This private Wall Street tycoon intends to leave a mark on Chattanooga

This private Wall Street tycoon intends to leave a mark on Chattanooga

January 31st, 2016 by Joan Garrett McClane in Local Regional News

Staff Photo by Dan Henry / The Chattanooga Times Free Press- 1/27/16. W. Thorpe McKenzie, Managing Director of Pointer Management Company, LLC, and hedge fund millionaire, speaks about his personal history and his nonprofit The McKenzie Foundation which had remained relatively unknown until just a few years ago. McKenzie is a musician as well as outdoorsman and splits his time living in Chattanooga and Florida.

Photo by Dan Henry /Times Free Press.

Gallery: The Silent Partner: Thorpe McKenzie may be unknown to most in the region, but the very private Wall Street tycoon intends to leave quite a mark on Chattanooga in the years to come

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In and around Chattanooga, W. Thorpe McKenzie isn't quite a household name — not yet, at least.

He might be a familiar face to Wall Street, and most certainly is known in the wealthy enclave of Lookout Mountain where names matter greatly, but to the teacher in Red Bank and the mechanic in Soddy-Daisy, the multimillionaire, hedge fund magnate remains no one special.

And McKenzie, who has been religiously private most of his life and rarely, if ever, seeks publicity, prefers it that way.

But his local foundation — nurtured quietly for the past five years by Johnny Smith, a charismatic, reformed felon McKenzie entrusted to direct his local charitable aims as he traveled and managed multiple ventures — is now pulling him into the spotlight as its work and staff grow in preparation for an ambitious local mission that will likely play out over the next few years.

Pete Cooper, a revered fundraiser who retired from the Community Foundation of Greater Chattanooga at the end of 2015 after 25 years at the helm, joined Smith, the lone employee and director of the McKenzie Foundation, at the beginning of the year as a full-time employee. And the two plan to work in conjunction with McKenzie to plan and execute an unnamed education project they hope will alter the landscape of inner-city schooling and offer more disadvantaged children opportunities for academic success and future stability.

"We have the best combination of executives in the city," McKenzie said this week in his foundation's hidden and fairly humble office off Market Street. "Hopefully we can really ramp up."

None of the men are ready to share the ins and out of the project, which could entail a downtown, neighborhood-based charter school for boys. But for Cooper, who raised an adopted child and three biological children with his wife, Linda, while caring for foster children for decades, it is a rare chance to pursue a personal passion. It is also an opportunity to work with two close friends he believes are committed to leveling the playing field for local children, he said.

"This is a different focus for me," Cooper said. "Education reform right now is the most exciting thing going on in this city, and I want the McKenzie Foundation to be a major part of it."

Lucky Beginnings

The seeds of what is now taking place at the McKenzie Foundation began years ago with a drawer in McKenzie's office and a phone call to Cooper in a moment of frustration.

McKenzie, who grew up on Lookout Mountain, had not planned on getting rich or being rich enough to give away a sizable amount of his fortune. As McKenzie tells it, he "just got lucky."

His grandfather, who founded a local for-profit business school called McKenzie College that brought economic opportunities to females, minorities and rural residents at a time when few trade programs were available to them, taught McKenzie it was not intrinsic flaws that kept people from reaching their goals, as much as a lack of access to the people and education he and so many like him were able to tap into.

"I think that Thorpe was influenced greatly by the efforts and attention that his family offered people who were disadvantaged and wouldn't have otherwise had access to a skill or a trade," said Sarah McKenzie, his wife.

And his father's job as general manager of The Chattanooga Times, gave McKenzie access to prominent local players, including publisher Ruth Holmberg, who was very influential in his early life, he said.

And when his father, Bill McKenzie, died at the age of 45 from cancer, many swooped in to help. His mother, a homemaker until her husband's death, was given a job by local real estate giant Fletcher Bright. His father's friends also helped McKenzie's mother get him through his costly, private education at Baylor School.

"I was never top of my class, but I had terrific role models in Chattanooga," he said, naming people like Holmberg, Kenco Group President James D. Kennedy Jr., hosiery mill owner Joe H. Davenport Jr., banking heir Scotty Probasco and businessman Hardwick Caldwell. "I got a lot of encouragement from (my father's) friends and some of the great entrepreneurs and business people (in the city). When I think back, they were really my heroes in giving back to the community. They encouraged me to go to Wall Street. They thought I would do well there."

He caught another break when it came time to choose a college, he said. As a senior in high school, he and a friend traveled to North Carolina to apply to the University of North Carolina at Chapel Hill. His friend had an obvious edge. His grades were far superior, McKenzie said, and one of his parents had graduated from the selective state university.

McKenzie, on the other hand, had neither the family legacy nor the grades to qualify him for admission, but he said he thinks the admissions officer at the university wrongly filed his application with his friends and granted him a spot at the school by mistake.

"I can't prove it," he added.

He described his acceptance at the prestigious Wharton School of Business at the University of Pennsylvania as another fluke. His undergraduate grades had been mediocre, he admitted. Still, he made it in and through the graduate program, with consistently decent performance and was able to pay most of his tuition with a $5,600 loan from the Downtown Chattanooga Rotary.

"(My mom) had to put my sisters through college, and I decided I needed to be off the family payroll," McKenzie said.

After finishing the program early, in just 18 months, he said he was rejected by 20 brokerage firms before being hired by Kidder, Peabody & Co. Inc. in New York City to fill a low-level sales position making $12,000 a year in 1971, he said.

Yet, two more fortuitous encounters paved a way up from the bottom, he said. First, his advisor at Wharton gave him an important piece of parting advice.

"Unfortunately, all this academic background in finance now is not very useful in the real world. It will help you get a job, and they will be impressed that you have a degree from a prestigious Northeastern school, but nothing you learned here is really worth anything," McKenzie said he was told by his advisor, who went on to work as chairman of the Federal Reserve Bank of Cincinnati. His final piece of guidance: "Go to work 15 minutes earlier until you are the first person to enter the business, and stay until you are the last to go home. And in 10 years, give me a call."

So he put in the time and learned the business, he said, but that wasn't what helped get him get noticed by Julian Robertson, a hot up-and-comer at Kidder, Peabody.

"My first week on the job I met a guy (Robertson) who was older than me and who was on his way toward becoming a famous investor. We were both from the South, and I was able to become his assistant," McKenzie said. "We hit it off. Both of us were University of North Carolina graduates. I had a Southern accent that he noticed."

Robertson would go on to co-found TIGER, once an enormously profitable global hedge fund, with McKenzie in 1980.

McKenzie made a lot of money at TIGER and made a lot of money for the people invested with him, including some prominent people back home in Chattanooga.

L. Hardwick "Hacker" Caldwell III, who was just 32 when McKenzie opened TIGER with Robertson, sent half of his inheritance to test the hedge fund model of shorting stocks, while using options and leverage. A short seller borrows shares and then sells them, expecting they will be cheaper to buy back in the future.

The fund did so well in the 1980s it floated Caldwell when his other ventures performed poorly, according to a short biography published by the University of Tennessee at Chattanooga.

In a profile written about Robertson after TIGER went under years later, Bloomberg Business reported that in 1981, a year after opening, the TIGER fund recorded a 24.3 percent gain as the S&P declined 5 percent. Of those earnings, the hedge fund took 20 percent of profits and 1 percent of assets as an incentive fee.

McKenzie's stint at TIGER was brief. He left in 1982, after just two years at the hedge fund he started, to work as a private investor until he co-founded Pointer Management Co. in Chattanooga in 1990. He also ended up heavily investing in a biotech company called XBiotech conducting antibody research.

And around 2000, he decided the time had come to begin returning some his growing fortune to the city that helped launch him.

"I called Scotty Probasco and said, 'Who in town can give some money away?'" McKenzie said, recalling the conversation 15 years ago. "Scotty said, 'Call Pete Cooper.'"

At first, after receiving some tips from Cooper, McKenzie managed his own philanthropy. He kept a list of the nonprofits and charities he liked in an office drawer, and every year, he wrote and mailed a check in support. But when one of the checks came back returned because the nonprofit had closed, he decided he needed a more professional approach to giving.

So in 2006, on paper at least, the McKenzie Foundation was born.

An Unlikely Friendship

The foundation didn't have hands and feet on the ground in Chattanooga until 2010, when Smith was hired to head it.

The North Alabama native was installing lights at McKenzie's home when he met the eclectic multimillionaire. The lighting company he worked for at the time had taken a risk hiring him, he said, because he had just finished a federal prison sentence for gun and drug charges. But his warehouse work impressed management, and they promoted him to doing exterior lighting design not long before his chance encounter with McKenzie in the summer of 2008.

"I was just walking through his yard at night, checking my work and not expecting him to be home, when I heard him playing guitar in his house," he said.

The unlikely friendship sparked over their shared love of music. Smith, an accomplished drummer, had performed with Grammy-winning musicians before serving his prison sentence, and McKenzie asked him if he would be willing to play with him. A few months later, Smith and McKenzie began building a band.

At first, Smith didn't tell McKenzie about his past or his record. He said he feared the truth would end their new relationship. But when McKenzie handed him the keys to one of his buildings after practice one day, he felt the time had come to be honest.

"Thorpe, I have to tell you something. I am a felon. I am not a thief or anything, but I committed a drug crime; and I messed up; and I am embarrassed," Smith remembers telling McKenzie.

"The first time I haven't done anything wrong I will start judging you," Smith said McKenzie retorted. "Take the f——— keys."

So Smith took the keys, and not long after, he was sitting in a leather swivel chair with his own office on Market Street, writing checks for and representing one of the wealthiest people in the city.

There were many times when even Smith doubted McKenzie's logic in hiring him, but McKenzie brushed it off.

While he might have benefited from a great amount of "luck," he assured Smith he had one strength.

"As an investor, you go out and look for companies that are a good investment. When you meet the management of a company and the guy is a Harvard MBA who has inherited the business from his great grandfather and has never had to scrap and pinch pennies to make budget, it's not good. But if you meet men who started a company from scratch with nothing and who have their souls involved, to me, over time, those always turn out to be better investment than going to guys with button-down shirts and Harvard ties," McKenzie explained.

"I would rather have Johnny representing me because he has credibility in the school of hard knocks. Give me an executive from the school of hard knocks any day rather than someone coming from an elite background."

And Cooper came to very passionately agree. After years of reviewing grants, studying nonprofit approaches and pouring over audits, Cooper had become frustrated with how the nonprofit industry, at times, seemed more focused on entertaining the affluent to maintain support and salaries than connecting with and meeting the needs of those struggling.

When the tornadoes hit the region in 2011, Cooper said he saw some big, brands in the nonprofit world, with much invested in marketing, fumble locally when faced with real demand and crisis. Yet, Smith knew people from the communities hit hardest and knew what they needed to get through the devastation.

McKenzie immediately started a pot of money for victims with a $100,000 donation, and with the help of Cooper, the two elicited donations totaling almost $2 million in just a few days. The responsiveness of the young foundation impressed Cooper, who already had his retirement in sight.

"We aren't complete kamikazes here, but if there is a great idea, we can act on it fairly aggressively," McKenzie said.

Smith and Cooper, on the ground locally, traveled to the hard-hit pockets in Georgia and Alabama and assured the money made it to the right people. That was when Cooper recognized how right McKenzie had been about Smith.

"Johnny doesn't see this as a job, he sees this as a commitment to the ministry of helping people, and the passion and compassion he has clearly shows in how he handles that job," Cooper said.

The three men have high hopes for the McKenzie Foundation and expect it to have a significant footprint.

At the moment, the foundation maintains a board, although it is mostly for appearance, McKenzie admits, since he is still alive and involved in decision-making.

"It's more of a dictatorship," McKenzie, 68, said, laughing.

But one day, the the foundation will likely rival, and may even dwarf, the philanthropic prowess of well-known local organizations like the Lyndhurst and Benwood foundations, Cooper said.

McKenzie has four children, two stepchildren and two grandchildren, and all but one of them live elsewhere.

Still, he has pledged a majority of his fortune — the total dollar amount of which is unknown but could reach into the hundred of millions — to his foundation, meaning much of his estate will be spent on the future needs of Chattanooga residents.

McKenzie remains reluctant to make flashy claims, however.

"It just depends on how well my investments do," McKenzie said, when asked how much he thinks will be left to the foundation.

Smith and Cooper, sitting nearby, exchanged a telling glance.

"Well, you have a pretty good track record so far," Cooper said, trying to nudge his new boss from reluctance to confidence.

"You know, ego is rooted in insecurity," Smith chimed in. "There is a fine line between confidence and ego.

"Thorpe has always been very confident. There is no doubt he is in charge, but he acts with humility."

And McKenzie's tact had taught him one of the most valuable lessons, Smith said.

"Sometime I get to thinking I am really important, but I am really not," he added before McKenzie chimed in.

"Everyone should be in the army," McKenzie said, with a tone of certainty that seemed to put a final point on the discussion. "When you do push ups in the mud next to someone, it doesn't matter where they are from."

Contact staff writer Joan McClane at 423-757-6601 or jmcclane@times freepress.com.


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