I’ve been an asset management professional for over 20 years. One important lesson I learned, (though to be fair, never truly understood, or appreciated until now) is how corporate culture is an often overlooked, but critical, component a CIO should weigh when looking for a partner to manage their accounts.
It goes without saying that the first thing most CIO’s look at are the measurables: the experience of the investment team, investment performance, the type of products offered, and so on. That said, taken in aggregate, when weighing one firm against another, assuming all other factors are similar, the tie breaker can often be how one firm’s culture compares to another’s.
Finding an investment manager with the right culture — one where openness is the norm and where different views from all levels are not only looked for, but expected, is critical to building lasting business relationships and long-term investment success. This type of culture is a key differentiator, and is critically important when a client advisor sits across from a CIO and tries to persuade that professional that his or her firm is the best one to manage their money.
It’s all about culture when you are building or running any business based on advising and servicing clients.
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Case-in-point, in the third party insurance asset management space, our primary point of contact often is the Chief Investment Officer. Typically they have a very asymmetric job. CIO’s tend to get little kudos for making budgeted return numbers. Alternatively, they feel the wrath of their board of directors and CEO when investment returns do not pan out according to plan, and often get criticized on the smallest non-traditional allocation in their portfolio with the largest risk budget assigned.
In my personal experience, one example of when culture creates engagement can be found in our private placement team where analysts are encouraged to raise their hands early when a credit they have been working on starts to creep on the side of becoming a problem. At many firms, an analyst that sponsors a deal would be chastised if a credit goes bad and therefore would be less likely to raise their hand quickly on early red flags.
What does this mean for the CIO? This approach creates a culture of understanding and teamwork to address issues before they become critical problems, and in turn helps our business address the asymmetrical component of our client’s job.
This same approach of encouraging teamwork and addressing issues before they become unmanageable is critical when navigating within the volatility, uncertainty and speed at which the markets move today.