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On February 28th, CFA Society Chicago hosted its Industry Roundtables event at the Standard Club. This event was an opportunity for members to join in-depth discussions with leading investment professionals and colleagues in a small group setting. Tables hosts covered 10 different sectors in the investment industry. CFA Society Chicago reporters Brad Adams, CFA, and Chris Fry attended the event and provided a recap a few of the discussions held at this popular event.

Emerging Markets: Kevin Ross CFA, Senior Vice President and Portfolio Manager, Advisory Research Inc.

Ross has been at Advisory Research since 2013, first as a research analyst and, since 2017, portfolio manager for the Emerging Markets Opportunities and International Small Cap Value strategies. He has twelve years of industry experience including positions at Driehaus Capital Management and Raymond James. He began with a list of key take-aways he wanted to emphasize for anyone interested in working in emerging markets;

  1. The importance of sound product development
  2. The importance of flexibility in seeking career opportunities
  3. The importance of matching one’s personal investment style to the firm’s

Ross went on to describe emerging markets (EM) as those characterized by an underdeveloped economy or financial markets. He singled out Portugal and South Korea as two with developed economies but underdeveloped financial markets. This puts them within emerging markets in the categorization of the MSCI indices. The index is approximately two-thirds in Asia, and one-third in Latin America, with small allocations to Eastern Europe and the Middle East. He expects the category’s weight in the MSCI All Country World Index to increase because its market cap weighting should rise to match its global GDP weighting. Additionally, impending regulatory changes in China will relax restrictions on trading by foreigners in that country. When MSCI reflects this, China’s index weight should increase by 3-4 percentage points.

Research Advisory is an active manager and EM strategies provide good opportunities to beat passive strategies because the markets are much less efficient.  There are approximately 7000 publicly traded companies within EM countries, about twice the number in the United States, and it is growing. Each is covered by an average of only four analysts compared to 22 analysts for large cap U.S. companies. The category has a history of long term outperformance relative to benchmarks and to developed markets, although it tends to be cyclical. From 2011-15, EM underperformed developed markets.  Recessions in Brazil and Russia, and declining growth in China were the primary reasons. These trends are reversing and the category has outperformed for two years.

Ross noted that his firm’s process relies more on bottom-up analysis (80-90%) than top-down, the better to identify undervalued companies. He also emphasized the importance of research into corporate governance. Most EM countries lack the laws and regulations that protect shareholders in developed markets. Corruption is more common as are complicated corporate structures with interlocking ownership connections. Getting just this aspect correct can form the basis for a success product.


Consultant Relations: Jason Brandt, Head of North America Consultant Relations, Global Client Group, AB

Brandt has been with the firm for 23 years in increasingly progressive and geographically expansive roles. He is focused on the firm’s institutional clients through his leadership of the consulting partners’ team, new business development and relationship management. As a leader with one of the majors within the industry, which includes Mercer and Willis, AB has a deep and diverse product portfolio to offer clients. Although product offerings may greatly differ, from alternatives to ones tailored to achieve certain targets within a particular economic clime, the focus on the client and the sales platform’s framework remain consistent. The framework of the “4 P’s” is utilized to differentiate and compete:

  • People
  • Process
  • Philosophy
  • Performance

Competition can be challenging, especially when the client is seeking a more generic product in which differentiation amongst offerings is miniscule, possibly only in the cost. Yet, Brandt emphasized a “friendly competition” environment in which one’s connections to competitors are important for providing the best service for clients as well as fostering a healthy referral environment.

Starting in the sector as an associate for outbound consultants, Brandt mentioned associates tend to be “data hogs.” In addition to supporting consultants in Performance category, Global Investment Performance Standards (GIPS Standards) compliance is a key part of an associate’s function.


Fixed Income Analysis: Jose Pluto, CFA, Aegon USA Investment Management

Pluto is a structured product research analyst with US centric, fixed income focused Aegon AM US which is under Transamerica Corporation’s investment arm, Aegon Asset Management. Aegon, headquartered in The Hague, acquired Transamerica in 1999. Pluto’s currently focused on asset-backed securities (ABS) research, analysis, and underwriting. Pluto has developed an interest in equipment leases as well as esoteric ABS. Within the later category, Pluto stated the emerging solar financing market and its complexities are of particular interest. He was previously a fixed income analyst with Thornburg Investment Management in Santa Fe. Initially, Pluto focused on interest rate derivatives and government bonds with JP Morgan Securities, Bank One, and Goldman Sachs. Before Thornburg, he was a fixed income portfolio manager with Stark Investments actively managing a G-4 interest rate products total return portfolio. Today, Pluto is personally responsible for $14+ million within the ABS subsectors.  He stated by focusing on smaller opportunities that come to the debt market less frequently, Pluto is able to find the best opportunities to generate total returns and capture alpha.

In addition to Pluto’s interest and focus on esoteric ABS, he has a particular enthusiasm for securitized aircraft leases.

For those interested in his thoughts on the future of Airbus’s A380, Pluto conjectures that the airlines’ decreased utilization of the hub-and-spoke model in favor of point-to-point will drive the A380 into niche markets with decreased route applicability.  This trend will keep the future of A380 program uncertain and likely reliant on the 13 current operators.


Fixed Income Portfolio Management: Ronit Walny CFA, Managing Director, Global Investment Grade Fixed Income, Neuberger Berman Investment Advisors, LLC

Walny is portfolio manager for multiple fixed income and inflation strategies at Neuberger as well as part of the team that sets portfolio strategy for global investment grade fixed income. Previously, she was a portfolio manager and trader at PIMCO, and had held various trading, analytical, and advisory roles at MSCI Barra, Northern Trust, MacroMarkets, and Kellogg Capital Markets. Her current functional title at Neuberger Berman is client facing portfolio manager, a role that requires a significant amount of face time with clients explaining the details of the firms fixed income strategies and performance, as well as collecting client feedback to report back to portfolio managers. She finds the role to be a good blend of her in interest in trading/portfolio management and client communication. This satisfies one of her primary keys to a successful career: being involved in something that interests one to a great degree making it easy to develop a proficiency.

Walny got her start in fixed income because of its dependence on the application of mathematics. The fact that changes in bond valuations are more easily explained by changes in the metrics that define the market appealed to her greatly. The “stories” that can affect equity valuations play much less of a role in the bond market (and also commodity and currency markets where she participates for inflation-hedging strategies).

Besides working in a field one finds naturally comfortable, her other keys to success include:

  • Working with a team one finds enjoyable to work with,
  • Learning constantly through observation and experience, and
  • Reading to improve oneself (both financial literature and general topics).

Her advice to someone seeking to make an entry into the business includes:

  • Taking baby steps to gain experience,
  • Networking to get referrals from people in the business,
  • Investing free time in learning on your own.
  • Learning not only your key products thoroughly, but also why your clients use them.


Private Equity: Michael Sullivan, CFA, Kinzie Capital Partners

Sullivan is an investment associate at Kinzie Capital Partners, responsible for evaluating and executing new investment opportunities, and for managing portfolio investments. He described Kinzie as an independent sponsor of private equity investing.  They use their partner capital to position them in the lead of new investments, but add in funds raised from the outside (primarily from family offices). In addition they use debt financing to lever up the firms they acquire. They seek to invest in firms that are in a transition, which might involve the exit of a founder, switch to a new generation of owner/managers, or a company ready to make a jump to a larger scale from a plateau in earnings. They focus on the consumer goods, manufacturing, and services industries, and limit technology investments to applications rather than development.

Before working in private equity Sullivan was involved in consulting at Accenture and fixed income analysis at CNA Insurance. Following those experiences he sought a role that combined what appealed to him most: the “Fix it” function of consulting, and investment management. Private equity offered both, as well as a constantly changing environment that Sullivan finds appealing. Sullivan is currently working on an MBA degree to complement his CFA charter. He sees the MBA as a marketing tool because clients recognize and value it.  However, it doesn’t offer practical training or experience that the charter offers. Having the charter “catapulted” his progress toward the masters degree by allowing him to skip introductory courses and take a greater number of higher level elective classes. That greater depth of classroom work allowed him to present a better profile when seeking internship positions.

Kinzie’s investment process is highly selective. In a given year the firm might research 300-500 potential investments but close deals on only 1-2%. Their keys to success are determining if the attributes Kinzie excels at can add value, and whether a target firm is the “right fit” for Kinzie’s management. They need to get emotionally invested before they are willing to make a financial investment.  The debt capacity of the target is also paramount, as leverage is important to their strategy. Sullivan noted the importance of working with a bank experienced in the target firm’s industry. This will make the bank more comfortable to extend credit on favorable terms and may also speed up the due diligence process. Relationship management is important in managing an acquired firm since the holding periods average 5-7 years, but can extend longer. It’s also critical for raising funds, arranging debt financing, and sourcing new deals.