On October 14, 2022, A&P’s founder and initial CEO, John W. O’Brien, passed away after an extended battle with cancer.
John was “born in the Bronx”, as he liked to say, in 1937. After high school in Long Island, he received a BS degree in engineering and economics at MIT, and later, an MS in Operations Research from UCLA. He spent 5 years in the air force and working with a RAND-related strategic think tank. After working on that firm’s pension plan, he soon switched his interests to finance. John founded O’Brien Associates (later Wilshire Associates) and created the O’Brien 5000 total stock market index (later the Wilshire 5000). He subsequently joined bond specialist A.G. Becker, where he analyzed pension fund investments and happened to attend a professional conference at Berkeley. There he learned about portfolio insurance, a dynamic hedging technique just developed by faculty members Hayne Leland and Mark Rubinstein. |
Impressed with the commercial potential of the idea, O'Brien agreed to become chief executive of Leland O'Brien & Rubinstein (LOR) in 1981, bringing what the venture sorely needed: the ability to break down complicated ideas into graspable pieces. Aided by John’s marketing talents, portfolio insurance quickly became the darling of Wall Street. By 1987, it had garnered assets that followed the strategy exceeding $100 billion ($1 trillion at today’s market level). LOR’s principals were named “businessmen of the year” by Fortune Magazine. But the product grew too quickly for its own good. The volume of selling by it (and others) overwhelmed the market on October 19, 1987.
Responding to the liquidity stresses created by dynamic hedging, LOR subsequently developed a set of securities that provided both a “basket” security containing the S&P500 Index securities, and related securities that provided protection with no subsequent trading required: the “SuperTrust”. After 3 years and several million dollars of legal expenditures, LOR finally gained SEC approval of the product—the first “exchange traded fund” (ETF). This established the basic legal precedent for all subsequent ETFs, arguably the most important investment product of the last thirty years. John raised $1 billion and the fund was launched in late 1992. But because some of the SuperTrust securities’ payoffs were non-linear in the S&P 500 returns, the SEC demanded that all buyers—even those buying the basket only—be “options qualified”. This severely limited the demand for the product, and the SuperTrust never gained the needed trading liquidity to succeed commercially. It was closed after three years, and the simpler SPDR became the successful S&P 500 basket (and now has the highest daily volume of any single security).
Along with a business interest in Home Equity Securities, which offered a new form of financing (equity sharing) to supplement the debt-only mortgage financing of homes, John became Director of the Haas School (Berkeley) Financial Engineering Program, offering the nation’s top-ranked Masters degree program in quantitative finance.
In 2014, John and four colleagues formed A&P Capital, LLC. Its name, "Accumulate and Preserve," represents the strategies it promulgated. The firm has recently focused on fund allocation strategies that assure retirement income levels, in contrast with strategies that focus on annual expected return and standard deviation of asset value. It jointly has developed with Invesco the Retirement Income Index (RIIX) which calculates an ongoing daily cost of obtaining $1 per year of income (assured unless the US Treasury defaults) for 30 years.
John combined financial theory, practical smarts, and personal charisma to develop and market revolutionary securities. Not all his ventures ended in success, but all were revolutionary. He was an inveterate optimist and his enthusiasm inspired his colleagues throughout his long career.
For all the time and energy John devoted to his professional activities (which included receiving a Graham and Dodd award and Investment Management Consulting’s McArthur award), John was a remarkable family man, whose members include six children, multiple grand- and great-grand children, and most recently a great-great grandchild. His first wife, Jane, and mother of five children, died in 1999. His second wife, Adalena, survives him, and provided enormous support in the last several years of his life.
John’s life and ideas will remain an inspiration to his family, to his friends and past associates, and to his colleagues at A&P.
Responding to the liquidity stresses created by dynamic hedging, LOR subsequently developed a set of securities that provided both a “basket” security containing the S&P500 Index securities, and related securities that provided protection with no subsequent trading required: the “SuperTrust”. After 3 years and several million dollars of legal expenditures, LOR finally gained SEC approval of the product—the first “exchange traded fund” (ETF). This established the basic legal precedent for all subsequent ETFs, arguably the most important investment product of the last thirty years. John raised $1 billion and the fund was launched in late 1992. But because some of the SuperTrust securities’ payoffs were non-linear in the S&P 500 returns, the SEC demanded that all buyers—even those buying the basket only—be “options qualified”. This severely limited the demand for the product, and the SuperTrust never gained the needed trading liquidity to succeed commercially. It was closed after three years, and the simpler SPDR became the successful S&P 500 basket (and now has the highest daily volume of any single security).
Along with a business interest in Home Equity Securities, which offered a new form of financing (equity sharing) to supplement the debt-only mortgage financing of homes, John became Director of the Haas School (Berkeley) Financial Engineering Program, offering the nation’s top-ranked Masters degree program in quantitative finance.
In 2014, John and four colleagues formed A&P Capital, LLC. Its name, "Accumulate and Preserve," represents the strategies it promulgated. The firm has recently focused on fund allocation strategies that assure retirement income levels, in contrast with strategies that focus on annual expected return and standard deviation of asset value. It jointly has developed with Invesco the Retirement Income Index (RIIX) which calculates an ongoing daily cost of obtaining $1 per year of income (assured unless the US Treasury defaults) for 30 years.
John combined financial theory, practical smarts, and personal charisma to develop and market revolutionary securities. Not all his ventures ended in success, but all were revolutionary. He was an inveterate optimist and his enthusiasm inspired his colleagues throughout his long career.
For all the time and energy John devoted to his professional activities (which included receiving a Graham and Dodd award and Investment Management Consulting’s McArthur award), John was a remarkable family man, whose members include six children, multiple grand- and great-grand children, and most recently a great-great grandchild. His first wife, Jane, and mother of five children, died in 1999. His second wife, Adalena, survives him, and provided enormous support in the last several years of his life.
John’s life and ideas will remain an inspiration to his family, to his friends and past associates, and to his colleagues at A&P.