Launched in 2005, Phocas Financial Corporation is headquartered in bucolic Alameda , California , a suburb of San Francisco .  The firm began to accept assets last year, and now manages $200 million among its small cap value, small cap growth, equity REIT, and high yield equity portfolios and mutual funds.  Current clients include two prominent public pension plans, and pension plans of several corporations, including an iconic global technology firm.

Phocas is another emerging manager seeking to distinguish itself through its investment performance.  This is consistent with the investment principles and ethos of Phocas’ CEO, William Schaff , CFA, who believes ardently that investment mandates should be awarded on the basis of investment performance.  “I worry that there’s not enough focus on performance as a metric in the emerging manager space,” Schaff says.

Phocas’ investment returns suggest that Schaff and his team have indeed been focusing on performance.  For instance, since its inception nearly a year ago in June, 2006, the Phocas Small Cap Value portfolio is up 18.88% through March, 2007, more than 400 basis points ahead of its benchmark, the Russell 2000 Value Index.  With a history that begins in January, 1998, the Phocas Equity REIT portfolio management team has delivered annualized returns since inception of 18.31%, beating its NAREIT Equity REIT Index benchmark by more than 440 bps.  For 2006, the REIT portfolio was up 38.51%, 345 basis points ahead of its benchmark.

Schaff certainly knows a few things about performance.  He has built a 10-year record of accomplishment managing institutional equity portfolios and mutual funds for the firm he founded in 1987, Bay Isle Financial, as well as the Undiscovered Managers organization, Janus Capital, and Berger Funds.  Over the years, Schaff developed specialized expertise in securitized real estate investments; he also designed and launched two small cap value stock portfolios, including the one he now manages at Phocas.  Today, Schaff oversees the firm, and co-manages Phocas’ small cap value and equity REIT portfolios and mutual funds.

Having served as a multi-term trustee and investment committee chair of the Alameda County Employees’ Retirement Association (“ACERA”), Schaff also knows a few things about the multiple priorities that public pension plan staffs and board members must balance well in order to be good fiduciaries.  That knowledge was especially instructive to him when he conceived and designed the firm’s investment products and infrastructure, including its compliance and extensive technology capabilities.  In short, he constructed Phocas from the ground up to make it easy for institutional clients and consultants to approve when any Phocas products can satisfy investment mandates on which they are working.

Again focusing on performance, Schaff reasoned that for investment products to generate the best investment out-performance persistently, they must adhere to rigidly observed limits to assets under management, or lose their performance advantages.  He acknowledges that this means that Phocas will never manage $100 billion, but that consideration undergirds another way in which investment performance shapes Phocas’ outlook: to be successful over the long term, the firm must also limit the size of its team.

With that in mind, Schaff set out to select competent, reliable people for his team.  He chose people who shared a robust ethical framework, and who understood very clearly why clients pay money management firms: to generate the best investment returns possible within given investment stipulations.

When he formed the firm, Schaff chose two long-term investment colleagues, James Murray, CFA, and Steve Block, CFA, to join him.  Murray has worked with Schaff for some 10 years, and co-manages Phocas’ equity REIT portfolios and mutual fund.  Murray was the trader and a senior member of Bay Isle Financial’s institutional team.  James brings strong analytical and quantitative skills to the research team and portfolio management process, with particularly strong expertise in the area of modeling real estate companies.  Block was Schaff’s first investment hire at Bay Isle Financial, 11 years ago, and co-manages the firm’s small cap value stock portfolios and mutual fund.  Block also co-manages Phocas’ high yield equity portfolios.

This February, Bruce Gulliver, CFA, joined Phocas to manage the firm’s small cap growth equity portfolios.  Gulliver, who has known Schaff for more than 10 years, has nearly 30 years of experience in the financial services industry.  For the last 17 years, Gulliver has been the President of Jefferson Research & Management, an equity research firm he founded.  Jefferson provides research, including the Torpedo Alert™ Rating Service, to a range of asset management clients that have included firms like General Motors Asset Management.  He was also an invited speaker at the 2002 AIMR Conference, and the 2003 Annual AIMR Meeting, the title of which was "Revelations From Financial Reporting: Detecting Company Problems."

The month earlier, Schaff, Murray and Block had invited Kevin Granger to join their team as a small cap portfolio manager with additional responsibility for developing the firm's partnerships and distribution channels.  Leaving his position as director of research at a manager of emerging managers where he developed relative return as well as absolute return products, the main driver for Granger joining Phocas was his immense trust in, and personal respect for, Schaff, whom he first met some 15 years ago.

About Schaff, Granger says that, "In good times and bad, I've consistently seen Bill follow three rules: always do what is right; focus on performance; and never disserve your current clients." Granger is clear that Schaff’s dictates regarding performance and caring for clients have ramifications that extend to something rare in his experience of traditional long-only managers: refusing new assets when taking the new business would harm investment returns to current clients.

Granger is further reassured by Schaff’s insistence that service to current clients must be considered before acceptance of new clients or asset additions by existing ones, because of the shared perception that history is littered with the wreckage of firms that accepted more money than their respective strategies’ could absorb efficiently, thus imploding their clients’ portfolios and flouting one of the most important assets one can earn: trust.

With nearly 20 years of institutional investment experience – including stints at General Motors Asset Management, where he was the sole investment analyst covering small cap growth stocks; at Value Line Publishing, where he analyzed companies in such diverse industries as aerospace, commercial banking, computer services, defense, food, insurance, media, specialty chemicals, and tire and rubber; and at Lehman Brothers as a mergers and acquisitions analyst – and a diverse network of industry contacts to show for it, Granger has been steadily building Phocas’ pipeline of business since his arrival at the firm. Granger is quick to acknowledge the importance of a combination of people as well as attractive returns, saying, "None of my friends and industry contacts would give Phocas a second look were it not for the professional and personal reputations of the rest of the firm's team members … and Phocas' demonstrated credibility as an investment performer."