What does a chief investment officer actually do? What's the difference between a portfolio manager and a CIO? How do you develop a team of analysts? TD Asset Management CEO Bruce Cooper (and former TDAM CIO) joins the show to discuss the role of a Chief Investment Officer. (November 14, 2019)
What does a chief investment officer actually do? What's the difference between a portfolio manager and a CIO? How do you develop a team of analysts? TD Asset Management CEO Bruce Cooper (and former TDAM CIO) joins the show to discuss the role of a Chief Investment Officer. (November 14, 2019)
Hello, and welcome to Actively Speaking. I'm your host, Steve b Weiberg. Join us each episode as we discuss current issues concerning capital markets and portfolio management from the perspective of an active manager. Hello everyone. Welcome to another episode of Actively Speaking. Uh, today we have a very special guest. My guest today is Bruce Cooper, who is the CEO of TD Asset Management. Welcome, Bruce.
Speaker 2:It's great to be here. Thanks, Steve.
Speaker 1:Uh, now prior to your, um, uh, elevation to being the ceo, you spent a number of years as CEO and cio, and prior to that you were also just the cio and, and I should, for anybody who thinks that might mean like Chief Information Officer, it means Chief Investment Officer. So how, how long did you spend as a Chief Investment Officer at TDS in management?
Speaker 2:I was five years as a cio, and then my background is equity, so I was head of, uh, our equities group, uh, for about 10 years. Uh, prior to that, going back in time, sort of an analyst on the equity side and a portfolio manager on the equity side.
Speaker 1:Got it. I should also mention, just for anybody who doesn't know that Epic, of course, is, is owned by td, and so TDS Asset Management is essentially a sister company of, of Epics. What we wanted to talk about today was this whole concept of a Chief investment officer and, uh, Bruce, we're gonna talk to you about what does the CIO do. Uh, I think it's a role that not everybody is familiar with, uh, necessarily people who are listening to this podcast. Um, if you aren't familiar with the role and you hear the title, you may think, whoa, the Chief Investment Officer makes all the investment decisions, but that's not what it is. So, uh, briefly outlined for us, what is it that a CIO does? What are the responsibilities of Chief Investment Officer? Yeah.
Speaker 2:So sometimes the, the best questions are the simplest questions. What, what does the CIO actually do? I think there's a few things I would, I would highlight. Um, all successful investing starts with a, a sound philosophy. I, big part of the CIO's job is to ensure that you've got a, a philosophy that stood the, the test of time. Obviously here at Epic, uh, free cash flow is very central to the way you think about investing. And so that's your philosophy. And it's kind of that, that north star that, uh, in difficult times, uh, in markets, you can, um, be guided by. And so I think that, uh, articulation of, of a philosophy is hugely important. Um, getting the right people in the right seats, uh, you know, in the end, this, uh, a people business, uh, uh, investment excellence, adding value for clients is, is not an easy proposition. So you need to make sure the right people are there and that they're there for a very, very long, uh, period of time. So I think that's, um, hugely important. And then ensuring, uh, that, uh, you get results, you know, so it sounds like a simple thing, but, uh, someone's gotta make sure, um, that, uh, you know, you put points on the board that people are accountable. And I think the CIO's job is to ensure that after you've put the right people in the right seats, and they've got that philosophy, that they're sticking to that philosophy and delivering the portfolios that our clients expect, uh, year in and year out.
Speaker 1:Okay. Uh, that's, that's a good answer. Let's, let's dive in a little deeper on some aspects of that. So you talked about, um, portfolio managers attracting, you know, how do you get good portfolio managers in place? So how, how do you attract and then retain, you know, talented portfolio managers to an investment management organization?
Speaker 2:Yeah. You know, I think people want to work in a growing and successful organization. Um, you know, as you mentioned off the top, um, I'm from TD Asset Management. Um, I've been there for about, uh, 25 years, give or take. And when we started, uh, our asset management business was I think four people in the equity side and, and two people on the fixed income side. Wow. So it's a, a relatively modest organization. Uh, today, just in the investment team, were over 200 people. And of course that's created opportunities for people like myself, but all sorts of other people. And so I think growth is really fundamental, uh, because it allows people to manage their careers and blossom and, and take on additional responsibilities over time. Uh, you know, compensation is of, of course, important. Um, but in a, in a lot of ways, I think the easiest, you know, we have data on what, you know, uh, peers make, and so you have to hit the bullseye. Um, uh, so it's important, but not complex. Uh, I would say, and I think culture is, uh, hugely important. You know, at, in our shop, we have what we call a collaborative culture. Um, you know, which means, you know, we, we'd expect that people won't go into their office, close the door and, you know, stare at their screen all day. We're, we're here to work together to, to build solutions for our clients. We think collectively we're better than we are as a group of individuals. And I think, uh, we found that, uh, it sounds trite, but I think it's super important if people like working somewhere, you know, they like getting up in the morning, walking the door, they'll come back the next day. And so I think if you kind of do all those uh, things, then, uh, you'll be able to attract and retain the brightest people, and then it kind of builds on itself. Right. You know, if you've got the best people mm-hmm.<affirmative>, you know, the next person walks in the door and says, gee, this is a pretty great place, and they're happy to stay. Right.
Speaker 1:I'd like to work with those people. Yeah,
Speaker 2:Exactly. Right. Right.
Speaker 1:Um, so in the past, and I'm, when I say the past, I mean like the 1960s, seventies, eighties mm-hmm.<affirmative>, um, banks and insurance companies, when they, uh, in their asset management divisions were kind of known for having like centralized investment committees. Yeah. And even though you had portfolio managers there, a portfolio manager did not have complete latitude to buy. Yeah. Whatever he or she wanted there. There was a, an investment committee that created a, an approved list of stocks Yeah. That the PMs could buy from. And then in the 1970s and eighties nineties, there was, at least in the United States, big wave of quote boutique asset managers. Yeah. And, uh, they, you know, at times where, uh, it went to extremes. We had this expression, you know, gunslinger. Yeah. Uh, portfolio, Gogo portfolio managers who each one could do whatever they wanted. And, uh, how do you, as, how does a chief investment officer strike the right balance between those two extremes? Because, you know, you don't want somebody to be totally unsupervised. Yeah. Uh, but you don't want, you don't want to completely limit their freedom such that you can't, you can't attract really talented people if they feel like they're not going to have any enough
Speaker 2:Freedom. Yeah. So I think about, you know, key things we're trying to drive here, process is important, which I think is what you're getting at. I'll get back to that in a second. Accountability, I think is, is really important. And nimbleness, um, is important. Um, and some of these, uh, you know, there could be tensions amongst all these things. De you know, depending on what process you, uh, have in our system, uh, we give the portfolio manage or freedom to make the decisions. And the philosophy we've had is, I'm gonna hold the portfolio manager accountable for the performance, therefore I need to give them the responsibility to make decisions. Um, having said that, if you, you start with that idea of a philosophy, which we touched on right at the beginning, you know, portfolio, A good portfolio manager is gonna wanna make sure that the pro the, there's a process in place to ensure that you can have the disciplined implementation of that philosophy. And so I don't think these things are necessarily, um, there's a huge tension here. Uh, you know, if you hire the right people, they're gonna wanna make sure, uh, that they've got analysts that are, um, doing the work to provide the recommendations, uh, the consistent with the philosophy that allows them to make decisions. But I, you know, we've shied away from this kind of committee approach. I think this, this way. I kind of raised this idea of nimbleness. Um, look, markets are prone to sharp dislocations, right? You know, stocks can go down five, 10, 20% a day or up, you know, you need to be quick to make decisions. And I think, you know, if, if a portfolio manager is unencumbered by a kind of, uh, bureaucratic process or, you know, a, a quarterly or monthly meeting, uh, they can react in the way you would want them to. Uh, so that's, that's kind of how we come at it. Individuals make decisions, but they're surrounded by a group of talented people. There's a process in place, but you know, it, it leaves room for, uh, that, that quick decision making, uh, which is, to be honest, a lot of the, a value you add, I think is in those stressful times. Mm-hmm.<affirmative>, you know, either good or bad, you know, buying stocks when they're under pressure or selling when they get to exuberant. And I think, uh, that, that quick decision making is an element of that.
Speaker 1:Uh, so in your experience as a, as a cio, and you mentioned, um, TDS and management has about, uh, 200 people, over 200 people. So how much of your time as CIO was spent kind of on the investment, pure investment side of things, working with portfolio managers, uh, developing processes, working with analysts, talking about how research should be done, and how much was sort of on the other side, more personnel management, you know, h HR kind of stuff, uh, you know, what, what does that mix like for a CIO and how does that change as the firm gets bigger?
Speaker 2:Yeah. Well, uh, the people issues become more complex and involved as a firm guest speaker, there's no question about that. But I think a lot of these things end up being intertwined, you know, so I think a big part of the role of CIO is kind of coach, mentor, leader. And so you might be talking to someone about markets or, uh, stock or, you know, the current environment. Um, and so on one level, it's a conversation about, you know, a decision you might wanna make or, um, how you wanna structure a portfolio. But on a different level, it might be about, um, you know, guiding that person, helping them make decisions, you know, as, as people are earlier in their, their career and young, uh, sometimes, you know, they get a bit frozen during stressful moments since they just need someone to hold their hand and, and coach and mentor them. So I think, you know, that's where I think these things kind of come, uh, together. You know, most of the personnel issues are not really about, of course, at certain times of year you've got, you know, whether it's annual performance ratings or compensation, but in the big picture, those don't take a lot of time. Most of the personnel issues are really around coaching and mentoring, I would say. Mm-hmm.
Speaker 1:<affirmative>. So presumably there came a time, you said you started out as you were a portfolio manager. Yeah. And eventually you became the chief investment manager at some point. Did you give up your responsibility over any portfolios?
Speaker 2:I, I did. Um,
Speaker 1:How did you feel about that?
Speaker 2:Yeah, I had very mixed feelings about it, to be very honest with, I love being a portfolio manager. You know, being a portfolio manager is probably one of the great jobs in the world,<laugh>. Uh, but, you know, our firm is at a, a scale where it was hard to do, uh, both. And, you know, I, I kinda look at it philosophically. I got to spend, let's say, half my career, uh, analyzing stocks and building portfolios, and hopefully I get to spend another half of my career building a business and leading people. And to be honest, they're both incredibly satisfying, uh, jobs. And I'm lucky to have been able to do both
Speaker 1:Uhhuh<affirmative>. So, so in the end, how does having a CIO in an asset management firm benefit the firm's clients? That's really what we are here for, is to provide a service to our clients. So how, you know, how would you explain to a client why, how a CIO having a CIO at a firm as opposed to like, I just hired this PM to manage my money. Yeah. Why, why does a firm need a cio? How does that benefit clients?
Speaker 2:Yeah. I think of it as, you know, we give a series of promises to our clients. Um, you know, if you buy this product or buy this solution, here's what you should expect. And, you know, think of it that that product comes in a 10, and on the outside of the 10 it says something, right? Um, you know, if it's shareholder yield here at Epic, there's certain expectations that get built into buying that product. I think the CIO's job is to make sure that the promise we've given to our clients, um, is it consistent with the experience that they have over time. Um, and you know, that comes back to all the things we've been discussing. Do you have the philosophy? Have you got the right people? Are they adhering to that philosophy? Is the process consistent with, um, the discipline, implement implementation of that philosophy? So I think that, um, the CIO is really there for the clients. Um, and, uh, you know, are we delivering that investment excellence.
Speaker 1:Okay, Bruce, well that's very clear. Uh, I wanna thank you for joining us here on actively Speaking.
Speaker 2:Been great to be here.
Speaker 1:Okay. And, uh, thanks for listening and we'll talk to you again soon.
Speaker 2:Terrific.
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