Larry Post realized he wanted a career in high-yield bonds in the mid-1970s while working, of all places, for stodgy Massachusetts Mutual Life Insurance Co.
The insurance company had a portfolio weighted toward safe, conservative investments, but as a convertible bond specialist he began to study what became known as “junk bonds” – higher yielding but riskier corporate debt.
It was before the market for such debt exploded in the 1980s.
“I found it to be very fascinating and an inefficient part of the market,” Post said.
Fast forward more than three decades, and it’s a corner of the market that he’s still pursuing as vice chairman of Post Advisory Group LLC, a high-yield specialist based in Santa Monica that he founded in 1992.
The company caters mainly to institutional investors, including the Los Angeles County Employees Retirement Association and California State Teachers’ Retirement System, as well as high-net worth investors, who account for 10 percent of its business.
Post has $10 billion of fixed income assets under management, up $700 million in the last five months. A new fund, launched in November, focuses on bonds with an average duration of fewer than two years and seeks to deliver “a consistent rate of return with limited risk.” It already has $600 million in assets and is performing well, with a return of 5.05 percent since inception.
Investors sought out the fund, mostly through word of mouth.
“I was very flattered, it felt like when I first started out,” said Post, 64. “I feel a little less nervous because I have 19 more years of experience.”
Post left the insurance company in the late 1970s to pursue his high-yield bond career in New York, where he headed the high-yield department at SmithBarney & Co. before going to Salomon Bros., where he led high-yield research.
In 1981, he made the move to Los Angeles after being personally recruited to Drexel Burnham Lambert by junk bond king Michael Milken, who made a billion dollar fortune before being tripped up by securities violations.
“It was just amazing. They had probably 90 percent market share,” recalled Post. “Milken had caught on to a concept and we were helping him implement that.”
Post went out on his own after Drexel declared bankruptcy in 1990. His first fund totaled just $16.8 million and was raised from 35 investors; it realized double-digit annual returns.
The fund performed so well that Post was able to start Post Advisory within a year. The firm initially focused on high-net-worth individuals and grew to $400 million under management by 2000.
Post said he was content with the growth, but an old Drexel colleague, Rich Hollander, convinced him that focusing on institutional investors would help the firm expand. Hollander came on board and the firm grew quickly as institutions were warming up to the idea of investing in junk bonds. The move paved the way for the sale of the company in 2003 to Principal Global Investors, a unit of Des Moines, Iowa, financial services firm Principal Financial Group. The company purchased a 68 percent stake in Post Advisory, which at the time had $3.4 billion under management.
“They were looking for a stand-alone high-yield manager to add to their portfolio of boutique managers,” Post said. By 2008, Principal owned the entire company; it had bought out the principals during the preceding five years.
Another change came in December 2008, when a handful of Post Advisory principals bought the company’s hedge fund assets from Principal Financial and started their own company: Beach Point Capital Management LP. Beach, based in Santa Monica, has $5.2 billion in fixed income assets under management.
However, Post stayed with Principal Financial, where he is actively co-managing the newest fund.
“I find it to be very challenging and stimulating,” he said. “I enjoy the competitiveness and the satisfaction when I’ve made a good investment call. It’s different from other careers in that you get a report card every day.”
Post Advisory Group
Santa Monica
Founded: 1992
Fixed Income Assets: $9.3 billion
