Category Archives: Local Charterholders

Building Extraordinary Teams with Liz Uram, the Coach & Mentor Group

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-Chris Kelley, CFA

On Thursday, October 22nd Liz Uram presented on building an extraordinary team. Focusing on a topic different than the usual brought an eclectic group of leaders to the presentation, all of whom were interested in the soft skills of people management and leadership. Liz’s expertise in the industry as both a practitioner running teams at Wells Fargo and other financial institutions as well as her strong academic background resulted in a vibrant presentation that was very interactive with all the participants. Liz’s expertise in the industry as both a practitioner running teams at Wells Fargo and other financial institutions as well as her strong academic background resulted in a vibrant presentation that was very interactive with all the participants.  She touched on a variety different topics and industry research that showed a consistent level of employment dissatisfaction, even though billions of dollars has been spent trying to engage employees.

Liz touched on three basic take-aways that can eliminate the majority of the indecision and friction in most offices: 1) a 3 step process in setting goals that eliminates the noise of corporate bureaucracy. 2) Components for keeping performance feedback stress free and rewarding. 3) Surefire way to gain employee buy-in on strategic goals and direction of any firm large or small. Though not explicit in her presentation, my key take away is a classic 80/20 example. Taking a little more time and thought (20% more) can alleviate and eliminate 80% of your office and team issues and produce a more streamlined and well-run team. The presentation was informative and educational to all participants and I gained a great amount of value from it.

 

– Ildiko Hildreth, CFA

Liz shared the results of a 2014 Gallop Poll which found that 51% of workers are disengaged, 18% are actively disengaged, and only 18% are engaged. And, that this statistic has not changed much in recent decades. Wow! If that is not a reason to think that there is room for improvement in our work environments, I don’t know what is. After all, the more effectively we communicate, the better our teams function, and the better our performance.

So how does one foster more employee engagement? Liz discussed the importance of communicating goals and strategies to the team. Also, how listening is a key to employee buy-in. She laid out how a simple goal setting process based on a few key performance measures and behavioral standards can be tailored for each individual. And that when you let people know what is expected on the front-end, giving and receiving performance feedback can be less stressful.

I found the meeting to be thought provoking. In our profession, we all work and communicate with clients, portfolio managers, analysts, “the street”, and support staff. And, most, if not all, of these are teams in some shape or form. The trick is how to improve investment outcomes by building an extraordinary team.

If you are interested in a handbook that describes what Liz discussed and more, she invites you to request a copy by e-mailing her at liz@coachandmentor.net with the subject line ‘CFA handbook’. Additionally, Liz expects to release a book soon called Connected: Bridging the Gap Between Strategy and Execution.

Watch Me Whip

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Susanna Gibbons, CFA

As I was doing The Whip last night in my living room, my son covered his eyes with his hand and walked out with a disgusted “that’s just wrong.” I yelled after him “I don’t need your permission to do The Whip…hey, are you listening to me…? Anybody can do The Whip if they want to. Anybody!”

So much has been written over the past couple of years about the lack of diversity in the investment business. We’ve tried the mentoring programs, we’ve highlighted the performance benefits, we’ve taken the negotiation courses, but for all of the hand-wringing, it feels like we have gotten nowhere. According to the CFA society, we have in fact gotten nowhere. Focusing just on women, there are currently a lower percentage of women applying to take the CFA exam than there were 20 years ago. Most of the people I know in the business say they can’t find the diverse applicants they want to hire. And women in particular seem to be avoiding the business because of the lack of visible, viable career paths – there’s no one who “looks like us,” so how can we possibly imagine an investment career?

Last night, as my progeny turned his back on my dancing, I had a moment of clarity around this problem. We are all, always, seeking to affiliate. We have fairly rigid ideas about who can do what. In the investment business, we have collectively allowed this urge to overwhelm our rational judgment. We have become increasingly balkanized in our own affiliation groups, somehow unable to step beyond these boundaries to make the choices we know will result in better businesses and better careers.

For those in charge of the hiring, that means you have to stop thinking about diversity as simply a willingness to accept those who show up. You actually have to go out and build the pipeline, develop the networks, and find a way to reach the people who currently are not reaching you. Stop thinking about this as an altruistic burden; it will be a profitable investment in your business.

And for those among us trying to break in or move up – they ain’t going to give it to us, you gotta take it. Stop waiting for permission, stop expecting to find affiliation. Move outside your comfort zone and pursue the investment business because it is exciting, intellectually challenging, ever changing and rewarding. Even if you don’t end up where you initially intend, the journey will be amazing.

Take that, my little teenager. Watch me whip.

ESG Investing 101 – Event Recap

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Submitting by Amy L. Jensen, CFA, Investment Director, Northwest Area Foundation

On Thursday October 2nd the McKnight Foundation hosted a presentation by Mercer and Mellon Capital titled ESG Investing 101.  McKnight President Kate Wolford opened with a discussion of McKnight’s efforts to achieve greater alignment between the Foundation’s mission and values and its investments.  Laura Kunkemueller, Principal at Mercer, reviewed the vocabulary associated with ESG Investing, various methods that investors have to achieve better integration of values and asset class level opportunities and risks.  Exclusionary or negative screening has become much less of a focus, with investors showing more interest in positive screens, thematic investing, ESG integration into investment strategies as well as increased engagement.

Karen Wong, Managing Director and Head of Equity Portfolio Management at Mellon Capital, described how Mellon worked with McKnight in the creation of more carbon-efficient version of the Russell 3000 index, after the existing index was identified as the greatest carbon contributor in the portfolio. Although some advocate for divestment of companies that are owners of carbon assets, Mellon partnered with McKnight to develop a solution that reduces exposure to companies that produce more carbon per unit of sales than sector peers, minimizes tracking error to the benchmark and still allows opportunities for engagement with public companies. For more information on how McKnight is engaging companies you can go to http://blog.mcknight.org/2015/06/elizabeth-mcgeveran-fighting-climate-change-one-step-at-a-time/. The resulting Carbon Efficiency Strategy is a much more thoughtful approach than would be achieved through simple negative screening.

It was clear from the discussion that the creation of the strategy took time and required careful analysis and reflection on the Foundation’s true priorities as well as quantitative analysis of the index. McKnight’s hard work and collaboration with Mellon laid the groundwork for the creation of an investment product that is now available to other institutional investors. You can learn more about the strategy at https://www.mcm.com/web/mcm/carbon-efficiency.

Improving Your Investment Commentary

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Tom Brakke, CFA

It’s two weeks after the end of the quarter – do you have your commentary finished?

Many investment professionals who are responsible for writing a quarterly update for clients dread the thought each time around and drag their feet. It’s not easy to write clear and effective commentaries; often they feel formulaic, with the same structure and the same themes being used over and over.

How can you do better?

For ideas, I participated in a webinar put on by Susan Weiner, “How to Write Investment Commentary People Will Read.” Weiner is a chartered financial analyst who provides writing training and bespoke services, and who has presented at many CFA society events. (More information about her can be found on her website.)

To write commentary that is compelling for your readers, know your audience – and know that they wonder: WIIFM. That is, “What’s in it for me?” Making your ideas relevant to their personal interests is critical. “What keeps them awake at night?” asked Weiner. Start there.

A client-focused commentary includes the words “you” and “your” and a connection between the events of the quarter and their own situation, rather than a dry and distant recitation of facts.

“Say something provocative” was one of Weiner’s suggestions, although it’s not always easy to find a topic that is of great interest that hasn’t already been thoroughly covered in today’s 24/7 world of communication. For example, most of the participants felt that interest-rate risk in the bond market and the crisis in Greece were topics that would fit, but it’s not as if there’s been a shortage of coverage regarding them.

Weiner offered some ideas: look for differences of opinion (in the market or even within your firm) that can be explored, pass along ideas from materials you read that your clients likely haven’t seen, and directly address questions that you have heard from your clients about the issues of the day.

How to structure a commentary is highly dependent on where it is used. Many hedge funds, for example, produce a multi-page quarterly letter that is somewhat flexible in format. In other cases, managers only have a few brief paragraphs to get their ideas across – and they have to do so within a tightly-constrained organizational template.

No matter the palette at your disposal, it’s imperative that you structure your writing in a way that helps the reader to comprehend your ideas. Weiner suggested that you organize your thoughts before you ever start writing, and she advocated for the use of mind mapping to help you to do so. She stressed the need for strong topic sentences in each paragraph; one of the exercises in the webinar involved crossing out everything else in a piece and seeing how well the essence of it was conveyed by the topic sentences alone. Layout options can also help – bullet points, sidebars, headlines, and exhibits – if you have the flexibility to use them.

For those of us whose writing gets needlessly complex, the most important message of the webinar was, “Simplify, simplify, simplify.” Weiner urged participants to use strong verbs, to kill needless adverbs, and to be brief and precise. If you want something to be readable, use shorter words, less complex sentences, and aim for paragraphs of around 42 words and sentences of 14.

It’s better to have your writing come in at the tenth-grade level (in terms of comprehension) rather than that of a Ph.D. You might not feel as smart, but your writing will be more effective. (I took Weiner up on her suggestion to test some of my own, using the Hemingway App. It’s a good way to see whether your writing has become hard to read.)

As investment professionals, we also tend to use jargon too much. That’s how we talk amongst ourselves, and it carries over into our writing (and our presentations). Instead, Weiner said that we should follow the lead of Warren Buffett, who wants his annual reports to be in plain English, “understandable by his sisters.” In doing so, he has made them accessible to professionals in a way that others don’t.

That should be the goal. As Weiner said, focus on making your writing “compelling, clear, and concise.” If you do, it will stand out.

Standing Out in a World of Asset Management

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Tom Brakke, CFA

The CFA Institute Research Foundation Board of Trustees met in Minneapolis recently. In conjunction with the visit, CFA Society Minnesota hosted an event which featured talks by Paul Smith, the new CEO of CFA Institute, and Brian Singer, head of William Blair’s Dynamic Allocation Strategies team and a trustee of the foundation.

Smith spoke briefly about his first five months as CEO, focusing primarily on improving the value proposition that CFA Institute offers to its existing charterholders. He stressed the word “standards,” saying that the organization needs to be vigilant in protecting the standards that apply to the awarding of the CFA, CIPM, and Claritas designations. In addition, in his estimation, CFA Institute must continue to be outspoken in improving how the investment industry operates and how professionals meet the needs of their clients.

The latest event in the Distinguished Speakers Series, Singer’s presentation challenged the entrenched orthodoxy of today, which he said is due in part to the success of the CFA program. The foundation of that orthodoxy is Modern Portfolio Theory and related ideas, the assumptions of which Singer called “inherently yet quaintly stupid.”

He urged the attendees to consider the traditional notion of equilibrium versus the operation of a complex adaptive system. One is static, the other dynamic. One linear, one not. One characterized by complete information, no errors or biases, and no “endogenous novelty” – the other featuring incomplete information, plenty of errors and biases, and differentiation, selection, and amplification effects that cause distortions that aren’t immediately corrected.

When asked which they thought represented the market environment in which they work, audience members voted overwhelmingly for the latter. However, even though that is his thesis, Singer said both perspectives are important to understand if you are to be successful as a professional.

Singer disputes the notion that the fundamental value of an asset is reflected in its current price, but rather believes that fundamental value serves as a gravitational force for price over time. Therefore, he thinks that a short summary of a sound investment process involves three basic questions: Where do prices differ from fundamental value? Why do prices differ from fundamental value? How can those value/price discrepancies be captured?

While he talked about the hot topic of Greece to illustrate how his team uses game theory to assess the objectives of geopolitical (or market) players, perhaps Singer’s most interesting commentary concerned the structuring of his organization versus others.

He eschews the traditional approach, where analysts seek more and more information and then try to sell their ideas to portfolio managers, thinking that it leads to behavioral errors and a torturing of data in search of an answer. Instead, he wants his group to create “deductive frameworks” that don’t look like the decision tools that others use. For one thing, he says, in contrast to others, “We don’t need that much information.”

The key is to create a structure in which to organize information that focuses on the most important elements of a decision – and to staff the organization in a way that brings diverse points of view to the table. That means hiring individuals with different cultural, educational, and work backgrounds. Each puts forth his or her opinions privately, in advance of a discussion, so that the range of views within the group is accurately conveyed before debate is dominated by the loudest and most powerful voices.

Singer stressed the importance of being clear about the information at hand prior to making conclusions. What is fact and what is opinion? We can lose sight of the facts, because the rush to form opinions often overwhelms the process of thoughtful analysis.

In Singer’s eyes, the world of asset management as we know it has evolved on the basis of outmoded theories, no doubt reinforced by the career risk that keeps investment professionals from straying too far from the crowd and the organizational structures that haven’t really changed in decades.

It’s time, he says, to rethink your approach and “put a stake in the ground about what you believe.”