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In the mid-‘90s, Thomas Ricketts, AB ’87, MBA ‘93, saw an opportunity to offer individual investors a new product: investment-grade corporate bonds. According to a June 13 article in BusinessWeek, it also gave him a chance to carve out his own niche rather than join Ameritrade, the family business.
Previously, retail investors had only two options for buying corporate bonds. They could purchase them via a mutual fund which carried high fees without a steady stream of income. Buying them through the market was costly and often didn’t allow for small purchases.
Taking a cue from the junk-bond market, Ricketts started his first firm selling GMAC retail debt. He and his partner were so successful that ABN AMRO eventually bought the company. Now, Incapital, the firm Ricketts’ founded in Chicago, competes head on with ABN AMRO and Merrill Lynch.
Bonds can be a tough sell when interest rates rise. However, Ricketts’ sees a large market in Baby Boomers. He believes their demand for fixed-income securities as they approach retirement should sustain bond sales.
A challenging environment doesn’t stop Ricketts from seeking out new markets and products. He firmly believes “more and more people need steady income.” So, Incapital will soon offer debt issued by a foreign government. They have also bundled 11 bonds to create a diversified income stream at a low cost.
Ricketts will be honored by the GSB in October when he receives the Distinguished Young Alumni award. The award is given in recognition of such factors as extraordinary career success since graduation, outstanding leadership by peers and colleagues, and influence in the business community to support the school and current students.
The article is available online at BusinessWeek. Free registration required.