Over 350 asset management executives gathered at NICSA’s Strategic Leadership Forum at the end of February to discuss some of the most timely and pertinent topics affecting the global financial industry. As always, the much anticipated “Face the Membership” session provided valuable insight into industry trends from the perspective of some of the industry’s leading firms. The CEO roundtable was moderated by John Stadtler, Partner, PwC, and featured experts from Thornburg Investment Management, MFS Investment Management and Northern Trust.
Carol Geremia, President & Head of Global Distribution, MFS Investment Management, shared her perspective on product development and the debate surrounding active versus passive funds.
“The power of the pause is extraordinarily valuable when thinking about these business decisions in our organizations.”
“We’ve had to look at our value proposition and challenge ourselves to make sure that we are communicating how we manage money clearly,” she said. “It’s not so much about what you do and how you do it. You really need to help people understand why you manage money that way.”
Ultimately, Geremia said it’s not a debate around passive vs. active. “Today, they should exist together, just like fixed income and equity.”
“When people say passive vs. active, it’s a very narrow view on a broader question,” said Mike O’Grady, President and Chief Executive Officer at Northern Trust. “The wealth management business, for us, hasn’t been just about asset allocation.”
Instead, he said, it’s been about client goals. “It flips the question around and really says ‘what are you trying to achieve?’ Based on that, we can construct the portfolio,” he said. “In the end, it generally tells you that you need a number of different types of assets or strategies, and a number of different types of managers to be successful in those strategies.”
Jason Brady, President and Chief Executive Officer at Thornburg Investment Management, focused on trust. “People trust less — they want to know where their money is going,” he said. “For me, part of the problem around product innovation is we seem to be geared to do more, which is further confusing our client base. We feel like we need to capture the next hot thing, when most of the effectiveness is less about a whiz-bang combination and more about long-term trust and investment.”
The panelists agreed that “short-termism” — the prioritization of instant results over long-term interests — is a challenge across the industry. “We’re measuring the wrong things over the wrong periods of time,” Geremia said. “MFS Investment Management is focusing on how to get boards and investors to focus on the things that actually matter to the long-term vs. this micro-management over short periods of time. It’s course-correcting.”
“It absolutely requires a realignment among all the players in the system,” O’Grady added.
As firms aim higher, it’s crucial they maintain a steady foundation in terms of risk. “We’ve done a really good job producing data and [protecting the] privacy of our clients, and we have to hold on to that with everything we have—no matter what the stakes are when trying to be innovative,” Geremia said. “The power of the pause is extraordinarily valuable when thinking about these business decisions in our organizations.”
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the NICSA event panel, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
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