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Trader Joes 

National Life does a multibillion-dollar bond business, Vermont style

Published April 7, 2010 at 5:06 a.m.

At first glance, the bond trading room at National Life Group’s headquarters in Montpelier could pass for any Wall Street firm. Traders and analysts with headsets sit at rows of computer banks, staring intently at flashing stock prices and fast-moving columns of economic data. On the far wall, a TV broadcasts CNBC, its manic ticker scrolling across the bottom of the screen with up-to-the-minute financial figures.

But a second look around the room reveals a distinctive Vermont vibe. For starters, a huge window affords a panoramic view of distant Camel’s Hump and the gentle ridgelines that sweep down from its peak. Then there’s the dress code: The traders are wearing button-down shirts, but there’s not a tie in sight, much less a blazer.

To be sure, this isn’t your usual trading operation, but breathtaking vistas and dressed-down attire aren’t the only things that distinguish it. Consider that National Life’s headquarters, one of the largest buildings in the capital city, is LEED silver certified and boasts one of the largest solar arrays in the state — 418 rooftop panels that produce 73 kilowatts of power. Cafeteria food waste is composted, and waste cooking oil is collected and made into biodiesel. Shredded paper provides bedding for 700 milking cows, and is added to manure piles to spread on fields as fertilizer. Take that, Goldman Sachs.

When it comes to money, though, there’s nothing quaint about the fortune that National Life manages. The company has $23 billion in assets under its control — money from some 870,000 customers who have purchased mutual funds, annuities and life insurance policies.

Of that amount, $18 billion moves through the small “fixed-income trading room” on the building’s fifth floor. Last year, $6 billion in investments changed hands here.

Tom Brownell, National Life’s chief investment officer, is the person in charge of making that money grow. He comes across as a laid-back Vermonter, but one with a sharp mind for the intricacies of financial markets. Brownell is also a cycling nut — he races every Wednesday evening in warm weather, and his talk turns to bikes almost as much as to bonds. The workout helps him blow off steam from the pressure of being entrusted with billions of dollars’ worth of other people’s money.

“Yeah, it gets stressful,” Brownell says. “But on a sunny summer Wednesday, I can blast out of here at 5:30 and be on my bike going for a long ride.”

Country roads for cycling are one perk his last job didn’t have, at GE Capital’s Corporate Finance Group in urban Stamford, Conn.

National Life Group actually comprises five companies doing business under one umbrella. The three biggest are National Life Insurance Company, which sells life insurance policies; Life Insurance Company of the Southwest, based in Dallas, Texas, which sells annuities; and Sentinel Investments, which sells retail equity and fixed-income mutual funds.

Twice since its founding in 1848, National Life has flirted with leaving Vermont, but both times company leaders opted against it. Only a tiny fraction of its business — around 1 or 2 percent — comes from Vermonters, but home-state commitment runs deep. For years, the company’s slogan, “As solid as the granite hills of Vermont,” resonated with people around the country, says company spokesman Chris Graff.

“It played well with the old image of the conservative and frugal Vermont Yankee,” Graff says. “Vermont has been very good to National Life. We have families who have worked here for generations.”

Each morning at 8:15, Brownell gathers his 18-member investment team for a daily briefing. Some sit in chairs, others crowd onto a windowsill they refer to as “the bleachers.” Ken Hart reports on what bond issues are coming out that day. Jason Doiron summarizes how foreign markets performed overnight.

At 8:30 a.m., the government releases economic data showing the latest numbers on employment, GDP, consumer spending and other indicators.

From there the traders hit the computers, buying, selling and evaluating corporate bonds and securities when the market opens at 9:30. Each trader comes with his or her own specialty, such as energy and utilities, financial services, medical products and pharmaceuticals , and industrials.

Aside from the talking heads on CNBC, the trading room is relatively quiet. “The world has changed a lot,” Brownell says. “Guys used to be on the phone a lot. Now it’s done electronically using the Bloomberg system, or what we call ‘on the wire.’”

To the untrained eye, the data on Jason Doiron’s monitor look like code from The Matrix — series of numbers blinking through different frames of the Bloomberg Terminal system the traders are tapped into.

To Doiron, however, those numbers tell a detailed story about Greece’s debt crisis, U.S. Treasury bonds, and various stock indices.

Doiron’s job title is “fixed-income portfolio manager for corporate bonds and derivatives.” His job is to find the right mix of investments that will maximize returns, while minimizing the risk, for those who’ve sunk money into funds and policies managed by National Life.

Before he moved to Vermont, Doiron lived in Chicago, where he worked for RBC Capital Markets. He grew up in Maine and wanted to raise his family in New England while still pursuing his career. His gig at National Life has turned out to be a great fit, he says.

“My family’s in town for Easter,” says Doiron, an avid skier who lives in Stowe. “I’m hoping to sneak out today and do some runs before dark.”

Brownell says he gets a lot of résumés from job applicants more interested in skiing than anything else. (Doiron is not one of them, he assures.) But he asserts that holding out for the best has paid off.

“There’s still a perception out there that to be in the game you have to be in New York,” Brownell concedes. “But we’ve had no problem finding top-flight talent who enjoy the quality of life here.”

One of those standouts is David Brownlee, who manages what Tom Brownell calls “the really arcane world of mortgage-backed securities” for the company. National Life manages $6 billion in the category, which gained infamy for its role in the national subprime mortgage debacle.

National Life largely dodged that bullet by not investing in subprimes — a choice that led Brownell to a “whew” moment, he says. In fact, one government securities fund David Brownlee manages performed so well in 2010 that it won a prestigious Lipper Fund Award for the best overall performance of any fund in its class over the past 10 years.

Vermontisms aside, National Life has a traditional and somewhat staid business sense, according to company officials. Its funds are composed of holdings from some of the most tried-and-true megacorporations, such as McDonald’s, Microsoft and Praxair.

Brownell describes his own approach to investing as measured, which he believes befits a 161-year-old company. His guiding philosophy is straightforward: “Produce superior returns without taking undue risks.”

For an executive who excels in orchestrating a complex and sometimes chaotic line of work, Brownell’s desk is a tidy workspace. Copies of the Wall Street Journal are fanned out next to issues of the Economist and the business newspaper Barron’s.

The work isn’t without Wall Street-style pressure, though. After a Sunday bike ride in September 2008, Brownell returned home to learn that the government had placed Fannie Mae and Freddie Mac into receivership. Without stopping to remove his helmet and cycling shoes, he assembled his investment team by telephone and spent the rest of the day sorting out what the news meant for National Life’s investments.

“I’ll never forget that day,” Brownell says. “I thought the world was going to end.”

It didn’t, of course. And National Life’s $23 billion portfolio escaped the brunt of the crash. Brownell attributes that to the company’s broadly diversified portfolio. Having many eggs in many baskets — corporate bonds, mortgage-backed securities, commercial mortgages — meant no single loss could sink the whole ship. Plus, being privately held meant no pressure from jittery shareholders to hit quarterly profit margins.

If 2008 was a bust, 2009 was a boon, at least for National Life. After suffering losses in the tens of millions from the crash, the company rebounded last year to post a company record for total revenues of $1.6 billion — and did so without layoffs. Though sales of life insurance policies fell 16 percent, sales of mutual funds shot up 155 percent, while sales of annuities — which guarantee a steady annual rate of return — rose by 32 percent.

Risky business, but when it works, solid indeed.

The Money Issue

It's not keeping us awake at night, like it was last year, but money is always an issue. The last 28 months have been an endless lesson in short selling, credit default swaps and underwater mortgages. Are we any smarter as a result? Let's hope. In that spirit, our Money Issue underscores financial matters in Vermont, where Mark Young lives in the bank he owns in Orwell. Meanwhile, in Montpelier, National Life's bond-trading floor is as close to Wall Street as you can get. Burlington sure could use some of those billions. Kevin Kelley analyzes the city's moneyman, Jonathan Leopold, whose frugality rep is now in question. Along those lines, we've included three budget-stretching stories: Ken Picard offers up his coin collection for evaluation; our food writers compare cheap-eating strategies; and Alice Levitt blows $20 at South Burlington's new Goodwill store.

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About The Author

Andy Bromage

Andy Bromage

Andy Bromage was a Seven Days staff writer from 2009-2012, and the news editor from 2012-2013.


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