Academic (Ir)relevance | Chief Investment Officer

CIO-February-2015-Scene-And-Heard-Story-2-Victo-Ngai Art by Victo Ngai“Saying something is ‘academic’ means it is irrelevant in almost every language…” says Sir Andrew Likierman, the dean of London Business School (LBS). “Apart from in Serbo-Croat.” (In the Slavic language, it is taken literally and viewed as a positive.)

We are sipping university cafeteria coffee and looking out over the Regent’s Park boating lake on a chilly January morning.

Sir Andrew is right. The term almost universally means immaterial or inconsequential. “If the Tea Party wins the next US presidential election…”; “If CIO hosted an event after which there wasn’t a great party…” These could be dismissed as academic: They are not going to happen.

Most discussions and research never leave the corridors of academia, but LBS and its new partners don’t accept it is all irrelevant.

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“It’s important to take research and implement it in the real world—there’s a lot to be done,” says Likierman.

LBS’ partner in creating the Institute of Asset Management, which—according to the blurb—is “aimed at advancing research and best practices in the global asset management community,” is AQR. The initiative is to last 10 years.

A man in a blue suit and round, black-rimmed glasses appears, popping his head around the door. He could be an economics lecturer, but he is actually AQR Co-Founder David Kabiller. He settles in to a plastic chair.

“Apparently academia is an irrelevance…” I start, with a wry smile to Sir Andrew.

“Except in Serbo-Croat,” he juts in. I nod him the point.

“And that is what we are trying to change,” begins Kabiller.

There are to be conferences, courses, and “reach-out” opportunities to LBS students, but also to the asset management sector. Prizesfor research and the best, new applicable ideas are to be distributed too.

“It’s a collaboration between accounting, finance, and economics,” says Sir Andrew. “We want to create something and delve into matters of interest to all these sectors.”

“We want the partnership to have made a difference in 10 years,” adds Kabiller.

“It’s not about profit and loss,” says Sir Andrew. “And we have no ax to grind.”

“It’s about encouraging best practice and discovering new things,” says Kabiller—who, it must be said, has helped his firm to great profits.

And if they discover AQR has had it wrong all this time?

“I’m confident we won’t,” he says with a grin, “but we are always looking for ways to improve.”

The interview is bluntly interrupted when a hairy guy (who probably has a PhD in electronics) comes to fiddle with a machine in the corner of the room.

I bid them goodbye and wish them srečno for the project. In Serbo-Croat, it means “good luck.”

New York City’s pension system has hired chief risk and compliance officers, and an internal auditor as part of a comprehensive ethics reform program following a pay-to-play scandal.

Scott Stringer, the city’s comptroller and overseer of the $163 billion pension system, said the appointments are “important steps in enhancing accountability, transparency, and ethics in [his] office.”

Miles Draycott, formerly at Merrill Lynch and Deutsche Bank, was appointed chief risk officer, and will be tasked with “developing and institutionalizing formal risk management,” the comptroller’s office said.

In addition, Draycott will be responsible for creating and implementing systems to “assess and monitor financial and enterprise risk.”

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The pension system hired Shachi Bhatt, the associate director of compliance and risk management at Convergent Wealth Advisors, as chief compliance officer. She will be responsible for implementing systems to “assess and monitor regulatory compliance” within the pension funds as well as external managers, parent companies, and joint venture partners.

Lastly, the comptroller’s office employed Khanim Babaveva, formerly at Grameen America and FINCA International, as an internal auditor.

“One of the lessons of the financial crisis was that risk and compliance functions must have a clear line to the top, which is why these three executives will have direct access to me.” Stringer said.

These appointments are part of Stringer’s six-point ethics reform package announced last year.

The city’s pension system had suffered from “problems with ‘pay-to-play’ practices and conflicts of interest inherent in the use of placement agents,” according to then-Attorney General Steven Cohen in 2010.

Stringer’s office said the reform plan included banning placement agents across all asset classes as of June 2014, boosting investment disclosure policies, and implementing “cutting-edge training on ethics, conflicts of interest, and financial regulation.”