets,

George Russell went on to build a powerhouse firm. The company guides over 1,900 clients in 44 countries with $2.4 trillion in assets and manages $171 billion in funds. It manages mutual funds, retirement plans, and other accounts worth more than $66 billion, and compiles the well-known Russell 1000, 2000, and 3000 stock indexes. It is now owned by Northwestern Mutual Insurance.

Reflections on "Going Down Tobacco Road" and Investing

EMPLOYEE BENEFIT FUNDS – PART VI – RJR…