Dial M for Money Management

The letter “M” is important to Missy Kraus for many reasons

by Rosalyn Graham

Missy Kraus made one of the most difficult decisions of her life when she left her job with a high-profile investment firm in New York City. The Chartered Financial Analyst and owner of M. Kraus & Co. in Shelburne has no regrets.

Missy Kraus had a dream job. She was responsible for marketing initial public offerings at the world-famous investment bank Drexel Burnham Lambert Inc., the former company of junk-bond king Michael Milken. 

For a woman in her early 30s with a love of math, a degree in economics from Vassar and a master of business administration in finance from New York University, it was perfection. She had paid her dues, working first with a small, nimble hedge fund and then with the larger Bernstein-Macaulay Inc., where she assisted in managing about a billion dollars in assets.

But Kraus had a problem. “It was interesting, challenging, exciting,” she says. “I worked on the IPO of MTV. But it was getting very clear to me that there were no female role models. I was 31 or 32, I loved what I was doing, but I also loved sports and reading and spending time with my large family, and there were no role models for when I would be 45 or 50. The only women in the business were women trying to fit in the men model.”

Then in the summer of 1985 there was a pivotal event. Kraus’ younger brother owned a sporting goods store and she used to help with the books, so when he had a serious car accident she needed to take some time off to help. 

“I went to my boss to say I needed to take the next week off, and my boss looked at me and said, ‘At Drexel families do not come first, but do what you have to do.’ Those lines stayed with me.  There were too many obstacles for me to continue on this path.”

An attractive alternative path presented itself. Kraus had been making regular visits to her college roommate Peggy Rodgers, who lived with her husband, Dale, in Westford. People Express made it easy. “I used to come to Vermont one or two weekends a month, and they kept saying, ‘You have to move,’ but mine was not a job to leave behind lightly.”

She left Drexel at the end of ‘85 and moved to Vermont in mid ’86. “I was fortunate enough to land what I think was the best investment job in Vermont, managing the investment assets in the trust department of the Chittenden Bank.” 

She enjoyed meeting new people, working with Vermonters and others, like bank president Bill Bruett, who shared her New York City background, and, as she says, “getting my feet wet.” 

M. Kraus & Co., which started with about $30 million under management, now manages more than $100 million. Jeff Cohn (left) is Kraus’ husband and company co-founder. Chris Capano, portfolio manager, has been with the firm since 2004.

While she was at the Chittenden, Kraus met Jeff Cohn, introduced by a co-worker who told Cohn, “You should meet Missy; she also used to work at Drexel.” Cohn had graduated from The University of Vermont, spent 14 or 15 years working in New York, including Salomon Brothers and a stint at Drexel. His specialty was analyzing bank stocks and when they met he was consulting for the Chittenden.

1992 was a landmark year. she and Cohn were married and Kraus left the Chittenden. “It was time to leave,” she says. “I had made a mark and I was being nudged forward by my entrepreneurial spirit and that need to see how far you can push yourself.” 

She became a partner in Rauh King and Kraus, an investment management firm in Montpelier, where she had the opportunity to see how a small business was run. 

For four years she and Cohn had one of those Vermont marriages we read about with increasing frequency: he spent four and a half years doing research for boutique investment firms, first in Boston, then New York, commuting to Vermont on weekends. “Something had to give,” Kraus says. “Jeff really wanted to be here; we wanted to have that lifestyle that drew us here. We were both doing something we loved to do and were trained do, so the logical thing was to start a firm together.”

In the summer of 1996 they founded M. Kraus & Co.. “Initially it was just the two of us; and Denise Dalton, who is still with us as portfolio administrator, joined us two months later,” Kraus says. “We started with $30 million under management, and now have over $100 million and we’ve been able to create fantastic jobs for well-educated, well-motivated people.”

The minimum account size at M. Kraus & Co. $500,000; the average account is $900,000. Bonnie Heaslip (left) is operations administrator; Denise Dalton is portfolio administrator.

M. Kraus & Co. clients are typically high–net worth individuals, from all parts of the country, frequently referred by other clients, all attracted to a highly customized service. “We work as a team,” Kraus says. 

She, Cohn and Chris Capano, who joined the company in 2004, having followed a similar “UVM-Wall Street-return-to-Vermont-to-raise-your-children” path, sit down with new clients and talk about their goals, their need for income and how much volatility they can tolerate. Kraus says everyone likes upside volatility and has much less tolerance for downside volatility. 

“Then we calculate how much should be in cash, stocks, bonds; and we do research on which stocks and bonds should be in their portfolio,” she says. “We make those choices one at a time, selecting about 30 stocks and 20 bonds to reach the right amount of diversification.” 

Kraus says their policy of creating a very diversified portfolio is a reason they have a minimum account size of $500,000. “You need a larger pool of assets to reach the right amount of diversification,” she says. The firm’s average account size is $900,000.

Teamwork is a key to the character of the business. The firm’s 100-plus clients work with Kraus, Cohn or Capano on buying decisions. Dalton, portfolio administrator Bonnie Heaslip and office assistant Suzanne St. George provide support. “We don’t have voice mail,” Kraus says. “When you call here you get the person who can handle your needs.”

That size is a big plus, according to Kraus. “We’re a niche firm surrounded by behemoths,” she says. “In every cycle, small independent firms have always survived. Small independent advisers outlive the cycles and fads.”

Among the fans of M. Kraus & Co. and its personalized service is Paul Bruhn, executive director of Preservation Trust of Vermont. They met in Montpelier when Kraus was managing PTV’s account at Rauh King & Kraus. Since opening her own business 10 years ago, Kraus has handled all the PTV investments, both endowment and short-term. 

“Missy and Jeff have helped us develop a strategy and policy around how our funds are invested,” Bruhn says. “On the performance side, they have done very well by us; and more important, they have a genuine appreciation for the work that we as an organization do — providing technical support and expert advice for organizations and individuals saving old buildings, protecting downtowns and preserving the essential character of Vermont.”

That appreciation for Vermont and the search for a lifestyle that brought Kraus and Cohn to Vermont 20 years ago, have been confirmed both in their business life and in their personal life. 

On the business side, Kraus points to the “lack of noise” here — the constant buzz that fills the offices, restaurants and even commuter trains of New York. “When you’re in the middle of that, it’s hard to filter out the noise,” she says. Here, she adds, they have access to the world and contacts all over Wall Street, but less “noise.” 

On the personal side, Kraus says, “I couldn’t do this in New York and have the balance I have.” She speaks with pride of second-grader Mason, the pleasure of volunteering in his Charlotte Central School classroom, and the time to enjoy the sports she loves: tennis, yoga, biking, hiking, skiing, and working in her garden at their home on the eastern slope of Mount Philo. “Charlotte is a fabulous community,” she says. 

Mason’s name continues a family tradition of “M” names. Although she was named Aileen when she was born in New York City, she was promptly dubbed Missy by Doug, her older brother, now a judge in Chappaqua, N.Y., where they grew up. 

The name was a recognition that she was the first “Miss Kraus” in the family for many generations. “Going to Wall Street in 1979 with Missy as your name ... well, Missy isn’t a power name; but although it was sometimes discussed, I didn’t change it.” 

When Kraus and Cohn were beginning their investment management company, the subject of naming garnered lots of attention. “I brought the assets I was managing in my previous partnership with me, so I was the person people knew,” Missy says. 

“We thought it would be fun to carry on the legacy of my father’s business. His business, M. Kraus & Brothers, was the main lamb distributor in the east, a business his father had started at the turn of century in New York.” 

The name is a tribute to the man whose dinner table conversations with his children about investments and financial independence, and whose encouragement of his daughter who loved math, made such a difference. 

As Kraus says, “My father said, ‘Go out in the world and do what you would like to do.’ If Mason finds our business interesting, that’s fine, but I’ll encourage him to find his own path. You know inside when you find the thing you are passionate about.”