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The asset management business—as we know because we like to hope we understand it—attracts more than its fair share of intellectually gifted individuals. This is because it is an exceptionally interesting business; it is highly compensated; and it is complex—which rewards those with the ability to handle complexity.
Some measure of ruthlessness is no doubt useful in any career, and asset management is no exception. But it is typically a small part of the mix. In stark contrast, ruthlessness, whether or not it is accompanied by any other talent, always seemed to this observer to be a recipe for riches on Wall Street. How many of us have watched utterly vacuous individuals, with no patent attributes other than a willingness to ride roughshod over people, thrive at Street firms?
And yet the vacuous, no matter how ruthless, will likely not thrive in asset management. It is, at heart, a people business. That is its charm.
All this musing stems from a comment expressed to me in frustration recently. A successful institutional asset management firm is looking for a new chief executive, and the individuals tasked with the search were aghast at the quality of the candidates they were interviewing.
But the more I thought about it, the less surprised I was. To be at the helm of an asset management firm today involves an extraordinary range of characteristics. It requires clarity of vision, for—perhaps even more than usual—the industry is in flux. It calls for inordinate people skills to shepherd portfolio managers and analysts, where egos are legendary. It demands sales skills: At an asset management firm, the CEO has to be the firm’s chief salesman. It helps to be -likeable.
How many executives have these skill sets? In a business that attracts the intellectually gifted, this is still a high bar. Even so, this is the thing that matters, because great chief executives make great asset management firms. Indeed, great chief executives make great asset owners, too. Nothing matters more to continued success than the individual who runs the company. These are not periods of rising tides where mediocrity is rewarded; in the next decade, the race—whether the metric is returns or assets gathered—will be won by the swift.
Space (and a measure of tact) precludes me from listing the all too numerous examples of men (yes, men: The female executives who have risen to the top of their asset management organizations have clearly had to be smarter and more driven than the men around them, and boy does it show) who have done nothing with the firms they ran.
But instead of listing mediocrities, let’s look at an individual who in his time was considered a superlative asset management executive: Putnam’s Larry Lasser. Certainly ruthless, and arguably a visionary, too. But hardly a salesman or a shepherd. Putnam thrived, and then suddenly, circa 2003, did not. That’s Lasser’s legacy.
In its essence, this column is really a reminder of how rare the talent is that can successfully run a large asset manager or asset owner. In my view, the individuals who best exemplified these necessary talents have now left the scene: Nick Lopardo, the rough-edged CEO of State Street Global Advisors, and Harvard’s Jack Meyer. Both had their detractors, to be sure, but both did extraordinary things with the opportunities they were presented.
Perhaps the most interesting chief executives in the space today can be found among the small handful of hedge funds and private equity firms that have cracked the institutional space, and their reward has been exceptional financial success.
And yet there is another, perhaps largely untapped, source of talent for tomorrow’s chief executives: asset management start-ups. In a recent meeting in the ETF space, I found myself sitting opposite as thoughtful and insightful a thirty-something CEO as I can remember meeting. If this is the last time you read about Bruno del Ama and Global X Funds, then this columnist is a poor judge of character.