Tag Archives: BlackRock

2020 Annual Dinner Recap

·

Written by: Tharaniitharan Panchalingam, Junior studying Finance and MIS at the Carlson School of Management and Fixed Income Analyst at the Carlson Funds Enterprise

The 2020 CFA Society Minnesota Annual Dinner featured Rick Rieder at BlackRock, with questions moderated by Society volunteer Susanna Gibbons, CFA, Carlson School of Management. Rick Rieder is BlackRock’s Chief Investment Officer of Global Fixed Income, Head of the Global Allocation Investment Team in the Multi-Asset Strategies Group, a member of BlackRock’s Global Operating Committee and Chairman of the firm-wide BlackRock Investment Council. In addition to this, he is a member of the Borrowing Committee for the U.S. Treasury and is currently a member of the Federal Reserve Bank of New York’s Investment Advisory Committee on Financial Markets.

The presentation got off to a humorous start with Rick sharing how his multiple flight delays in New York had him running around the Downtown Minneapolis looking for our venue! After he gathered his breath, he went into what his day was like. In the morning, he presented to the New York Fed on his outlook of the global economy and the policies that ought to be implemented. After this Rick mentioned how he was on a call with Elon Musk to give his thoughts on Tesla’s expected share sale to raise capital. Rick concluded by saying that Elon Musk is probably the smartest person of our generation.

We then went into conversations about Fixed Income; Rick believes that debt is far too cheap and that we are in an environment where spreads are unbelievably tight but, there is still a massive demand for US based fixed income assets, which further puts pressure on the US and global economy. He also stressed that due to the nature of the market, Fixed Income managers must not “stretch in 2020” and that hitting five percent would be an accomplishment.

He also touched on technology and how companies that have significant investments in R&D are creating this “incredible growth paradigm,” while those that don’t invest aren’t experiencing much growth, if any.

This led to one question that caught my attention. Susanna asked Rick, “what do you think of Negative Interest Rates and what are commercial banks’ alternative?” Rick immediately responded with “I think that negative interest rates are the dumbest invention of all time.” He went into why and stressed that it breaks down the traditional investment paradigm and that in Europe, because of the way businesses operate, growth will be extremely hard to come by. Rick said that Europe needs to create “exogenous growth” by investing in innovation. Europe’s innovation is stifling and as a result, don’t benefit from the dramatic growth that it has the potential for. He also said that Japan is in the same predicament and that there may be a time in the future where Japan will default on significant portions of its debt.

We ended the night talking about equities being very cheap relative to credit and that we will see a turn or two in equity multiples over the next few quarters.

All in all, this was a tremendous night. Rick has such a wealth of knowledge and his ability to weave a coherent picture with the data he analyses is incredible. We had great food, great company and a very insightful hour-long conversation! We hope to have Rick back soon!

Event Recap (part 2): Diversity & Inclusion: Bridging the Gap in the Investment Industry

· · Leave a comment

By: Hilary Wiek, CFA, CAIA, Society Volunteer

In my last blog post, I provided an introduction to the excellent program CFA Society Minnesota had in June on Diversity and Inclusion. In this post, I’ll outline some of the key topic areas from the event, drawing upon talks by BlackRock’s Jonathan McBride, Wells Fargo’s Leyla Kassem, CFA, discussions at the tables and then shared with the room, and two panel discussions – one with women working in their organizations on diversity and inclusion issues and the other with women discussing their paths to the leadership positions they now hold. A third post will provide information about where one can read more about or do more to advance this important topic. So here are some thoughts on the topics discussed on June 5:

1.) To have productive conversations about diversity and inclusion:

Assume positive intent. Our speakers challenged us to have an important and uncomfortable conversation. You probably have noticed that you will allow some people to tease you quite mercilessly and you take no offense. Or if you do take offense, you find yourself excusing them because you know that they meant nothing by it. Yet if a stranger made the same joke, your reaction might be quite different. This is one indicator of unconscious biases that we all harbor.

When hoping to have a constructive conversation on the topic of diversity and inclusion, it is good to do what you can to be aware of your biases, realize that the other people have their own biases, and make an effort to act with the assumption that you both have positive intent, regardless of what comes out of your mouths. By doing this, hopefully everyone will give the benefit of the doubt when it comes to word choice and will truly hear the perspectives being expressed.

It is important to note that unconscious bias training will not eliminate biases. The hope is to mitigate biases and have people learn to hire or act around the biases.

2.) Hiring a diverse workforce in the investment industry:

One major problem to getting to a more diverse workforce: pipeline. Many people at the event mentioned that when trying to hire people for their open positions, the applicants were overwhelmingly white males. One leader had assumed that her company was just doing a poor job recruiting, that the diverse talent was out there, but she came to see that many women and people of color opt out of the business because of things they have heard about the lifestyle and culture or they do not even realize what investment roles entail when they are in the process of designing their educational path. The next blog post will list a few real-world programs working to solve the problem of attracting diverse individuals to the industry.

It was noted that the accounting world has been successful in recent decades in identifying potential talent when there is still time to get the proper training. The investment world needs to get to diverse individuals early on and share with them what skills, attitudes, and attributes are needed to be successful so that those who are attracted by those things will know what they need to do to be qualified for investment roles when the time comes.

While schooling is important to get your foot in the door, learning the investment business is very much done through apprenticeship. It is important that young diverse talent has access to the mentors who will guide them through the early years of their career and give them the opportunities to broaden their skill sets at appropriate intervals. Companies can create programs to ensure that unconscious bias does not lead to only a certain type of person being selected for such opportunities.

What’s the goal? 50/50 male/female? Numbers are arbitrary and it could take years, even decades, to get to that level at the current pace. But getting to inclusive is more immediately achievable. The goal is to create an environment where all cultures and backgrounds feel heard and want to stick around. It will be harder to get to 50/50 if your diverse staff keep leaving because they don’t feel welcome.

3.) To get the most benefit out of having a diverse workforce:

The problem: retention. Even if you are able to make diverse hires, you will not garner the benefits of diversity if you are not able to make everyone feel heard (the “inclusion” part of diversity and inclusion), as the struggle to fit into an unnatural mold will be exhausting for many. While people are struggling to conform, they will not feel comfortable providing their best ideas for fear of dismissive attitudes from colleagues. Eventually people will depart, leaving your team back at square one in trying to restock the talent pool. Many firms will see this as a learning moment and assume that people who bring in diverse perspectives are a bad fit and they decide to hire people more likely to stick around – which often means hiring people who look or think or act as the current employees already do.

The solution is to focus the company’s efforts on inclusion. This means getting to know everyone, learning to play to each person’s strengths and listening to their points of view. This may be challenging to some, but it has been proven (see the next blog for research citations) that the more difficult and uncomfortable investment discussions that come from heterogenous teams result in better team decisions. As one speaker said, unanimity feels like a good thing, but hard things should be hard.

One way to work on the inclusion problem is to get to know each other. We have been conditioned to not ask about others who are different at work, to “keep it professional”, but getting to know the people on your team allows for the evident differences to fade and the commonalities to shine through. It also allows people to open their minds to the differing perspectives and realize the value they bring to a conversation. Diverse teams must find ways to bring the diverse points of view out, or the effort will have been wasted.

In a crisis, all of the differences and negative intent assumptions matter less and people come together to get something done. And afterwards the team is stronger for it. As a company, you have to figure out how to get your staff there without a crisis. Managers who are willing to show vulnerability to employees by admitting that this is hard and they need help will get their staff to care. Be fallible. People like the underdog.

I typed pages and pages of notes from this event and there were other really great points made during the morning, but I have attempted to faithfully provide the major areas of discussion. Please feel free to comment on the CFA site, particularly with substantive efforts you have been involved with or are trying that are intended to make a difference in the diversity profile of our industry.

A CFA Candidate’s Perspective

· · Leave a comment

Each season CFA Society Minnesota invites finance students to learn about the CFA Program by interning with the local society. Students assist society committees with research for their projects, and are encouraged to take on tasks that broaden their skills and industry insight. Augsburg College senior Kyle Louzoun-Heisler will be sitting for Level I next year, and wrote this commentary with the assistance of Freezing Assets contributor Lissa Rurik, CFA. If you’d like to work one-on-one with a future CFA Candidate this season, please contact us to volunteer!

There seems to be a consensus in the literature of the major financial institutions that stocks, despite a five year bull, will continue to make small but positive gains. They seem to agree that low interest rates, low inflation, and an improving economy will continue to support increases in the stock market, albeit small. However, there are risks, including shifting geopolitical climate, the Federal Reserve, and asset bubbles that pose threats to stock market gains. Despite these concerns, the majority of firms recommend a Bull market strategy.

With the stronger stock market many firms suggest investing in stocks instead of bonds in 2014. However, there are strategies to navigate a rising interest environment. The recent climate has many financial firms predicting a higher treasury yield and a steeper yield curve. The Fed is central to this topic because there is reason to believe the fed funds rate will be increased in the future. BlackRock and Ascent are predicting a modest increase in rates to about 3.5%. However, this is largely based on the pace of tapering. And despite the recent fear over the fed raising tapering ahead of schedule, the meeting minutes show no such thing. Both Ascent and Columbia Asset Management recommend investing in shorter financial institutions debt, rather than utilities and industrials, citing a bank’s ability to pay lower interest on deposits and receive higher rates on loans.

In order to gain in a rising rate environment, BlackRock and US Bank are in favor of investing in munis and high yield bonds. Those in favor of high yield bonds cite the investment climate (with the Fed’s quantitative easing, economic improvement, and low default rates) and interest rate risk as the primary reasons to consider those options. Furthermore, as interest rates increase, high yield bonds can protect from that risk. Although last year high yield bonds offered the best return in 2013, BlackRock believes they will be closer to fair value.

In addition to high-yield bonds, BlackRock and US Bank favor municipal bonds as well. BlackRock mentions that March was one of the three best months for munis in 20 years. However, despite these ending, it still makes sense to look at these bonds because of their tax exemptions.

Although BlackRock mentions the Emerging Markets as a potential investment, Columbia asset management recommends it. Columbia believes that investors should stop playing duration defense. Furthermore, credit risk is preferred to duration risk. Like BlackRock, Columbia mentions the possible increase in the yield curve, but they believe that the curve has already taken most of it in. They say that if you want more of an investment-quality bond, corporate and munis make sense, but that if you have longer latitude it makes sense to look at the EM debt. Although EM debt did poorly last year, they believe it will perform better as those economies improve. Columbia believes global demand to increase and thus EM debt values to react favorably. Abbot Downing also believes that EM debt will improve as those markets grow and will be a good long-term investment.

BlackRock and Columbia are asset management firms.
Ascent is a private wealth management firm- subdivision of US bank.