When Karen Firestone walked into Fidelity Investments in 1983, she entered a world that was dominated by men. The firm employed 750 people. Women were few and far between. And the culture, needless to say, was not built for women.
Four decades later, Karen Firestone, who goes by Kari, is the co-founder and Chair Emerita of Aureus Asset Management. Her firm oversees more than $8 billion in assets. She sat down with Karen Finerman for a special episode of the HOW SHE DOES IT podcast at the CNBC Pro Live Event: Wealth For Women, and shared what she learned about investing and risk, as well as what it takes to build a meaningful personal and professional life.
A Different World
Karen Firestone was drawn to the world of investing while still in high school. She earned a scholarship to Harvard and went on to graduate with an MBA from Harvard Business School. She recalls her 22 years at Fidelity as being a “very competitive, pressure-cooker environment” where one was expected to work long hours, even on the weekends.
One example of how different the times were: When Firestone delivered her first set of twins on a Sunday, her boss, legendary fund manager Peter Lynch, called her at the hospital. After congratulating her, he asked about the status of one of the companies she was assigned to research.
Then, she says, she went into the office that Friday. “I’m not suggesting that to anybody,” she says now, with a laugh. “But it was a little bit of the culture.”
Two years later, she was pregnant again, and an ultrasound revealed it was another set of twins. The prospect of being 30 years old with four children under two, she was concerned about whether it would be possible to continue working. Even friends and family suggested it was best that she stay home.
She was torn.
Expert Advice
Shortly afterwards, while still pregnant and traveling for work, Firestone had an unexpected encounter on a flight that changed her perspective. She found herself seated next to famous advice columnist Ann Landers, whose real name was Eppie Lederer. Firestone introduced herself and asked, “Would you please talk to me? I have a problem.”
The two spent four hours in conversation. Lederer’s advice was simple but transformative.
“She said, ‘You just need to make sure that you’re happy, because if you’re not happy, then no one else is going to be happy in your family. And you can’t be overworked. You have to have plenty of help— lots and lots of help. You have to make sure everybody is getting enough sleep, enough attention, that you’re in good shape,” Firestone recalls being told. “’But it’s important for you to work, so take the time off you need, but then hire the right people and go back to work’.”
Re-entry wasn’t easy, and Firestone made the necessary adjustments. She skipped after-work socializing, negotiated her Saturday office appearances down to once every six weeks (sometimes bringing a child along), and was out the door by 5:30 p.m. to pick up her kids at hockey practices and swim meets. Her children, now nearly 40, insist she never missed a thing. She’s not sure that’s entirely true, but she’s grateful they remember it that way.
Lessons from a Legend
Managing a portfolio is a high-stakes job, and few have done it better than Peter Lynch. For the 13 years he ran Fidelity’s Magellan Fund, it delivered an extraordinary average annual return rate of 29.2%. Karen Firestone became the third assistant fund manager on Magellan, working alongside Lynch at a time when he held 1,000 stocks and had only 12 analysts to cover them.
Lynch’s approach was all about deep research on every opportunity. “Turn over another rock at the beach,” she recalls him saying, “and eventually you’re going to find an oyster with a pearl underneath one of them. You just have to keep looking.”
The key was to scrutinize each potential investment in order to understand its potential value before others caught on. Firestone recalls that Lynch did this with Las Vegas, recognizing its promise as a family-friendly destination long before the strip underwent its megaresort boom of the late 1980s and 1990’s. It was her assignment to know everything about that market.
“I spent so much time in Las Vegas that everyone in my family and my friends thought I had a gambling problem,” Firestone recalls, laughing. “Even my husband.” But her work researching emerging companies in the area paid off.
“And we invested in almost every single company that came public [in Vegas] which happened a lot in the ’80s,” Firestone recalls. “And we made a lot of money.”
Risk, Resilience, and Living Life To The Fullest
Firestone has spent her career managing risk. She literally wrote the book on it, Even the Odds: Sensible Risk-Taking in Business, Investing, and Life. She created a framework with the four tenets she believes need to be considered before making any big decisions:
- Make sure the risk is the right size
- As best as you can, ensure the timing is right
- Have the necessary knowledge and experience
- View it all with a healthy dose of cynicism
Firestone employed all four of those considerations when taking her biggest professional leap: co-founding her own asset management firm, Aureus.
“I was 47, so I had a lot of experience. My kids, the youngest ones, were going to college,” Firestone recalls, so the timing felt right as well.
“I didn’t need to get a paycheck for a while. I mean, I hoped I would get a paycheck,” Firestone shares, chuckling. Her backup plan if things didn’t work out? “Crawl back to Fidelity,” she says.
But that wasn’t necessary. Founded in 2005, Aureus now manages billions in assets for families, individuals, and endowments. Firestone even invested the proceeds from selling her Fidelity shares back to the company upon her departure into portfolios at her new firm.
Across the past 20+ years, that’s proven to be a smart investment. “[Aureus ] beat the market for most of those years,” Firestone said, noting she “was so happy and grateful that I did that because I couldn’t have imagined doing better.”
Through hard work and an indefatigable work ethic, Firestone took risks and reaped the rewards. Despite battling breast and ovarian cancer and enduring 15 surgeries over four and a half years, she remains positive. These days, the avid runner, mom of four, and grandmother of six is all about being in the moment. “I don’t feel that longevity is so important to me,” she reflects. “It’s the quality of my life. It’s how I manage every day.”
In other words, Firestone bet on herself and won. Vegas would be proud.
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