New A-teams need both brains and brawn
Chief Investment Officers have taken on a much higher profile in many banks and must be ready to swiftly respond to changing situations.
Even before policymakers of the European Central Bank, the Bank of China or the US Federal Reserve sit down for one of their periodic, heated debates about whether to raise interest rates, chief investment officers at the world’s leading private banks and fund houses are evaluating possible outcomes and how to react to them.
These typically erudite, economically astute and politically sensitive men and women until recently played a vague role, broadly developing long-term asset allocation strategies.
Although they have much in common on the surface, their styles differ not just in economic thought-processes, but in the amount of day to day involvement they have converting high-powered philosophical positions into viable investment products.
William de Wijlder, CIO of BNP Paribas, is an intellectual heavyweight who talks at great length about the vagaries of the markets. But actually committing him and his colleagues to clear product calls is another story. The art of translating summaries of market movements into bankable returns is devolved to another team.
Unicredit’s Manuela D’Onofrio is a storyteller of the traditional type, communicating the tale of the investment markets personally and passionately to major clients. Paul Marson at Lombard Odier is a voracious consumer of research, giving him the confidence to talk about investing in specific sectors in both the developed and developing worlds. While self-assured Swiss investment boss Burkhard Varnholt at rival Swiss bank, Sarasin, is happy to lecture on the science of portfolio theory to students of asset management, the man once perceived as the product ‘enforcer’ in a previous role at Credit Suisse, will press his bankers to adopt specific mutual funds and structured products, related to his detailed, thematic views on the markets.
The role of these financial philosophers, some of whom until recently commanded huge salaries for sharing occasional sparks of wisdom with private banking minions, is changing significantly.
Today, as described by Gérard Piasko, now CIO at the Swiss arm of Deutsche Bank subsidiary, Sal. Oppenheim, the role of the chief investment officer has taken on a much higher profile within many banks. The academic egg-head is turning vigilante, armed with the latest portfolio management tools and research back-up.
With tactics fast becoming the new strategy, the CIO must have the courage to lead a rapid-response team. These tough-guys of finance must answer investors’ panic-driven calls to respond to fast-changing global, macro-economic indicators.
Heading up these new ‘A-teams’, the worms have turned. The CIO is in effect becoming a cross between the investment world’s barnstorming BA Baracus, as played by Mr T in the 1980’s television series, and George Peppard’s Lieutenant John ‘Hannibal’ Smith, whose unorthodox strategies usually proved effective.
This combination of brains and brawn required is summed up by Mr Piasko, who paints his task as a mix of surfing and playing chess. You need to ride the wave, and be ready to jump off the board at the final moment, before being swallowed up by a fast-disintegrating trend. At the same time, you are in a battle of wits with the market, staying several moves ahead, while working out scenarios related to different outcomes.
This means being ready to act and cooking up a variety of responses for when interest rates are raised, when oil prices spiral due to the latest Middle Eastern conflagration or when further bailouts are arranged for countries on the periphery of the Eurozone. Space reserved in private banks and asset management houses for pure economists is dwindling fast.
Yuri Bender is Editor-in-chief of PWM
