The Shepard Osherow Story

Shepard D. Osherow

– Co-Founder of Sanford C. Bernstein & Company

When you reach a certain age the need to address your past becomes important. It is then that a person realizes their own mortality and can reflect upon what they have accomplished and what they have not. That is the basis for my first story. Possibly some may gain some insight from what I have experienced. Some may find this story similar to their own; others may find simply meaningless. But to me, it is important and by sharing my memories it allows me to clarify this particular period of my life.

I graduated from City College in 1959. I received the Wall Street Journal Award, along with the “ Highest Award for Finance and Investing.” I started on Wall Street in 1955. I worked for F.I. Dupont and then went to E.F. Hutton and was personally hired by G.M. Loeb. In 1961, I was hired by my former teacher from City College, Leon Levy, to work at Oppenheimer & Company. My original job at Oppenheimer was stock brokerage, along with generating research ideas for their brokerage staff. I was also helping Archer Scherl who ran the Oppenheimer fund.

At Oppenheimer I met Sanford Bernstein. He decided to start his own firm. He ran a full-page newspaper ad with one word, “ BERNSTEIN ”. After this bold inception in October of 1967, by January the new firm was falling apart. His two other main associates, most notably Archer Scherl, left the firm. The only other major asset he had was his own accounts and his brother Paul, who was a great salesman.

In 1968, Roger Hertog and I, both at Oppenheimer, were discussing the idea of starting our own firm. Bernstein had been at Oppenheimer. Since two of his original associates had left so quickly, among the possibilities, was discussing the idea of joining the firm. Bernstein was on the way out of business. He was interested and agreed to our proposal. We brought along Lewis Sanders, who I believe was working as an assistant at Oppenheimer.

We negotiated with Bernstein for what seemed like 72 hours straight. He wanted a few special considerations. To the best of my recollection, one was the name of the firm, the second was that he would have perpetual ownership and I believe the last one was that he couldn´t be fired for almost any reason. It was a tough negotiation. As I recall, rather than reconstructing the legal documents for the firm formed in 1967, we decided to form a new entity that we would call “Sanford C. Bernstein & Company”. Bernstein had the largest percentage of the firm, followed by me, then Roger and Lew.

Considering Bernstein´s desires, and the fact his firm probably would have gone out of business without me joining him because I brought several significant clients, I came to regret giving him such concessions. I don´t recall Roger and Lew bringing any significant number of clients to the firm. If Bernstein was going to maintain a perpetual ownership, I felt I was entitled to the same thing, but at a lesser percentage. To be completely honest, Bernstein out-negotiated me and I agreed to his requirements. I was able to come to an agreement that removing me from the firm required a special voting procedure. I should never have agreed to these terms, but I did and that´s history.

Bernstein was the Chief Executive Officer. I was originally named executive vice president and I believe Roger and Lew were vice presidents. In 1970, I was made President and Chief Operating officer and in approximately 1975, I was also named chief investment officer. For the record, I was one of the co-founders of Sanford C. Bernstein and Company and was with the firm as second highest executive from 1968 to 1980. I was a consultant for several years thereafter.

In the early years, Bernstein was making the investment decisions for the firm, although I did not think he was qualified to do so. His investment philosophy was concentration of investments in large positions and extensive use of margin. There was disagreement between me and Bernstein as to the appropriate investment approach.

Around 1974, Bernstein´s concentration of our clients money in the wrong areas along with an overall market downturn, caused a significant decline in the client´s accounts. The ongoing argument that I should take over as Chief Investment Officer intensified. The entire way we conducted our investments needed change. With the backing of Roger Hertog and Lew Sanders, Bernstein agreed to remove himself from the investment decision process. In addition to my other responsibilities as President and Chief Operating Officer, I was now in charge of making the investment decisions. Roger and Lew reported to me in my capacity as President.

Between 1975 and 1980 I was able to produce an investment performance record which stopped the firm from going out of business for the second time and move it in a forward direction. As you can see from the linked article from Fortune Magazine, Lew Sanders is quoted as talking about the Bernstein investment performance numbers as being superior starting at about 1975. I believe I outperformed the market consistently as we began to rebuild the firm. My performance numbers were reported by the firm for many years after my departure. For all I know they are still being used somewhere in the firm as an indication of performance since inception of the company.

About 1980, after I had single handedly taken responsibility for investments, Bernstein, Hertog and Sanders collectively decided that the three of them should be responsible for the firm going forward. They claimed I was overworked in my capacity as Chief Operating Officer and Chief Investment Officer. They offered me all kinds of new titles, none of which I found to my liking. Prior to this, I had attempted to persuade Martin Sosnoff, a brilliant investor, to join us as Chief Investment Officer so I could devote my complete attention to the duties of Chief Operating Officer.

The extent of the political forces facing me was not apparent. In the chaos of the time and the confusions among the parties, Bernstein had warned me that I was being betrayed by the same two men that joined me in the firm originally, especially Hertog. I could not conceive that this was even remotely possible. Roger was my close friend.

In the end I saw that Hertog and Sanders were no longer on my team. It was said to me “ we have to stick with Bernstein; he has more money in the firm than you ”. Somehow, my presence, my efforts, and my contributions, as one of the original co-founders of “ Sanford C. Bernstein & Company ”, were erased from history. Over a decade of my life was spent helping to build the company. The initial success of Sanford C. Bernstein & Company was substantially based upon my joining under extremely negative circumstances and combining my business with the original accounts. I saved the firm twice, by joining it in 1968 when it was ostensibly failing, and again in the 1975-1980, when I took over responsibility for all investment decisions.

Considering the level of my personal commitment, my hard work and labors that I put forth during the formative years of this firm, it is very disappointing and difficult to not have been thanked or even acknowledged for my part in those early years. There is no mention of me, nor has there ever been made any reference to my name or my contributions to Sanford C. Bernstein & Company. It´s almost as if I never existed, although my presence in the firm´s origination was well known and documented during those years.

I am writing to preserve the integrity of my own life and what I achieved; something that had attempted to be taken from me by the omissions concerning the history of the firm, and the distortion as implied by the “ brain trust ” picture that appeared on the Bernstein webpage. I write this, not only for myself, but for my family and for those that have experienced the same type of historical dismissal that needs to be addressed and corrected.

If proof as to the integrity of this commentary should become necessary, the above shall be supported by substantive presentations and original brochures about the firm. Martin Sosnoff did not join Bernstein, instead he graciously offered me a substantial portion of his existing firm, Atalanta Sosnoff Capital Corporation. Together we built it from a few hundred million dollars under management to over 6 billion from 1980 to 1988.

As for Sanford C. Bernstein & Company, they were acquired by Alliance Capital in 2000 for a substantial amount of money. The firm is now called Alliance Bernstein. Roger and Lew are gone. Bernstein passed away and Sosnoff continues to own his own successful company.

More to follow….

Background of Shepard Osherow

  • Worked with Morris Goldstein at F.I. Dupont
  • Worked with Gerald M.Loeb at E.F. Hutton
  • Co-founded Sanford C. Bernstein and Company
  • Co-Founder, Atalanta Sosnoff Capital Corporation

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