134. Diversity, inclusion and how to manage fund managers

27 May 2021 (pre-recorded 25 April 2021)

Below is a transcript of the episode, modified for your reading pleasure. Please check the corresponding audio before quoting in print, as it may contain small errors. Please remember we’ve been discussing individual companies to bring investing to life for you. It’s not a recommendation to buy or sell. The fund may or may not still hold these companies at your time of listening. For more information on the people and ideas in the episode, see the links at the bottom of the post.

[INTRODUCTION]

Sam Slator (SS): I’m Sam Slator from FundCalibre and today I’ve been joined by Stephanie Butcher, who’s the Chief Investment Officer at Invesco. Hi Stephanie.

Stephanie Butcher (SB): Hi there.

[INTERVIEW]

[0:12]

SS: So, first of all, perhaps we could start with: what is the role of a Chief Investment Officer?

SB: Yes, it’s a very good question. I remember when I first got the role, a very senior and experienced client said to me, well what sort of CIO are you going to be? Are you going to be an investment CIO or a business CIO? And it was a really good question because the reality is the job is a mixture of the two.

You know, I think, you know, for me, I do still run money. I’m still intimately involved with the clients and portfolios. And so that part of the job is key, but I think it makes, it makes the sort of, part of the role of, you know, asking the right questions of fund managers, the oversight role, if you’re involved in markets day-to-day still, I think that that becomes easier. You know, the investment meetings, thinking about the right process to get the best out of the teams, you know, structure of the team, product and so on, that’s all linked.

And then on the business side, I think it’s really thinking about how do we, within the investment centre, link with the other parts of the business. So, whether that’s other divisions such as distribution, marketing, ops [operations], et cetera, but also being part of a global business, we’re part of a $1.4 trillion asset manager is, you know, how do we get the best of that platform for all of our clients and how do we work with those different parts of the business.

[1:32]

SS: And when you’re looking at sort of the managing of the team side of things, I always get the impression that sort of fixed income managers are always glass half empty and equity managers are kind of glass half full. Are there those kinds of personality differences between the asset classes or is it very much managing each individual, how’d you go about it?

SB: That’s quite amusing sort of linkage, I mean, there’s an element of that perhaps although in every team you have a range. I mean, I think that the truth is, is that, you know, in every team you’ve got very different characters and it is always thinking about how do you get the best out of all of them? You know, both within the team environment. So, naturally you’re going to have some big characters, naturally you’re going to have some introverts and really making sure that that, that balance is right, both in terms of the hiring process – so making sure that we’ve got that diversity of thought, which is very important, but also I think, you know, what’s been interesting about the sort of experiment we’ve all been forced into in lockdown is online is it’s really interesting seeing how different characters, you know, react to that. And we found that some of the people who in a physical meeting environment perhaps struggle, have really kind of, sort of broadened out and their voices have been louder in that environment. So I think it is just really trying to think out what are the processes and the formats that suit the individual so that you get the best out of them.

[2:58]

SS: And do you think that’s, some of those things that you’ll keep on after the pandemic, when we we’re all back at work?

SB: Yeah, no it’s absolutely something we’re sort of talking about and to working with all the desk heads. So thinking about, I think, I think like most, you know, we’re sort of thinking about sort of a hybrid environment. But I think there are certain meetings and we haven’t sort of fully decided, but I think there will be certain meetings that we will keep entirely online for exactly that reason that, you know, that confidence level of, you know, having younger or more junior members of staff who really have got something to add, but who perhaps find those very big physical meetings quite intimidating. And I think that’s something that we’ve, it’s definitely a sort of a positive learning from what we’ve been through.

[3:44]

SS: As a woman in what’s still very much a man’s world, you’ll be aware of the gender issues, but how do you and Invesco go about thinking about diversity and inclusivity when you’re constructing the investment team and thinking about what that team will look like in the future?

SB: Yeah. I mean, look it’s a crucial question and, you know, I’ve been involved with the women’s network at work and also sort of involved with other areas of our sort of diversity and inclusion sort of social mobility, which I feel strongly about. And we’ve got really active work streams in a number of areas.

I think the truth is, you know, none of these things you can turn overnight. You know, the reality is that, you know, at senior levels, the pool isn’t as broad as you’d like it to be. So I think a lot is about the pipeline. A lot is about, you know, that sort of granular work of going into schools, into universities, explaining what the business is, you know, where, what the different types of roles are and really doing an educational element. I think, you know, then when you all sort of, if you’ve got people interested is then that whole interview process is how do you make that as broad as possible? So we’ve done a lot of work thinking about, you know, what sort of questions you ask, how you do it, how you look, you know, how you move away from the more traditional CV type applicant. You know, thinking of, you know, really encouraging teams to think about, well, what are the pieces where you can actually train people into the role as opposed to needing to have it in place, you know, right from the word go. Thinking about who’s doing the interviewing, you know, making sure it, isn’t just sort of, you know, quite so mono in terms of character.

And then I think, you know, the really for me, I think one of the most powerful sort of methods is using mentoring when people are in the organisation and we have a very active mentoring process and I’ve done, you know, sort of number of years of, and for me, I think that’s a hugely powerful way of, you know, recognising that people have got different, you know, sort of senses in terms of their own abilities and encouraging them to go for things and push themselves in a way that perhaps they don’t naturally feel they could, for whatever reason.

[6:00]

SS: You’ve also done some work on taking away unconscious bias, is that correct?

SB: Yeah no, I mean look, we’ve done lots of, lots of areas of this. And I think, you know, the encouraging thing is that, you know, the team leaders have really, really, you know, opened to this. So, you know, they want to have as broad a slate of people to look at as possible. And I think, you know, a lot of the time it is just sort of pointing out to people: have you thought about, you know, how you relate with people, you know, even sort of job specs, how’d you write a job spec that actually doesn’t in its first place, put people off? And like, you know, sort of, you look at some of the specs that were placed, you know, years back and it’s like no wonder you didn’t have that have a breadth of applicant and we’ve made huge, huge moves on that. And like, you know, when you look at some of the sorts of internship programs we have and the breadth of the applicants we now have, I mean, we’ve made major, major moves, and I think that’s all to the good.

[7:01]

SS: And what about sort of thinking about the pipeline for the next generation? Are you doing any work with schools or colleges or anything like that to encourage people into? I mean, I fell into the finance industry, through languages and all things, I had no idea it even existed. So do kids today, do university, anyone there today, do they know that this industry exists in the first place?

SB: Yeah well I’m like you, I fell into it as well. I’m a historian by training. I had no idea. I mean, there was, there was no grand plan there at all, but I think you’re right. You know, this is what I meant, you know, this granular work of physically going into schools and I’ve done that and colleagues have done that. And again, in universities and that’s been, that’s been a really good sort of rich seam of just opening people’s minds up, not only to what the industry is like, but also the breadth of roles within it, because it’s not just about, you know, being a fund manager or an analyst, you know, there’s the whole marketing side, the sales, there’s ops, you know, there’s the finance, it’s a really broad industry to that extent. And I think, you know, when we’ve gone in, the reactions have been very positive and I know other firms do it too. I think it is, you know, as I say, there’s no magic wand here. It is that really granular element of just doing the legwork of going in and educating people.

It doesn’t help that, you know, for historical reasons, you know, whether it’s, you know, films or the media or whatever, and you know, some of the worst stories in the industry reputation at times isn’t brilliant. And I think it’s really thinking about, you know, really dismissing some of those myths and just educating people on the reality of the hard work, but fantastic, you know, job that this is and getting people excited by it.

SS: We need the Wolf of Wall Street going into universities and telling them the good side.

SB: Well, that’s it. Yeah, it’s not helpful. It’s not helpful, you know, hugely entertaining but you know, I always say to people that, you know, if you walk into an investment floor it’s more like a library than it is that sort of trading floor and the very different personalities, you know, again, the sort of image of our industry: big extrovert characters, we’ve got lots of introverts, you know, very analytical and so on. There’s room for everyone. But yeah, there’s a lot of myth-busting to be done.

[9:15]

SS: And just thinking a little bit about a few of the new phenomenons that we’ve seen over the last couple of years with the rise of Bitcoin and cryptocurrencies and Robinhood traders more recently, how, as professional investors, do you deal with things like that that can appear suddenly and then sort of change the way the market’s working either temporarily or long-term? What do you do?

SB: I mean, I think the first thing really is to educate yourself. So I think what you don’t want to do is just ignore it and sort of put it aside to some sort of fad or phenomenon. And I think it is really, really fascinating because I thnk, maybe it’s telling you a lot about policy changes. I think liquidity is a big part of it. So understanding that is crucial. And I think, you know, certainly for Bitcoin and for you know the, the whole sort of, you know, digital currency side of things and blockchain and so on, it’s really important that we understand it. You know, even if you know, it isn’t, you know, the day-to-day investment for us as, you know, long-term active equity and fixed income and multi-asset players

at the moment, but, you know, on the multi-asset, you know, who’s to say, but I think you need to understand it. And so we make sure that we have people come in and talk to the fund managers, both from externally and also, you know, people you know, on our ETF side have worked on some of these areas as well, and just educating the fund managers so that they understand what these are and, you know, rather than just dismissing it.

And I think, you know, even with, you know, things like Robinhood, which was very retail driven, you know, obviously almost by definition, they’re big players in the markets, you know, you can’t ignore them. And, you know, even for us as long-term fund managers, you know, you need to get a sense of how those flows may be influencing, you know, either directly your holdings or indirectly. And that’s been, you know, the traders have been super helpful to the fund managers on understanding, you know, the dynamics of that. So, yeah, it’s really important not to ignore it.

SS: Well that was a really interesting different take on sort of, we generally interview fund managers, so it’s interesting to hear from a CIO. Thank you very much, Stephanie.

SB: Pleasure.

SS: And if you’d like to find out more about Invesco’s Elite Rated funds please visit fundcalibre.com