Fayez Sarofim, The Egypt-Born, Texas Billionaire, Made A Fortune Betting On America’s Blue Chip Entrepreneurs
Fayez Sarofim, the billionaire money manager, died Saturday at his home in Houston, at age 93.
“I’ve always claimed it took someone from abroad to recognize the true potential in this country,” said Fayez Shalaby Sarofim in his first interview with Forbes Magazine in 1969. Back then Sarofim — 41 at the time — was a money man on the rise. The native-born Egyptian was known as The Sphinx for his inscrutable demeanor and his calm, unshakable faith in American exceptionalism. He bought blue chip stocks like P&G, Coca-Cola
“The U.S. is still a relatively young nation among industrialized nations. It can still mount the effort to become more competitive through technology,” he said at the time. “It’s blessed with natural resources and, equally important, the brainpower. And the U.S political system is still the most stable of all.”
His Coptic Christian family had left their native Egypt after the government ordered Sarofim’s wealthy father to sell his land or have it seized by the state. He arrived in the U.S. in 1946 and after school at UC Berkeley and Harvard, owlish Fayez entered finance and developed a knack for stockpicking.
With $100,000 from dad he launched Fayez Sarofim & Co. in 1958. Along with startup capital, his father gave him advice: “He told me not to draw a salary but to pour any profits back into the business so as to give the clients the best possible service. The profits would come later.”
This fish-out-of-water’s conviction of American exceptionalism played well among the oil tycoons in his adopted hometown of Houston, where despite the heat and humidity he stuck to his London-tailored three-piece suits. But it was his first wife Louisa Stude — a Grace Kelly lookalike and niece of George Brown, one of the founders of oilfield services firm of Brown & Root, now a subsidiary of Halliburton
By 1969 he had more than 400 clients and $1.2 billion under management. During the mid-1970s he bravely bought stocks at deep discounts. By 1980 assets had grown to $7 billion. He held on to oil stocks too long in the early 1980s when they crashed. But he kept the faith, and in a Forbes cover story in 1980 lamented that the market was weighed down with “too much pessimism.”
He was right, of course, to have faith in America and in entrepreneurial capitalism. “Betting on people is the most important thing,” he once said. Entrepreneurs simply “seem to produce better investment results, when they have their money — and their egos — on the line.” His average stock holding period of 5 years was eons longer than flakey peers.
In 1987 he was running $15 billion and appeared for the first time on the Forbes 400 with a net worth of $300 million. His worst day was “Marlboro friday” in 1992 when the company slashed prices for smokes and Sarofim’s fund lost $475 million. He made up for it later by steering clients away from Enron. Today, assets under management top $30 billion, and son Christopher Sarofim runs the company.
Sarofim spent a lot of money on divorces. In 1989 Louisa (who bore him two children) filed for divorce after reportedly being the last person in Houston’s tony River Oaks neighborhood to know that Fayez had been having an affair with one of his employees, Linda Hicks, with whom Sarofim had another three kids. He settled with Louisa for more than $100 million in 1990.
Though he bought Linda a 22,000 square foot mansion on River Oaks Boulevard, their subsequent marriage ended in 1996 and cost at least $60 million. Ever the ladies man, Sarofim raised eyebrows around town when he married again in 2015 to Susan Krohn, the mother of his son Phillip’s (now ex-) wife Lori, herself the ex-wife of Houston oil tycoon Tracy Krohn.
His passion (other than spending afternoons in a haze of cigar smoke at the Coronado Club in downtown Houston) was art. He started buying in the 1960s and built a collection including masterpieces by John Singer Sargent, Winslow Homer, Mary Cassat, Edward Hopper, Willem de Koonig. In his office he kept El Greco’s painting of Christ’s Cruxifiction on the wall, near a Picasso and Rothko. Sarofim’s last big philanthropic gift was $75 million to the just-completed expansion of Houston’s Museum of Fine Art.
It’s fitting that Sarofim’s favorite TV show was said to be Wheel of Fortune, which he enjoyed watching at home with his kids, still wearing the day’s three-piece suit. Having grown up in timeless Egypt, experienced being a Christian in a Muslim country, seeing his family forced to sell their ancestral lands, Sarofim had a deep enough perspective to know that America had been truly blessed by fortune, but didn’t always appreciate it.
For that first 1969 story, Forbes reporters asked Sarofim, “How did you come so far so fast?” His reply remains relevant more than half a century later. Because he was a foreigner, he said, he simply didn’t worry about some of the “problems” that distress so many American money managers. “At every turn during my ten years in business,” he said, “there have been hordes of doubters — worried men preoccupied with fears of lurking disaster. But look at what has really happened and promises to keep on happening.” Indeed, America has survived and thrived after every bear market so far, and will again.