The Egyptian-born ‘Sphinx’ as he is known, says he sticks to a strict policy when it comes to amassing his US$1.5bn fortune – buy stock in large companies and hold onto them through the good times and the bad. Well they don’t get much worse than this.
The son of a wealthy Egyptian cotton grower, Sarofim earned his degrees from the University of California and Harvard. At the age of 30 he founded Fayez Sarofim & Co investment bank in 1958, with $1m capital from his father.
Today the company manages investment portfolios for a wide range of clients including pension plans, foundations, endowments and individuals worth a combined total of $34bn.
Sarofim did enough marketing to land some major accounts early on and won management contracts for the pension funds at Mobil, General Electric and Ford. This year US public pension funds have had their worst year in history, exacerbated by funding shortfalls and putting pressure on state governments to shore them up. In the nine months to the end of September, the average state pension fund lost 14.8 percent.
Sarofim’s major coup was landing Rice University’s endowment. He also manages the Houston Fine Arts Museum’s $300m endowment. His fortune was also amassed following long-term bets on companies such as Procter & Gamble and Philip Morris – however both are down this year.
With his strict buying and selling policy, when he does trade it is an event. While most investors sell their winnings and hold their losses, Sarofim believes in selling the losers and doubling up on the winners.
He believes that the top three companies in an industry will make the most money; therefore provide the best return. Sarofim bets on stocks of companies with long-term track records and solid visions for future growth. He also invests alongside his clients. He only turns over around 5 percent of his portfolio each year, for one reason- his aversion to taxes.
“I don’t want to become a patriot,” he once told Forbes magazine. There have, however, been a few rough times, namely when he lost an estimated US$475m on that bleak Friday in 1992 when US tobacco giant Philip Morris cut its cigarette prices.
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