On what brought her to UBS:
On women in finance:
On asset management:
Markets today:
REITS, MLPs etc. vs. risk free:
Active vs. passive debate:
On Aspen institute:
Experience at Bridgewater:
Herdle Callahan: Multiple asset classes - what's the process like for alternative investment selection:
Whats the most interesting thing that people don't know about you?
Books:
Impact investing - how significant is it?
Outside office:
Advice to young people:
- After business school, started as a quant. Ran the entire department globally running running FI eventually at UBS.Started at UBS and eventually held senior positions at Bridgewater as well.
- Lived through the SNL crisis, asked to help with a high-yield portfolio, learned extensively from the chaos during that time frame. Essentially lived a career to jumping into things, being a problem solver throughout, eventually asked to run the division.
- "Buffet has lost it"- that was a saying then. Said she was a value investor herself in FI world. Gary Brinson, legendary value investor was critical in shaping her theories. Shortly after she joined, the firm was sold to Allianz capital. Then she moved to equities from FI, an unorthodox move according to her.
- Barry mentions - best equity researchers all started as FI researchers. Ranji says its true because they understand cap structure, term structure, risk at a very granular level.
- 2000-04 - all of HY opportunities became value opportunities. Eventually Ranji rose to become CIO at Bernstein. Joined the firm at a troubled time. A fundamental reset was needed to firms retail investors
- Bernstein embraced the work of Kahnemen in terms of value investing. Recency bias, confirmation bias etc. shaped the retail offers to many retail investors
- She thought about, what are resources of risk/return needed to be though, and therefore brought down funds from 55 to 15
- Asset allocation strategies - were to single best way to manage biases
- Now at Herdle Callahan, a firm that was the pioneer in the outsourced CIO business
- Think about an endowment, foundation, family - a 200 million firm that can not have the scale that is needed to attract human capital and everything else. Not just the operational backbone, but ability to access world class managers at low fees
- They are the mayo clinic. Someone comes in with an issue, and they need their problems solved
- 30 yrs ago, when the firm was formed, the outsourced CIO was not known. The Endowment model was not known. Single solution was not known. The industry didn't know any of that. Herdle Callahan firm is the largest standalone and privately owned firm with ~20 billion in assets today
- Most firms have conflict of interest as they have their own products (passive, active, liquid etc.)
- Factor investing was the firms way always, well before it was popularized
- Buying assets, any class, at the cheapest prices and reasonable valuations over long-time horizons is the firms strategy
On women in finance:
- The data suggests that not much has changed. Ranji sees it as a personal mission. Balanced work force not just gender balanced workforce is her mission. Best possible pool of talent is important
- Process design is critical here. Inputs that drive recruiting, those need to be taken into account
- What's holding Wall street back? Unconscious bias. Leadership has not made it a priority
- Barry mentions - women perform better as portfolio managers, and the make more unbiased decisions
- Ranji says - it's about culture of the firm
On asset management:
- Pooling of assets was novel in the last 40 years, and it has been a tremendous innovation
- Savings have been more productive than before
Markets today:
- We have come a long way from 2009, when everything was cheap. Interest rates have caused some of this. All risky assets are fully valued, and indeed over valued. Bond markets, the risk-free parts are fully valued. Credit is also looking fully valued as well. It's historical, relative to opportunities
- When you look at macro - earnings a strong, growth is fine, inflation is subdued, so we are prolonging this scenario
- Outside the US - earnings revisions are double digit
- Within equities - Europe is looking good. There is still room for improvement
- In the past 10 years of performance, Europe has done nothing
- Today, 10 years later, we have the excess of that. Risk free treasuries, corp orates, everything looks expensive to an extent
REITS, MLPs etc. vs. risk free:
- Now, a negative view on energy. 4-6% weight in energy
- REITS - fully valued for a while now
Active vs. passive debate:
- Journalistic excess for the most part. The firm is agnostic to this. There's time and place for both
- Today - Ranji is getting interested in active managers. In a market like today, active is looking better
On Aspen institute:
- Aspen fellow now. Institute was created to ask leaders in business - what's their responsibility to society
- Using readings that are time tested - stoics, Aristotle, how do we trade off choices in society
- As we confronted with retail investors - all of the principles, to be a steward of client capital going forward
Experience at Bridgewater:
- Fascinating institution in how they think about markets and risk. Broadened and deepened understanding there
- The culture piece, transparency, etc. in its benign form continues. 'How to be better at getting better' is the motto
- Bridgewater is a singular culture - the principles that have endured there - transparency and excellence
Herdle Callahan: Multiple asset classes - what's the process like for alternative investment selection:
- First inform the client - if the market turns, the illiquid portfolio will double, this is explained to all clients
- No FoF. Within these asset classes - only investing in them - if it's cheap to public market beta
- Understanding correlation to rest of portfolio is important as well
- 11K HFs out there - most are correlated to equities. Merg-arb - is structural beta, don't wanna pay too much for that
- The portfolio construction for us - deeply focused on strategies of underlying managers. Deep research process on manager selection. Illiquidity premium must exist vs. the market
Whats the most interesting thing that people don't know about you?
- "Conceptual creative side married to a hyper rational side has made me a leader thinker and a doer"
- Mentors were a very important factor. Burton Markhael was a mentor
- Never giving up on the value philosophy was important
- David Swinson helped shape philosophy of governance. People underestimate role on governance
Books:
- Most important books in finance were on human behavior.
- http://ritholtz.com/2017/09/ranji-nagaswami-outsourced-chief-investment-officer/#more-190030
Impact investing - how significant is it?
- Pension fund purchasing power is driving change in investing - use capital for more productive uses in society.
- "I'm a fundamental free market capitalist' ...but it has gone too far. Lack of responsibility - charging reasonable fees etc. is important. Changes are positive, but highlight the importance of finance in society
- Increasing interest in ESG investing. More interest rather than actual commitment of capital
- It's not about dogma, it's about not being secondary to return generation
Outside office:
- Mostly with Aspen leaders
- Meditation - talks about it at work
Advice to young people:
- Be curious, be prepared, and build lasting relationships
- Only way to succeed in the market is playing the long-game. All you know, is how much you don't know
