April 8, 2021

How CIOs Assemble Outstanding Investment Teams

Leading asset allocators offer insights into their techniques to form and manage top-notch staff.

Reported by Sarah Min

Art by Nurit Gross

Investment chiefs sit atop their pension funds, endowments, and foundations, and receive credit or blame for their plans’ performances. But even though CIOs often get most of the attention, what’s vital to their returns is how well they’ve done putting together the teams that do the minute work involved in investing billions.

Assembling an ensemble cast of outstanding investment professionals is no easy feat for any chief investment officer. The matter of attracting and retaining talented people, motivating them to perform at a high level, and setting the tone for the team culture resides at the very top.

Over many years, successful allocators have pulled off such a feat time and time again, building and supporting teams to create world-class asset allocation juggernauts. How did they do it? Here are some tips from the very best:

Establish Autonomy

Before they ever sign on the dotted line, investment chiefs who are considering a new post should make sure they’ve reached agreements with their trustees on the decisionmaking powers they’ll have, said Britt Harris, president, CEO, and CIO of the University of Texas/Texas A&M Investment Management Company (UTIMCO).

This first step is a crucial one for allocators who want to make an impact, Harris said. Otherwise, talented investors may find themselves signing up to work for institutions they believe in, only to find themselves and their teams hemmed in by red tape or a misalignment of values.

The important question is: “Do you believe that you can make a difference, and will you be allowed to make the difference that you think you can make?” he said.

Growing Teams: Attracting Talent

All employers have their own mix of attractions they could offer workers. Some can extend higher pay; others, more purposeful work appealing to a higher calling. Still others can offer a desirable lifestyle in a vibrant, urban locale or a name-brand employer that workers can put down on their resume.

For some, the appeal can be more autonomy. In the United Kingdom, when the Local Pensions Partnership (LPP) first formed in 2016, it pooled assets for 17 local pension funds. But the fund’s leadership didn’t want staffers to be overwhelmed by the entity’s larger structure size. A key selling point to prospective hires was a flat management structure and investment leeway from the board of trustees.

The freedom to make investment decisions helped LPP compete for employees who might have been otherwise swayed by more established investment banks, hedge funds, or bigger pension plans, according to LPP CEO Chris Rule. Rule was previously also the investment chief at the asset manager.

“Whilst of course there are different levels of seniority, everyone hopefully feels they understand what decisions are being made,” Rule said.

Other plans use location to their advantage. UTIMCO’s Harris has a singular practice. Calling it his “come home to mama” approach, the investment chief keeps track of the talented investment folks who leave the Austin, Texas, area (where the fund is headquartered), to spend the early part of their careers in larger metros such as New York City, where they learn from the expertise and talent in abundance there.

When these young investors, in the twilight of their 20s, start looking to settle down, or tire of the astronomical costs of big-city living, he gives them a call to enlist them.

“You always want to go home even though you’re enjoying where you are,” Harris said. “I can’t think of a Texan anywhere who’s left Texas, who said, ‘You know, I don’t ever want to go back.’”

Not to mention, Austin is a draw for plenty of workers who are moving to booming economies in the South, drawn to vibrant economies where living costs are potentially half the level elsewhere.

Team Building

Retaining talent is another matter. It’s a challenge for LPP’s Rule, whose organization has quickly grown to about 45 people in its five-year existence. While LPP is still hiring, it also makes a point of promoting workers from within. Another initiative the program is mulling: forming manager mentorship programs to help foster talent at the fund.

“As a manager, if I can create the people that work for me or help them get to a position where they could do my job, then I’m successful,” Rule said. “I think if we can get that culture in our managers, then that will help with our succession planning.”

This summer, LPP is also taking part in Britain’s nationwide 10,000 Black Interns campaign, which is meant to introduce Black students to investment management experience and offer internships in sectors that have struggled to increase their diversity.

Team building also means rewarding excellence and addressing underperformance, said Ash Williams, executive director and chief investment officer at the Florida State Board of Administration (SBA).

The pension fund has developed a market-based compensation system for all its employees, including performance-based incentives for nearly a third of its staffers, as well as promotions from within. It also holds quarterly town hall meetings to recognize the staff, including with cash awards and certificates for accomplishments, and it makes it a point to acknowledge teamwork.

Wrote Williams in an email, “Team building is a standard part of how we manage our businesses, not an occasional exercise.”

When building teams, one important leadership method is to deepen staffers’ understanding of their own personal preferences and capabilities. In the United Kingdom, Royal Mail CIO Ian McKnight said he encourages his group to take personality tests, such as the popular Myers-Briggs or the Insights color wheel tests, to help team members gain awareness of their aptitudes.

Understanding how their peers think about the big picture, whether they’re detail oriented or extroverted or introverted, helps his colleagues collaboratively work through challenges, the CIO said.

“It’s about how you think and what you can add academically to what’s effectively a problem, and are you part of the solution in an orthogonal way. Do you think the same as everyone else? That might work well in a homogeneous team,” McKnight said. But his group is not homogeneous, he added. “We’re not like that.”

Setting the Tone

For some, setting a high bar for the investment team helps the investment chief cultivate a culture of integrity and excellence.

UTIMCO’s Harris wants to improve a typical management problem and ensure that the bulk of his team is composed of go-getters. According to a Gallup poll, about 33% of workers in any given organization are fully engaged, 52% are just showing up, and 17% are actively disengaged. Harris wants to change those odds: half his workers fully engaged, half partially engaged—nobody disengaged.

For Harris, what ultimately matters in team members is high character. The mission of his asset management group includes providing student scholarships in the university system, as well as supporting research into areas such as curing cancer. The investment chief needs staffers who are fully on board for those goals. By all accounts, he has built that very thing.