Two years after retiring from Diamond Hill, Ric Dillon is back.
Starting a new business just as a global pandemic is beginning may seem like an invitation to failure, if not disaster. But that’s the short-term view. And one of Ric Dillon’s strengths is that he resolutely takes the long view.
Dillon is well-known in the investment community for founding the wildly successful, publicly traded Diamond Hill Investments in 2000. Under his leadership, Diamond Hill grew from nothing to be ranked in the top 1 percent of all public companies in the United States in shareholder total return, with an annualized total return of 27 percent. By 2018, assets of Diamond Hill were $21.8 billion.Stay up to date with the region’s movers and shakers, top employers, philanthropic causes, real estate developments and thriving creative and startup scenes. Subscribe to Columbus CEO’s weekly newsletter.
The following year, Dillon retired as chairman of the board. He had just become a father and was looking forward to enjoying this “new venture” with his wife Marina.
Dillon’s retirement was brief, however.
“I was driving on 161 with my wife and I got a phone call last fall, last year,” Dillon says. “The new CEO at Diamond Hill, Heather Brilliant, called and told me that the company would be exiting the private asset management business, ‘and I know that’s been near and dear to you,’ she said, and she was calling as a courtesy to let me know.
“I said thank you,” Dillon says. “And then I said, ‘I guess I’ll come out of retirement.’ About 30 seconds later I called (Diamond Hill’s former chief operating officer) Lisa Wesolek and said, ‘Want to join me?’”
Soon after that, Dillon told another former Diamond Hill colleague, Jason Job, “We’re getting the band back together.” The new company now had three co-founders.
In the year since those calls, the firm has moved forward quickly, pandemic be damned. The company was registered with the Securities and Exchange Commission, established a headquarters in New Albany, hired a team of experienced investment professionals (almost all from Dillon’s old gang at Diamond Hill), attracted more than three dozen clients and $128 million in assets under management and, oh yes, came up with a name—VELA Investment Management.
“It’s been made a lot easier since I go back 20 years with many of (my VELA colleagues),” Dillon says. It’s also been easy because Dillon “left Diamond Hill in great shape,” says Jack Kessler, chairman of the New Albany Co. and a longtime friend. “I’m just thrilled he’s back. I think his clients are thrilled. Besides, there are only so many days a week you can play golf.”
Dillon’s legacy at Diamond Hill “truly was extraordinary,” says David Meuse, who was chairman of the board for Diamond Hill Investment Group from 2000 to 2011. “It went from zero to $22 billion—that’s an unbelievable accomplishment.”
Like many entrepreneurs, Dillon “has a lot of drive,” Meuse says. “He’s very focused, sometimes stubborn—but I still love him. I think a lot of entrepreneurs are like that. He wanted to get back in the game. I worry about entrepreneurs who get back and it doesn’t work out. But it will work out with Ric because he’s very disciplined, very focused.”
Dillon also has other significant differences from other entrepreneurs and money managers.
“He had a lot of respect from people in the firm,” Meuse says. “He’s well-liked, a kind person. That’s not the case with many money managers—a lot of them don’t care about people. They’re just interested in making money. I think that’s a big deal. I care for him and I respect him, and I think most people respect him.
“He’s an interesting combination of entrepreneur with vision, and a good, long-term oriented money manager. He’s going to develop a nice firm there.”
One of Dillon’s hires at Diamond Hill, and now at VELA, is indicative of his approach.
Jenny Hubbard was working at a small investment firm in Nashville in 2002 when Dillon happened to get a look at a research report that she had written “and had a very favorable impression,” she says. “He was looking at building his research staff. He had a couple large clients in Nashville and whenever he was in town, we would have breakfast.”
A few years later, Dillon sought to hire Hubbard as an analyst at Diamond Hill, but Hubbard and her husband had recently moved their family to Denver. That didn’t deter Dillon.
“Ric said, ‘We can make it work,’” she says. “I was their only telecommuter and went back and forth every other week to Columbus. He’s just that kind of guy. When he finds someone who is going to be a good fit, he cultivates them. He treats employees like family. He’s very focused on attracting the right people.”
Today, Hubbard is a portfolio manager for VELA, one of a very few women in that role in the country. When pandemic conditions permit, she flies to Ohio from Denver to have face-to-face meetings with colleagues and clients.
Dillon believes the reasons he and his colleagues have been so successful boil down to four points.
The first is a valuation-centric philosophy. “I like to say, God knows what every company is worth. Humans can only estimate,” Dillon says. But in buying stock it’s important to have a best estimate on a company’s value, because “the price you pay, that is the only thing you can be certain of.”
The second is having experienced investment managers. “That’s a huge advantage,” Dillon says. In addition to having trust in his colleagues, trust that has been built up over years of working together, “we’re long-term in everything we do,” giving all of them deep knowledge of the businesses they cover and the events that have affected them.
The third is hewing to a long-term investment strategy. “I really do think that, over the short term, the market moves based on emotions,” he says. “But over the long term, the market moves based on economics. And by focusing on long-term economics, it’s more predictable.”
The final point is aligning clients’ investments with the company’s personal investments. Those words—valuation, experience, long-term, alignment—make VELA.
“We didn’t think ‘veal’ would be very good. And we found that ‘Vale’ was a Brazilian company involved in a dam collapse, so that wasn’t good.”
The final order, vela, turned out to be a Latin word meaning sails of a ship. That’s appropriate for a firm that seems to have had the wind at its back from the outset.
Tim Feran is a freelance writer.