The Firm’s Beginnings
Donald Stralem founded Stralem & Company Incorporated in 1966 to form a firm that would better keep pace with a modernizing Wall Street. Having been a partner at prestigious, old-line Hallgarten & Company, a firm linked to the Stralem family for many years, Donald sought to create an independent firm with greater capital to better serve client needs. Hirschel Abelson, a partner at Ladenburg Thalmann & Co., shared his outlook and joined him. Hirschel brought with him Philippe E. Baumann of A.L. Stamm & Co. and Coleman & Co., with whom he remained partners for 40 years until Philippe’s passing.
A Coveted Philosophy
Hirschel brought a solid and time-tested set of wealth-building principles that fit perfectly with the needs of private clients whom Donald and Philippe were introducing to the firm. These principles stretched back to before the Great Depression and were the brainchild of Harry B. Lake, who came to Wall Street in 1911. Hirschel, having previously worked with Marty Whitman and Lionel Pincus, had become Mr. Lake’s associate in 1960 and learned the specifics of his strategy. What has become known as the participation with protection philosophy still forms the basis of Stralem’s investment management today. It is the foundation of our Large Cap Equity Strategy™ (LCES), which has a long history of outperforming the S&P 500 gross of fees.
Participation with Protection
Legendary for having steered several portfolios successfully through the Great Depression, Mr. Lake had long understood that when it comes to building sustainable wealth, the impact of preserving capital in falling markets far outstrips the importance of outperforming the market in rising ones. Minimizing the decline means that once the market rebounds, an investment’s appreciation begins from a higher base with the significant opportunity to regain its initial value faster and begin outperforming the market sooner. This approach enables investors to participate when the market advances without undue risk and still outperform over time. In other words, participation with protection is the key to creating long-term wealth.
Mr. Lake also understood that certain types of stocks, just like certain asset classes, preserve capital by consistently retaining their value better than others during a sell-off. By always having an allocation to capital preservation alongside growth, a portfolio can be prepared for inevitable down markets while growing in up markets, resulting in overall greater wealth. The challenge lies in managing the allocation so that the portfolio benefits from protection in a down market while also growing in an up market.
To address this challenge, Mr. Lake employed a risk management model that Stralem still uses today to structure portfolios. Stralem believes that its unique strength lies in its ability to ignore market fads and adhere to this time-tested discipline, especially when it is at odds with popular wisdom. This discipline has served clients well time and time again through different market conditions.
Passed Down Through Generations
This philosophy of participation with protection has served as the backbone of Stralem’s approach to asset and wealth management for 50 years. Handed down through multiple generations, it drives the firm’s active management of U.S. equites for institutions and individuals as well as its diversified wealth management for private clients. Hirschel Abelson’s son, Adam, now serves as the firm’s Chief Investment Officer. Andrea Baumann Lustig, Philippe Baumann’s daughter, is the firm’s president and leads the private client practice.
More Relevant Today
Since the days of the Great Depression, Mr. Lake’s principles of participation with protection have proven highly valuable to generations of investors. Markets rise and fall, but investors often forget the lessons of the past, discarding discipline in favor of crowd behavior. Stralem provides institutions and individuals with the guidance they need to grow and protect their wealth through even the most challenging markets.