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Asset Management Leaders Talk Shop on Markets and Trends—and the Industry’s Gender Divide

By Rob Elson

May 31, 2018

A panel of four leading women in asset management took the stage at ICI’s 60th annual General Membership Meeting last week to share their insights on market outlooks, industry trends, and gender diversity.

Moderator Marie Chandoha, president and CEO of Charles Schwab Investment Management, kicked things off with a question about investment opportunities. Just where are they, she asked, in an economic expansion that looks to be nearing its end?

“For me, the value is in value right now,” said Sarah Ketterer, CEO and cofounder of Causeway Capital Management. “With rising interest rates in the United States, monetary policy turning the corner in Europe and Japan, and a likely contraction next year, if there is ever a time for value investing, it’s now.”

Rupal Bhansali, chief investment officer of international and global equities at Ariel Investments, agreed that “the easy money has been made,” noting her firm’s extra vigilance in positioning and its focus on the telecommunications sector. “My view is that telephones are the new consumer staples,” she said. “You can live without shampoo, but not your smartphone. You’re going to pay that bill whether you have a job or not.”

Matthews Asia portfolio manager Teresa Kong, a fixed-income specialist, gave her view on bonds. “We’re seeing the stars align right now in China,” she said, noting her expectation of higher yields in the near term. “Many of you know that China will be added to the Barclays Global Aggregate Bond Index next year...this is like saying that China now has the maturity, both in rights and responsibilities, of a developed nation.”

What about emerging markets, Chandoha asked? The sector was on fire in 2017, the experts agreed, but has hit a rough patch in recent months. “My quantitative colleagues say, ‘back away,’” Ketterer said, explaining that her firm is remaining cautious about the sector until some of the risk fades away.

Yet Bhansali is looking at the higher volatility in emerging markets as a “positive thing—because it provides opportunities for active stock pickers. If you know what you’re doing, volatility enables you to express your views. The best opportunities come when people are afraid.”

Success in Active Management

With a strong bull market and the growth of passive investing, active management hasn’t exactly been in vogue this decade, Chandoha noted. But for the panelists, success for active managers hasn’t been as elusive as many people think.

“Many of those who call themselves active managers are actually ‘closet passive,’” Bhansali contended. “If you exclude the closet passive managers from your active management data, the record of genuinely active managers is astoundingly good.” Kong agreed, adding that active managers “need to take back the moral high ground. We’re not just engineering a portfolio to reduce tracking error.”

Ketterer credited her success in active management to her firm’s efforts to combine a fundamental approach (reading financial statements, grilling management, asking governance questions) with a quantitative one (building a multifactor risk model to identify the stocks that have the most attractive risk profile).

“Our analysis of where the risks are—that’s what active fees pay for,” she explained. “It’s much more sophisticated than a naïve index.” As the world continues to turn the corner away from broad growth in all assets, she said, “investors might decide they’d like to pay a little more for performance.”

As Chandoha pointed out, investors these days also are looking more toward sustainable—or environmental, social, and governance (ESG)—investing. But not all firms are on board. Although all three panelists agreed that governance is the most important of the three ESG factors for shareholders, Bhansali posited that money management might not be the best avenue to pursue environmental and social causes. Firms engaging in ESG investing run the risk of “mission creep,” she said.

Narrowing the Gender Divide

Turning to the subject of gender diversity in the fund industry, Chandoha lamented that, according to a Morningstar study, women manage only 9 percent of funds and only 2 percent of fund assets—even though funds managed by women perform just as well as, if not better than, those managed by men. She asked the panelists their advice on narrowing the gender divide.

Kong responded that firms need to achieve a “critical mass” of women—not just a “token female” on each team—and to create a results-oriented workplace that enables people to work the flexible hours that care providers of both genders need.

Ketterer cited better marketing and dedicated skill-building as keys to encouraging women to enter and stay in asset management, and mentioned the need to create more programs like the Girls Who Invest initiative, which provides young women with internships in finance and helps place them in jobs. Program participants still need to finish college and earn an MBA before they should be considered for jobs in the industry, Ketterer said, but these positions are a great place to start.

Bhansali counseled that women “reset their thinking”—that is, they must consider and apply for jobs in the industry, even if they feel they aren’t fully qualified. “Asset management is the most fulfilling, rewarding, and challenging profession I know of,” she proclaimed. “So raise your hand to get that experience. It can be done, and it can happen for you.”

Rob Elson is a senior writer and editor at ICI.

Permalink: https://www.ici.org/viewpoints/view_18_gmm_investing

TOPICS: EventsGMMInternationalMutual Fund

Popular 529 Savings Plans Expand to Reach Students of All Ages

By Christina Kilroy

May 29, 2018

Today, on May 29—“5/29”—we mark 529 College Savings Day. Many people interested in saving for a child’s or grandchild’s future college costs are using targeted savings vehicles called 529 savings plans. The plans, which have grown in popularity over the past decade and a half as a way to save for a family member’s college expenses, may now also be used to cover tuition for elementary and secondary education....

Read more…

TOPICS: Investment EducationSavingsTaxes

SEC Commissioner Michael Piwowar: A Commitment to Markets, Shareholders...and Facts

By Rachel McTague

May 24, 2018

SEC Commissioner Michael Piwowar responded with candor to questions posed by ICI President and CEO Paul Schott Stevens during a lively discussion at the final day of ICI’s General Membership Meeting. Piwowar’s announced July 7 departure from the agency offered the outspoken commissioner the opportunity to reflect on fund regulation during his five-year tenure....

Read more…

TOPICS: Exchange-Traded FundsFinancial StabilityFund RegulationGMMMutual Fund

Jon Meacham’s Leadership Prescription: Curiosity, Humility, and Empathy

By Rob Elson

May 23, 2018

A lunchtime crowd of nearly 1,500 at ICI’s 60th annual General Membership Meeting sat rapt as Pulitzer Prize–winning author and presidential historian Jon Meacham dove deep into what he sees as three virtues that have defined America’s best eras, and that are “essential to any given hour in the republic, both at the top—and for all of us.”

Today’s divisive, contentious environment threatens those virtues, Meacham said, but not because of the division and contention themselves, which he said have been part of America and its system of government from the beginning...

Read more…

TOPICS: GMM

The Carlyle Group’s David M. Rubenstein: Expanding Horizons, Doing What He Loves

By Miriam Bridges

May 23, 2018

“It’s the rate of return. Everything is the rate of return,” said David M. Rubenstein, cofounder and co-executive chairman of The Carlyle Group, summing up what has fueled the growth and success of the modern private equity business.

Read more…

TOPICS: EventsGMMMutual Fund

Morgan Stanley’s James Gorman Builds Pride from the Inside Out

By Todd Bernhardt

May 22, 2018

A mental model that James Gorman uses in his role as chairman and CEO of Morgan Stanley involves viewing the world as a series of concentric circles: the innermost circle represents the firm itself, while the subsequent circles represent the industry, the economy, and the political environment that a firm operates within. To succeed, one must build an understanding and mastery of each circle. Only then can one move back toward the middle.

Read more…

TOPICS: GMMGlobalMutual Fund

2018 Investment Company Fact Book: Letter from the Chief Economist

By Sean Collins

May 15, 2018

Those of us who wear glasses know that one of the most crucial elements in seeing the world is the right lens. A bad lens warps the light and distorts the signals; the right lens sharpens the image and enhances our understanding.

This is a useful metaphor for the work that ICI Research does in providing informed analysis to guide public policy. Through our voluminous collections and surveys, we gather large amounts of data—signals about the behavior of funds, markets, and investors. But finding the patterns in these signals requires the right lens—accumulated knowledge provided by context, economic insights, and understanding of institutions.

The Investment Company Fact Book is one very visible result of this process and its many elements...

Read more…

TOPICS: Financial MarketsFund RegulationInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder

A More Accurate Evaluation of Retirement Plan Participation

By Miriam Bridges

May 2, 2018

What’s the actual participation rate of Americans preparing for retirement through a workplace retirement plan? It’s an important question, and one that ICI economists Peter Brady and Steven Bass shed some light on in their new analysis of tax data, “Who Participates in Retirement Plans, 2014.”

The retirement plan participation rate—often used to evaluate the performance of the US voluntary employer plan system—understates the true scope and importance of these plans. In their careful analysis, Brady and Bass give two reasons for this understatement...

Read more…

TOPICS: Retirement PolicyRetirement ResearchSavingsTaxes

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