One might imagine someone who directs a $1.5B strategy to suck the oxygen out of a room and fill the open corners with swagger and conceit. Garvey, on the other hand, moves stealthily but assuredly about, never drawing too much attention but making his presence known. It’s this quiet confidence that built the Tactical Income Strategy to such great heights and drew investors, team members and admirers alike to Hilton’s flame.
Like the man behind the strategy, Tactical Income is disciplined.Garvey’s journey began at Lehman Brothers in the early 1990’s. It was during this period that the earliest ideas of a strategy to generate yield without undue risk began to form. “It was the initial onslaught of the tech age, which ultimately blew up. Most investors weren’t ready for that kind of risk so I began obsessing over ways to generate yield and capital appreciation without taking risks associated with the S&P at the time.”
“It’s this quiet confidence that built the Tactical Income Strategy to such great heights and drew investors, team members and admirers alike to Hilton’s flame.”
Although they were created in the early 1980’s, Master Limited Partnerships (MLP) were still relatively new creations when Garvey was formulating what would become his defining strategy in the years to come. “We managed to put together a portfolio that reflected what was happening with MLP’s in energy. Interest rates were still pretty high so we had a pretty solid offering that worked for us,” says Garvey. “Around ‘96 I had an opportunity to jump to the buy-side and join Kevin McCarthy at Ashland where I stayed until 2001 building relationships and really honing my management skills.”
“The early years of Hilton were exciting and a tremendous amount of work,” recalls Garvey. “We had a small team and we all wore a lot of hats in those days.” Garvey approached his friend Larry Rafferty with the idea to found Hilton in June of 2001. By October, Hilton Capital was up and running. The mention of this period of time invites the inevitable questions regarding world events. True to form, Garvey just smiles and says, “We’re not special. Those were trying times for everyone.”
With the world imploding, Garvey doubled down and pressed forward with Hilton Capital. “I was doing the bulk of the research, trades, execution and relationship building. The returns were there so it gathered momentum over the next several years until we had about $175m in the strategy. A confluence of events put us together with Clark [Gillies], who was a good friend and one of the best relationship managers you’ll ever meet. It was after the financial crisis and Clark was looking for a home and he found it at Hilton. Glad he did.”
“People spend so much time deciding what to put in a portfolio and not enough time deciding what doesn’t belong.”
Because Hilton continued to produce returns, especially during a significant downturn, it wasn’t long before investors beyond the core relationships began to take notice. Investors were beginning to discover what Garvey had doing for years - generating yield with minimal risk. “People spend so much time deciding what to put in a portfolio and not enough time deciding what doesn’t belong.” This is precisely the type of nugget that Garvey sprinkles into a conversation that seems simple, but incredibly difficult to maintain over time. In reality, it’s a defining aspect of his personality and a core element of Hilton’s strategy and secret to success.
“The general sentiment was, ‘we like what you’re doing but what if Humpty Dumpty falls off the wall?’” explains Garvey.
The Humpty Dumpty metaphor illustrates a larger concern in the investor community that Hilton’s success was inexorably tied to Garvey. “We knew it was time to build a proper infrastructure because our assets had essentially doubled in a short period of time. Craig [O’Neill] was running a prime brokerage at the time and we knew he would be a great fit for us; so Larry and I recruited Craig to build out the administrative end of the business and really increase trading capacity.”
The Alex that Garvey mentioned in the opening of this piece was the next critical piece of the puzzle. “With Craig building the infrastructure it was time to find another investment strategist. We did a pretty wide search and found Alex [Oxenham] who was a rising star at HSBC.” Though Hilton was ultimately able to woo Oxenham to the firm, the timing proved somewhat awkward. “He joined us at the moment Greece was blowing up and the world was descending into crisis,” says Garvey. “No one was sure how he would react coming from such a large organization, including Alex himself. And it was hairy for a while. Now, it’s hard to imagine Hilton without Alex. He brings focus, intensity and great insight to the table.”
Walking the halls of Hilton Capital today, it’s hard to imagine the scrappy early days. Giant monitors adorn the workstations, interns hustle to impress executives and meetings spontaneously occur in doorways and hallways. The kingdom is growing and the army is prepared to do battle for the quiet, benevolent and steady leader.