“Erlina is one of the hardest working, most balanced members of the team. She is effective at making tradeoffs between different asset classes, which many struggled with. She is also able to assess emerging managers in a team that is very data-driven. She is a very thoughtful mentor and coach for younger members of the team.”
—Kim Lew, President and CEO, Columbia Investment Management Company
The CIO Editorial Team shared a dozen questions with all of our NextGen nominees and asked them each to pick six to answer. Their answers informed our decision to include them as a NextGen. Below are the answers from Erlina Yeo Terwelp.
CIO: What is the best way to bring more diversity to the financial industry?
Yeo: We need to internalize that diversity of thought is a necessary condition for success. It’s particularly important in the financial industry where human capital is the most important input, and we need to constantly innovate and evolve. At Columbia, we spend a lot of time on diversity: defining it, searching for it and supporting it, not just internally but as we look for stellar partners. We network with diverse managers and make it a point to give helpful and honest feedback. We also work with our existing managers to measure their progress.
There is no silver bullet, but measurement is an important part of the solution here. It’s hard to fix it if you don’t measure it. The other important piece is mentorship of diverse candidates, which helps with both pipeline and retention issues. It’s great to see organizations like Girls Who Invest, Toigo and AAAIM support diverse candidates, and graduates from those organization pay it forward.
CIO: How will the pandemic ultimately change the economic/financial world?
Yeo: Globalization took a big step back during the pandemic, which has had profound impacts on the supply chain, inflation outlook and growth prospects. The pandemic was a catalyst for some deglobalization trends, but it may serve as a longer structural trigger. The pandemic will also leave tangible marks on how we live, work and play, as the technology curve greatly accelerated. As we contemplate a post-pandemic world, investors will need to learn how to evolve, harnessing the use of technology while recognizing new risks to globalization plans.
Another phenomenon is the disruption of work culture, so we have to rethink team management and redesign the office concept. How do you build trust and sustain a culture in a hybrid environment, and across micro-generations (Gen Z, young Millennials, old Millennials, Gen X) who have had massively different work experiences? The response has been across the spectrum: some are back full time and others have gone entirely to the metaverse!
CIO: What role do blockchain or tokenization have in the future of institutional investing?
Yeo: I am bullish on what blockchain/Web3/tokenization will do in the future. We’re looking at a new architecture that a whole ecosystem of companies can be built on. The opportunity to disrupt and create efficiency (payments), security (data storage, transactions) and ownership (powering virtual worlds and assets) is massive if you take a long view. These companies have the potential to disrupt what we currently have in the portfolio, so it is important to monitor the development of the space.
Of course, we’re in the middle of another crypto winter right now, with few near-term catalysts that could turn it around, so it is tough to raise our heads and say that the long-term prospects are strong. While there will be carcasses by the road, I strongly believe that there will be great companies that come out of this rout. It is very early innings, which is both an opportunity and a huge risk, so sizing this appropriately is essential.
CIO: Which component of ESG investing do you think will have the most influence on institutional investing going forward, and why?
Yeo: It’s tough to pick just one component of ESG investing when that voice has become much louder, and rightly so. People are asking their institutions to speak up on social issues more than ever. People are much more aware of governance structures and asking for diverse voices to help govern.
We’re spending time looking at energy transition, an area where people are still doing a lot of learning. There is the obvious point of needing big infrastructure investments, but sustainability has touched almost every sector. I think there will be great and enduring franchises that come out of trying to solve environmental problems and helping the world live in a sustainable way.
CIO: What are the most important alternative asset classes for institutional investors, and why?
Yeo: I grew up in private assets so I am partial to buyouts, traditional bootstrapped growth equity and venture capital. You have multiple levers to pull when you can add value and structure your investment appropriately. You can access small private companies, which are a long-term bet on innovation. You can still capitalize on some inefficiency, although that gap tends to close quickly. Of course, the flip side is that you give up liquidity and take on different types of risks.
It’s more important than ever to be with the right partners in these asset classes in today’s world. A prolonged capital drought will be a crucible moment for many funds. Managers that have flexed the growth muscle for more than a decade will now have to think about value and deal with distressed portfolio companies. Our best managers are disciplined, cycle-tested or at least cycle-aware, and give us high confidence that they will be good partners in choppy waters.
CIO: What new skills do you think allocators need to be leaders in the field in the coming decade?
Yeo: Adaptability is going to be a differentiating skill: Strategies that have worked for decades may no longer be relevant. One of the biggest changes in the macro environment is that we are in a rising rate environment and we are having to think about inflation—both issues that have not been grappled with for a very long time.
The other skill that is an enduring quality is humility. What we’ve seen in the recent past is that the velocity of change has increased. Cycles are shorter, the pace of innovation is faster. Many black swan events have happened in a short period. The ability to listen to different perspectives and have the best one rise to the top, the ability to pivot and change course because facts change—these are hard things to do without humility.
