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Trading Places: An Interview with Morris Smith

May 9, 2009 | by Gail Schiller

How one man walked away from power and prestige to truly have it all.

In his brief tenure as manager of the world renowned Magellan Fund, Morris Smith achieved a level of success that most others can only dream of – he held one of the most profitable and prestigious positions on Wall Street, controlling billions of dollars in what was then the world's largest mutual fund.

But Smith also had the courage to go and do something that most others would never even dare dream of. After just two years as manager of Fidelity Investment's Magellan Fund, the 34-year-old Smith walked away from all his success and from what he himself described as a once-in-a-lifetime opportunity in order to pursue his own very different dream of spiritual fulfillment, closeness to God, and a meaningful life.

Smith took over the Magellan Fund in 1990 from the legendary Peter Lynch, who had transformed the once little-known mutual fund into the world's largest and among the most profitable. Lynch had built up Magellan from just $20 million when he took the helm in 1977 to $13 billion when he resigned 13 years later.

Smith's performance as Lynch's replacement was generally viewed as outstanding. Under his management, the Magellan Fund soared from $13 billion to $20 billion, beating the stock market by nearly seven percent over the two years Smith was in charge and posting a performance in the top 15 percent of all growth funds.

(Today the Magellan Fund is the world's second largest mutual fund with a staggering $109 billion in assets but is closed to new investors.)

Smith, an observant Jew, acknowledges that he was under a great deal of pressure from Wall Street, Fidelity and Magellan investors to perform as well as Lynch when he took over the fund in 1990. "I think the biggest issue that existed when I took over the fund was whether there was really life after Peter Lynch. So much of Fidelity's name, the impressions that the investment world had about Fidelity, revolved around the personality of Peter Lynch, and there was a perceived risk to the company that we could have a significant shrinkage in our assets if I did really poorly.

"Thankfully the fund did well and we continued to grow. Fidelity now has over a trillion dollars in assets and has gone on and done very successfully through the 1990s. I felt I had a small part to play in that," says Smith, now 43.

As an observant Jew controlling billions of dollars of other people's money, everything you do is magnified.

But even more than his performance, Smith was concerned about the possibility that, as an observant Jew controlling billions of dollars of other people's money in a very public position, he might do or say something that could lead people to view Jews, God or Judaism in a negative light.

"People knew that I was an Orthodox Jew in the work force and when you're an Orthodox Jew you're symbolizing certain values. Everything you do is magnified either in a positive way or a negative way, and I felt that, to some degree, I was representing the Jewish people, and I just wanted to make sure that everything I did would be done in a very straightforward fashion.

"Thankfully, the fund did well and there wasn't anything very negative written about me personally," says Smith, who was raised in an Orthodox family in the Flatbush section of Brooklyn, New York.

Smith launched his career at Fidelity Investments in 1982 at the age of 24 after graduating from the prestigious Wharton Business School with an MBA. He started out as an investment analyst, researching companies and making stock recommendations. Two years later, he started managing money for the first time.

From 1984 until 1986, Smith ran Fidelity's Select Leisure Fund, which soared from $500,000 to $350 million under his management. Then for the next four years he managed an average of $1 billion in the Fidelity Over-the-Counter Fund. And finally in 1990, at just 32, Smith took over Fidelity's premiere and most successful fund by far -- the then $13 billion Magellan Fund. Wall Street, Magellan shareholders and Smith's own colleagues were stunned by his meteoric rise.

A humble Smith attributes his enormous success to the bull market of the early 80s and to being in the right place at the right time, rather than to his own personal talent. "I really attribute my rapid success at Fidelity to being a victim of positive circumstances. I was very fortunate to start in the investment business in 1982. It was the beginning of a bull market and a lot of opportunities opened up for me because of the phenomenal growth at Fidelity. We got in a flood of money and basically a lot of the young people who started with Fidelity in the early 80s got pushed into very responsible positions.

"I was running money after only two years at Fidelity. I was running a billion dollars at the over-the-counter fund after just four years. That was unheard of in those times in the investment business. I was very fortunate. It was an accident of circumstances and fortunately I did okay as a fund manager, and then as far as taking over Magellan, I just happened to be the right person at the right time.

"It made the most sense to put me in that position given the personnel situation at Fidelity – who was running other funds. When they offered me the position, it was very hard to say no to it because it was a once in a lifetime opportunity."

There is much more to life than material success.

It was precisely because he enjoyed such enormous success that Smith felt he had attained all of his professional goals and decided that the wealth and power he had achieved were not enough for him. There was much more to life than material success, Smith thought, and he had the remarkable daring and courage to walk away from one of the most profitable and prestigious positions on Wall Street.

"As a professional I felt accomplished. I had been in the business 10 years, and every year I ran money, I had beaten the market. I felt that in the end I was working more and more for the money. I was enjoying the job less and less given the time constraints that Magellan was putting on my life.

"And when you start thinking to yourself that you are working for the money and not for any other reason, it really lessens to some degree the enjoyment you have for the job. Thank God I was paid well enough at Fidelity that I was able to take a break from it at that point. So I decided that I really wanted to shift some of my time and priorities and spend it in other areas of my life."

But Smith didn't just leave Fidelity to rest on his laurels, live in the lap of luxury, and enjoy his wealth. He left all that money, power and prestige behind to seek deeper meaning in his life – to find spiritual fulfillment, get closer to God and to spend more time with his family. Smith picked up his life and his family and moved thousands of miles away to Israel to learn Torah in Yeshiva, (a Jewish seminary), and to fulfill a dream to spend a sabbatical year in Israel. Both he and his wife had developed a strong attachment to Israel when they spent time there as students, and they had returned there nearly every vacation during their first 13 years of marriage.

Morris Smith and his wife, Devora.

Smith and his wife, Devora, loved living in Israel so much that the sabbatical year turned into seven years. They wanted to stay longer but had to return to the United States for personal reasons. Their return to the U.S. turned into a long-term commitment but they do hope to return to Israel as soon as possible. "I loved living in Israel and I miss it very, very badly today."

We don't put enough emphasis on our relationships between man and man.

Smith says that his Torah learning in Israel fostered his personal growth, strengthened his connection to God and the Jewish people, and helped him improve his relationships with his fellow man. "We tend to put a tremendous emphasis on the laws involving the ritual aspects of Judaism -- on the relationship between man and God -- but we don't put enough emphasis on our relationships between man and man."

Smith now lives in Lawrence, N.Y. with his wife and four of his children. His eldest son lives in Jerusalem, where he learns in Yeshiva. Smith still studies Torah about 30 hours a week, getting up at very early hours in order to squeeze the learning into his busy schedule. He spends much of the rest of his days managing his own money, mostly in U.S. and Israeli equities, but also works one to two days a week as a strategic and financial consultant.

Smith says he keeps his money very concentrated in 10 to 15 stocks. "I try to do as good a job as possible. I call my companies, keep up on research, and enjoy what I'm doing."

Smith also spends a great deal of time working with numerous charitable organizations, mostly dedicated to Jewish causes. "There's probably not a single day in the work week where something doesn't come up related to tzedaka (charity)."

Dispensing God's wealth is a responsibility that you have to take seriously.

Even though Smith sometimes feels the pressure of time constraints, he believes that having the financial resources to give tzedaka is a gift that God has bestowed upon him to help improve the world. "You're really the intermediary to dispense God's wealth to good causes throughout the world so it's a responsibility that you have to take seriously."

In fact, when asked how having financial resources has changed his life, Smith says that the nicest thing about it is that "it gives you a chance to give a lot more charity and to really get involved in tikun olam (fixing the world). You can direct money to projects that can really help mankind."

Other than affording him the ability to give tzedaka, Smith is grateful for no longer having one of the great stresses of life – the financial pressure to make ends meet. "It is a tremendous blessing from God. But all in all, wealth hasn't changed me much. I always was, and still am, a pretty simple person."

Since leaving Fidelity back in 1992, Smith's main purpose in life has indeed been tikun olam, and in his opinion, the best way to go about fixing the world is to first reawaken the Jewish people, and then the rest of the world, to their need for a relationship with God.

"What I think is critical is that everybody should have a much greater awareness of God in their life, to realize that everything that we experience in this world is really a blessing that God has given to us. And that we are all servants of God, and what we do in this world is really a reflection of our relationship with Him. As long as we have in mind that relationship and how we're trying to improve it on a day-to-day basis, then we can really be accomplished human beings," says Smith.

But even back at Fidelity when Smith was still focused on managing billions of dollars, his first priority was still bringing God and holiness into the world. He never worked on Shabbat or Jewish holidays, even taking off the Thursday and Friday that preceded the infamous stock market crash of October 1987 known as Black Monday. While nobody knew the crash was coming that Monday, the stock market slid 10 to 15 percent the previous week, but Smith took off for the Jewish holidays of Shemini Atzeret and Simchat Torah.

Asked if he has any regrets over not working those last two days before Black Monday, Smith says: "People think they're irreplaceable. The truth is that nobody in life is irreplaceable. We think if, God forbid, we get run over by a truck or a bus, the business won't go on and that is just not true. To some extent, I think that was proven. I lived through it, because I replaced Peter Lynch and Fidelity has gone on for years and years without me and without Peter ... There was never a question in my life about putting my work before Shabbos."

Even though Smith left behind a hugely successful career to pursue other, more meaningful dreams, he looks back on his years at Fidelity with great fondness. "It was the best job in the world and I still look back at it as a tremendous, tremendous field. I really love the industry."



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