Class of 2020 NextGens

Brian Curran has over a decade of experience in the insurance industry and recently began an exciting new role as regional chief investment officer overseeing approximately $3.5 billion in assets under management in the US region for Enstar Group (the company’s broader portfolio has a total of $14 billion). He is excited to have the opportunity to be part of a strong and collaborative leadership team.

Prior to joining Enstar, he most recently served as vice president of investments at Sompo International (formerly Endurance), where his responsibilities included investment manager due diligence and asset allocation. In this role he had the rewarding opportunity to mentor many young people entering the industry and provide them with thoughtful guidance navigating new roles and the learning curve that comes with a new work environment.

Brian earned a bachelor’s degree in business from Marist College, concentrating in finance, and then went on to earn a MBA from Pace University’s Lubin School of Business. In addition, he is a CFA charter holder.

CIO: What did you think you understood before the COVID-19 crisis … and if, during the crisis you were proven wrong, what did you learn from it?

Curran: I knew the Fed would be accommodative the next time we entered a downturn but what I did not expect was the speed and magnitude in which they acted. They had two emergency meetings in the span of two weeks during early March in which they cut rates to zero and began a new round of quantitative easing. This was followed shortly thereafter with additional supportive measures including expanding the size and breadth of their asset purchases to include municipal and corporate bonds as well as rolling out lending programs to local governments and small to mid-sized businesses.

During the global financial crisis the timeline from when the Fed began cutting rates to when they ultimately brought them to zero and later began quantitative easing was measured in months or years but in their recent response to the COVID-19 crisis their actions can be measured in days or weeks. What this has taught me is to not underestimate the Fed’s willingness or ability to take immediate action when necessary. 

CIO: What took you by surprise? What worked?

Curran: How much the markets have recovered off their lows in late-March based on the limited amount of economic data that has been released. The Fed has obviously taken a very aggressive approach to supporting the economy and stabilizing the markets. But aside from this, there has been limited other data which would support such a recovery. We still do not have a clear picture of when the economy will re-open or the ultimate impact the shutdown will have on the economy.

To the Fed’s credit their actions have been successful in stabilizing markets in the short term. I do not believe the crisis is over so it will be interesting to see if further monetary or fiscal actions will be taken and what the long-term effects of these policies are. 

CIO: How would you build the portfolio differently now that you have gone through this massive accelerated shift in the market?

Curran: As I reflect on what has transpired over the last few months, personally, this period has really reinforced the importance of structuring your portfolio with proper levels of liquidity to both meet operational needs as well as having dry powder to take advantage of new opportunities. As we have seen, during times of stress it can become extremely difficult and costly to transact in even the most liquid markets, and the last thing you want is to be a forced seller during these periods.

It is usually at these same moments, when you are presented with the best investment opportunities and having access to capital to deploy into these opportunities is critical. It is not always easy to maintain this liquidity and avoid reaching for yield, especially when you are 10-plus years into a bull market, but it is at times like these when you are rewarded for doing just that. 

CIO: ESG has been a tidal wave force behind recent innovative investment framework in our industry. How do you see the ESG framework and effort be influenced by the recent event?

Curran: While it is still too early to identify all the winners and losers in the current crisis, when we look back at this period it will be an interesting case study on the impact of ESG, particularly the social and governance components. From a social standpoint, the COVID-19 crisis is bringing to light the importance of social and human capital and impact it can have on an organization’s success. This includes being responsive to employees’ health and safety, adjusting to customers’ changing needs, and the interaction and support you provide to local communities.

From a governance perspective, times of stress can act as a litmus test for a company’s management and governance structure. Organizations that have the flexibility to quickly adapt to changing market dynamics as well as strong risk management teams and processes should be better equipped to navigate the current environment. 

CIO: What’s your view on the “perfect storm” that is currently impacting the oil markets, and how will that change how you invest in upstream energy?

Curran: The energy industry has been one of the most severely impacted by COVID-19 and the resulting global shutdown because of the abrupt shock it had on the demand for oil. On top of that, the recent price war between Russia and Saudi Arabia has put further downward pressure on the price of oil. For many oil and gas companies that have already had to cut their service costs and restructure their balance sheets after the 2014 drop in commodity prices, this most recent drop in price will put significant pressure on them moving forward.

Under these conditions, it will be very difficult for smaller companies, particularly those in higher cost basins, to access public markets to restructure their existing debt which will likely lead to some bankruptcies and further consolidation within the industry. On the other end of the spectrum, the largest companies in the industry who have the capacity to withstand the recent price drop should be in a position to take advantage of this and acquire some of their competitors at attractive prices.

For upstream energy, specifically, it is difficult to have much conviction investing in this space right now. We have seen in 2014 and again this year, how volatile oil prices can be and how sensitive to price many of these companies are. I also do not see oil prices snapping back once the economy re-opens because there is an enormous amount of supply that has been building up over the past few months which we will need to burn through before reaching pre-COVID-19 supply-demand balances.

CIO: What do you think will be the impact of COVID-19 on developing economies?

Curran: Unfortunately, COVID-19 will likely have a very severe impact on many developing economies both socially and economically. Most developing economies do not have the infrastructure or health care system in place to handle a pandemic of this scale. We have seen, in the US and other developed markets the inability to get testing, lack of medical equipment, and strain this pandemic has put on the health care system. For countries with less developed healthcare systems it will be even more difficult to identify and properly treat those who are infected and contain the spread of the virus.

From an economic point of view, COVID-19 will also likely have a lasting impact on these economies. Developing economies tend to be more reliant on trade and commodity prices which are both being significantly impacted by the crisis. These economies do not have the ability to introduce the same extraordinary monetary and fiscal measures as developed countries to offset these negative impacts. Many developing countries have a limited ability to issue government debt in their own currencies and expanding their central bank balance sheets through quantitative easing poses higher risks of inflation and destabilizing their own currencies. 

CIO: What are the new creative/innovative strategies that you are researching right now?

Curran: While not new, we have been approached by a few different asset managers who are raising capital to take advantage of opportunities they are seeing around the recently revived Term Asset-Backed Securities Loan Facility (TALF). This was a successful trade for asset managers coming out of the financial crisis so when the Fed recently announced they were reviving the program many of the asset managers have been moving quickly to raise pools of capital.

CIO: With the shakeout of industries currently going on—where do you see the most exciting opportunities over the coming years?

Curran: Until we have a clearer picture of when the economy will re-open it is difficult to gauge the impact the crisis will ultimately have on certain industries and companies. Understandably, the industries that have been facing the most pressure recently have been energy, travel, and retail but there is still too much uncertainty to get excited about these as opportunities just yet.

During the early stages of the crisis we have been finding the most attractive risk adjusted returns within the high-quality segments of the credit and securitized markets. I expect there will be opportunities in riskier parts of the market as the crisis persists, but we have been cautious in how we have deployed our capital thus far. 

CIO: And professionally, where do you see the most exciting areas to specialize further over the coming years?

Curran: Rather than specializing in a specific area, I feel being in an allocator role where you can assess relative value across various asset classes will be the most interesting. The investing environment is constantly changing, and I have no doubt that the opportunities in the market today will be different than the opportunities next year and five years from now. This is one of the aspects of investing that I find so fascinating and why I enjoy being in an allocator role. You do not always know where the next exciting opportunity is going to come from.

CIO: How is the quarantine affecting the way you view teams and working environments, such as work from home, meetings, etc.?

Curran: I have had the unique experience of starting a new job during the quarantine. I had the opportunity to join Enstar in late March and have been working from home since I started. Without having the ability to go into the office or meet many of my colleagues (in person at least) I had some concerns about the impact this would have as I began in this new role.

To the organization and team’s credit, most of my concerns were alleviated shortly after I joined as I realized the systems and technology in place allowed the team to work at a high level and easily communicate over voice, video, or chat while working remotely. Certain jobs do not lend themselves as easily to remote working and there is still tremendous value in having the ability to be in an office with your colleagues but, when appropriate, I do believe companies will begin affording their employees more flexibility in working from home in the future.

CIO: What exercises have you found useful?

Curran: I think it is important to have calls or other interactions with your team throughout each day. This helps ensure you are staying on top of all the current priorities but also allows you to maintain strong bonds across the team. This is a stressful time for a lot of people in both their personal and professional lives and continuing to have regular communication with colleagues can go a long way in terms of establishing a sense of normalcy.

CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?

Curran: It would be very interesting to sit down with Robert Smith from Vista Equity Partners. He has obviously built a very successful private equity business but what I would find most interesting to talk to him about is his approach to identifying top talent for his companies and his view on the future and how it will be impacted by changing technologies.

I’ve read about his unique hiring practices including using personality tests to gauge a candidate’s technical and social skills, as well as their interest in the arts and humanities. It would be interesting to hear how he determined which traits correlate to strong leadership and if there are any immediate red flags that he looks for in candidates.

With the impact technology is having on almost every aspect of our lives, it would also be great to hear his perspective on what technologies he thinks will make the biggest impact in our day to day lives over the next five to 10 years. Given the breadth of his portfolio companies and network within the technology sector I think he would be able to provide unique insights into this topic. 

CIO: And where in the world would that meeting take place?

Curran: Given the current circumstances it would likely be held over Zoom. As I am sure is the case for most people, video calls have become a regular part of my day to day life during this quarantine and I have found them to be quite effective.

CIO: What asset class or investment troubles you most right now—and why?

Curran: The asset class that troubles me the most right now is real estate because I am uncertain what the future holds for many property types and how the recent events may factor into that.

For example, retail has been a sector that has been under pressure for some time and it is also one of the property types that has been hit the hardest during the COVID-19 crisis. Looking forward, I imagine this crisis will only accelerate the pace of adoption for online shopping, especially for items like groceries, where prior to the crisis consumers may have been less likely to order their food online. What impact will this have on the demand for retail and grocery store space?

Office space is another property type whose longer-term outlook has the potential to be significantly impacted by the recent crisis. In the near term, the office sector should perform relatively well compared to other property types because it benefits from long-term leases from its tenants. Over time, however, if companies do adopt more flexible work arrangements for their employees what impact will this have on the demand for office space?

These are two examples of how recent events may impact the future of real estate, but I expect every property type will be impacted to some degree by this crisis. Couple this with the fact that cap rates were near all-time lows prior to the crisis and that is why I have a hard time assigning a value to this asset class right now.

CIO: Name your four-member investment dream team for your own family office.

Curran: My four-person team would consist of Warren Buffet (CEO, Berkshire Hathaway), David Swenson (CIO, Yale University), Robert Smith (CEO, Vista Equity Partners), and Suni Harford (President of Asset Management, UBS). These four individuals have all had very successful careers in finance and would hopefully each bring a unique perspective from their experiences and specialties which would complement each other to form a very well-rounded team.

CIO: Describe the weirdest interaction you’ve had with an asset manager.

Curran: Rather than single out an individual asset manager interaction, I will comment on a similar interaction I have had with various managers throughout my career which is when an asset manager does not take “no” for an answer. As you are going through the search process to identify an asset manager for a new mandate you inevitably pass on many more managers than you hire. It is not always an easy conversation to have with an asset manager when you let them you will not be hiring them, but most people are professional and accepting of your reasoning.

There have been a few cases though in which an asset manager is less accepting and continues to pitch you on their product after the decision has been made. It is important for asset managers to understand that hiring a new asset manager is not something we take lightly and there is a significant amount of analysis and considerations factored into our decision. The best asset managers, and the ones I am most likely to work with again in the future, understand this and respect our decisions.

CIO: What should be an investment trend, but isn’t (yet)?

Curran: This isn’t a new concept but it’s something that I feel has yet to gain the traction it deserves and that is building a team with diverse backgrounds and skills sets. It applies to both asset allocators and investment managers. Having a more diverse team promotes better creativity, idea generation, and problem solving.