An entrepreneurial mindset led to an incredible decision by two alumni from the class of 2016. Instead of taking jobs after graduation, Max Knape and Samuel Frymier together founded Quesne Capital, an investment management firm based in Pittsburgh. The idea for the company emerged from their senior finance capstone course—which focused on designing quantitative models to outperform the market.

In short order, Max and Sam finalized their business model and received their license from the Pennsylvania Department of Banking and Securities in early 2017. Their company is attracting considerable attention as well as investors and today Quesne Capital is managing millions in assets.

“We have a lot of people to thank for our initial success. If it wasn’t for the tremendous help of both the Duquesne alumni family and the finance faculty, none of this would be possible.” – Max Knape

 Enabled by Technology

Both graduating in the top 10% of their class, Sam and Max credit much of their initial success to the thorough training and cutting edge technological resources at Duquesne. The idea for their Value Algorithm Strategy (V-Algo) began before they graduated.

In their senior year, Max and Sam were introduced to WRDS— Wharton Research Data Services—the worldwide electronic “gold standard” for enabling sophisticated financial and investment management research. The School of Business subscribes to the WRDS platform and a variety of financial databases, making them available to students and faculty alike for both instructional and research purposes.

“When Sam and I realized the power of the WRDS database, and the type of research and tests you could run, we just dove right in and started doing research day and night for six months.” – Max Knape

Max and Sam spent the next six months using WRDS to help refine their algorithm in the School’s Investment Center, integrating input from several Duquesne professors along the way.

V-Algo Approach

Their resulting strategic algorithm, V-Algo, supports a concentrated value-style investment approach designed to outperform traditional passive indices as well as smart indices. The V-Algo investment approach is built upon the premise that certain company characteristics or factors drive equity returns. Specifically, V-Algo delivers concentrated exposure to deeply undervalued mid to large-cap US equities exhibiting good quality of earnings and profitability.

Following the Data

Max and Sam’s philosophy of managing money focuses on long term value creation, trying to compound their client’s assets at the highest rate possible rather than settling for average returns. “We are different from your average Index or Mutual Fund in that we run a concentrated portfolio of only 30 stocks, highly focused on only the best ideas V-Algo identifies,” says Max. Using their algorithm, Quesne Capital can analyze and evaluate over 4,000 stocks simultaneously, a task that historically required a fleet of analysts and several months to accomplish.

Indeed, two advantages of Quesne Capital’s algorithmic approach to investing are speed and processing power. “The untainted objectivity of quantitative methods is perhaps even more advantageous,” says Sam. “In arguably one of the most competitive industries in the world, no one is immune from the impact of emotional biases on the decision-making process, which is why systematizing it is key,” he adds.

Importance of Mentors

While they are both highly motivated to make Quesne Capital a legacy firm that will shine for many decades to come, Sam and Max realize that the business side of running a money management firm will be just as important as posting good returns.

“We are pleased to have three Duquesne finance faculty members as part of our research team. Professor Bhaskar, Dr. Charles Favreau and Dr. Gokhan Sonaer keep us updated with the latest research and technical skills needed to succeed,” Sam says. Mentorship from successful alumni has also been instrumental in our development and success. For that reason, Quesne Capital is looking to establish an advisory board of directors consisting of seasoned finance industry professionals in the next few years.

The Long Game

Sam and Max are embracing uncertainty, taking risks and having fun. They hope to grow Quesne Capital by offering a suite of different strategies that complement their current value-focused algorithm.

Their initial success notwithstanding, Sam and Max are far from where they want to be and realize that building a legacy firm takes time. While they have been successful with their early fundraising efforts, they are still looking to raise additional funds for their V-Algo Strategy, which is still open to retail clients. Our bet is they will do just that.

Learn more: Quesne Capital

Call Sam and Max at (412) 228-0359