Asset Management: Repositioning for the Future

Yeah.

[music]. Please welcome the panel on the asset management repositioning for the future moderated by Bloomberg markets anchor Caroline hide.

Yeah.

[music] Wow, what a joy it is to be here in the flesh surrounded by.

The leaders in the space to be habit to milk and events and be well.

Well it might not be deemed perhaps.

Not much of a critical issue for people, who want to make money out of uncertainty, but that's introduced all wonderful panel today because to my right. We do indeed have Gary clip Scott.

Really hesitant low quantity thousands of course of what quantum 2007 has been work on supposed to sound. It. So we're going to have to go deep into the data center 600 employees over there and we're talking automation, which looking I am pleased to say we've got next to my right cost the ninth close Chief business Officer of two Sigma as well we brought to my left.

You mentioned CEO CMO.

No.

Management once again a billion dollars of assets under management that John and while she's not class CRO, Chief risk officer of Citadel, and I might add a champion power left that if he didn't know already I know Wilson co CEO co Chief investment Officer E. J F capital, So I'm talking alternative asset management talking about what to do with.

And we're talking about the impact of AI, but crucially also impacts of talent right now within this moment and I've got a little bit of a comprehensive competitive nature as we all do in the audience on onset and might come on could romaine is currently interviewing on stage at the exact same moment. So we're going to make this formal fruitful exciting.

Good day eye-opening thought provoking conversation.

All of US can rise to the occasion, so let's talk a little bit about well this competitive space that we're in at the moment and indeed.

Well I don't know we've seen anything like this at the moment I spend my day in day out talking about on.

On the precipice of global.

Supply crisis energy crisis inflation up taking you know the sheer quantity of cash coming into the market.

We've never seen anything like it.

Halfway.

Is this a somebody who's trying to an unprecedented moment.

So thanks for being here everybody and.

It's a pleasure to be here.

Things conference Nick in terms of unprecedented if you take it literally without precedent no I mean, we have a precedent here in the U S.

Terms of borrowing or stimulus, there's certainly precedent.

If you think about what's new extra about the current period I'd say.

A number of things the scale of the borrowings that is unprecedented.

The timing, so highly likely that its coincident with a cyclical upswing.

Highly likely that its coincident with the initiation of a new commodity super cycle and.

The the context.

Yield starting from from all time lows.

And I think you know, we probably get into some of the sort of social things today, but another important one is the context of and investing community behind bonds have always been the things that protect your portfolio.

They protect your investment equity investment there not the things unprofessional risk manager then all the things that all the danger in your portfolio I think so I think that's that's you know, perhaps and inflection point now and then you know in last couple of things I would say is.

Fads that for the first time is starting to talk about things like being worried about.

The Soc.

Social inequality.

Also now they truly believe that that they've worked out the Philips carbon it's flat. So there's just there's a lot of ingredients in the mix I think that that really on you but look.

I'm in risk and so what do you do about that it's it's.

We're not here to just pontificate about these things.

So I think if you think about the past it took my inflation, probably a five year inflation. If I say to you you know what you think it's going to be a pre 2014 or a post 2014, nobody can have a valuable discussion we can make.

You know, we can make a scenario about that but if you can talk about something else for example, green energy and in Germany likely being out of the coal business in a few years.

Paul if past is prologue, it's very dangerous you're going to you've got a very kind of wrong answer that.

Many of us trying to find the data.

Ted with which to analyze that.

Scenarios to farther than what we could look forward to them and of course, then make you know efficient market decisions off the back of it Gary you, you're a man and says about the data data junky.

What are you reading at the moment in terms of is the data telling you we're at some inflection.

Inflection point across that and I thought.

So thank you very much for having me here. He said my name well too. So that's great but data data Junky you did a few you know data is something that we thrive on and we just heard you know probably 11 different ideas and things that are shaping what's going on in the world today and as we think about it you know there's this consumption were.

We're all sitting here were jockeying around the you know the auditoriums around to try to get more and more data and information to try to have a view on on you know what's going to happen next and so I think where we sit you know theres. So much amount of data, whether it's regulatory filings or corporate filings or brokers.

Distributing a lot of information you have.

Alternative data that's out there and so we're trying to synthesize that and come up with a view and an information is something that we try to do and very much diversify what we the amount of bets, we make which is critically important because there's not just one nugget, but millions and millions of nuggets of information that are here and out.

Out there in the World and then I think the other key thing is when we look at this all this data is the ability to adapt in one of your first your first question was around that adaptability and and what you can do with data and being investor of practitioners is something that's critical to success in terms of navigating.

So with that.

But we.

Everything.

The right opportunities to set yourself apart to make alpha the amendment. If we are on this juxtaposition Oh, yeah. If we are seeing a wall of data that you can navigate southern nuances in the market and people have completely different views on as to whether inflation as transitory and not that that's not even debate what the word transitory mean, but.

Is this an area is this the time to outperform I know someone like when you go to Sigma and that's exactly what you're trying to demonstrate in the data.

Sure I think we would be remiss to say there was no such thing as a time to not outperform and we get paid to outperform so when I think of what Joanna said was is part of it is the situation. We're in today without precedence in my.

My first instinct was it was yes. It is unprecedented because it's the summation of all of those different things that she was mentioning have we had inflation before yes have we had social unrest, yes have we had supply shocks, yes have we had them all at the same time have we had them all at the same time with a pandemic.

So when we look.

At that and were very similar to what Gary was talking about we try to gather the data. So when I hear those things I think of what dataset can we use to incorporate that scenario into our decision making.

Then it is adding different things up it might be looking at 2014, a month, you're looking at the eighties, Mike looking at the seventies might be looking at different types of data and when I hear something like.

Transitory I have no idea what that means.

I know there are 70, <unk> sitting outside the L. A and long beach ports right now that's a scenario that we've never seen before that's not going to be solved in weeks, that's going to be solved in months, maybe quarters because of how you're getting the data on like the amount of <unk>.

Ships that are outside support at the moment.

The alternative data that is the most ripe for this amendment well I got that by reading Bloomberg. This morning, it's not exactly a person, but I mean, there are there are alternative data sets that we'll look at shipping traffic they'll look at the Singapore Port sports in China, and they'll look at how much traffic is actually pulling out of that I'd say that those satellite imagery that was fancy alternative data from 10 or 15 years.

Years ago, a lot of that information is priced and very quickly now it's not as differentiated as it once was but it takes increasingly high or large investments in technology to be able to interpret that data because if everybody has it more than it's not differentiated and then it goes back to your original question to me. It's it isn't a source of potential outperformance because it's already priced in.

And our view of that information is being generated at far greater scale than it ever had it's been priced and much more quickly. So it's harder to find those shorter term opportunities because that information isn't as valid or relevant as long as it once was.

It's been a pick up maybe on them because I think it is such an interesting one and it's so funny because my mind when exactly the same places like.

Maybe it's the singular theme that we're seeing in the marketplace isn't unique are unprecedented combination of them is and I think a really great example of that is just really looking at employment data in the U S and it's sort of the and I mean, the labor force in the U S. It's obviously been shrinking for a long time right. So if you were to look back and sort of chart labor.

<unk> trends I mean, the big thing that's been happening in the U S is that men had been falling out of the workforce force at unprecedented levels. So you know the number of underemployed a man that could actively participate if you go back to 1930 was about 2% that was 6% in the eighties, it's not all 11 and a half 12%. So that's been something we've been seeing actually.

Since 2000, so what's the and the and there is that now women are opting out of the workforce and in fact, if you look at women's participation back to 2019, and you compare it to where it was the beginning of this year, it's fallen by 3% and women's participation rates overall is the lowest it's been in 30 years. So when you talk about I think precedents.

And what is unprecedented and how we kind of peel the onion as to what's transitory and what structural I think it is this and yes, and and Neil you find the sweet spot around regulatory change within this I mean, what's been so fascinating about this crisis has been the reaction function of the fed becoming.

Becoming more nuance this isn't about just inflation anymore in interest rates. This is about the labor force is about inequality within the Labor force is about trying to think about participation rates and then now people worried we're going to have a policy mistake, because well, they're looking more at getting people back into work rather than perhaps the running hot of inflation. When you look at it from a regulatory perspective that.

Are you looking more at what the administration might do about labor right now or is it more about what the fed is we look at investing through the regulatory ones. As you mentioned Carolina, but I think we are in unprecedented times I think we are sort of an inflection point and why do I say that because when we look at the pandemic it changed human behavior like we were talking.

Before going on stage, how do you get people back to work how are people you know 30 million online accounts were opened in the first 12 months of the pandemic behavior has changed and so the government I always I'm not the original person to say this but certainly we're lucky we had the financial crisis then the pandemic.

Downtick because the government didn't know what to do the fed now lets do the treasury knew what to do there should be commended for their their reaction, but you put six trillion dollars into the system and your change in human behavior. So what does that mean, so we focus a lot on the banking system, which is kind of a macro player. This time, the banks, where the transmission mechanism by which.

The government put money in the hands of borrowers you know that the public space.

They stay at home Covid creates a fear, but it also created you know acceleration of trends like like I said like online brokerage accounts banking. So what we see as a fundamental changes if you're a bank, let's say you've had it in your family.

A small bank for generations, you now know you recognize that you're a horse and buggy.

Kind of a business in a world where the iron horse is taking over so what does that mean that means you're consolidating and because you can't afford you can't hire people. The two sigma can hire or world Quant, you can't get programmers.

You don't have the budget to do it you have to combine and then you have to also figure out a way to find a way to have solutions for enhancing your business and that's going to be the certain tech companies Fintech companies and that's why you're seeing such an explosion in that space and US you know for us as a business that's why we've shifted.

To work medically from the old Horse-and-buggy banks, even though that's an important area of our business you got to move into the Fintech area, because that's where the trends are that's where the hockey pucks going talking attack. There was a QR code took a global pandemic with QR codes to suddenly become relevant it feels okay behind us look at it open.

So dramatic that it takes you to an awesome question because it isn't all about participation in this realm as well so he used to make their voices had and get questions up to this wonderful panel and I'm I'm interested in sort of as we see this fintech Revolution, you yourselves I mean, your whole business has been about embracing.

And they analogy embracing the data but also.

The talent within which to ensure that technology is used to the right kind of degree and I'm interested as to.

Whether you'll seeing China for example.

When youre looking at from a risk perspective, how much that sudden wall of data on the use of automation AI.

Thank you.

You'll you'll job negative.

So I I don't know whether people here are aware of the risk center and Citadel or you know the Big War. We have if you know that go into the website instead of a website I think it will give you a nice little virtual tool.

But you know our multi strategy funds, we have two businesses.

I'm from the CRA for both but let's talk about the hedge fund you know that's that's five businesses, they're very different global fixed income for equity businesses, our corn strategies business credit converts commodities and so you know how you bring all of those things into the tens and that's always been something that's very important to me I don't.

Wanted to talk to an investor and say.

This is the risk of al phone, Oh, but it excludes mascara when you call. It really include that in commodities doesn't fit so well. So you know how would you sort of bring all of these things in as has always been a very core part of what we do and the understanding of it. So I think you know we combine our fundamental understanding of each of the businesses, but it's.

Really important to pull them all together.

I would say one of the things that you know talking about financial technology. Since I started at Citadel, one of the things I've been very passionate about is actually moving away from vendors.

And really.

I won't risk software that is designed by us.

Paul.

US built by Us and.

There's this but a big part of that is another decision we made during the pandemic, which is to be together in the office at all times I listened to the CEO of Coinbase yesterday and she spoke.

With such a singular sense of purpose about their remote model. We see the same we you know for US. It was it was very different.

In 2008, I became a C already for the first time it was a tree battlefield promotion, but it was very formative for me to kind of be in that room and watch people at Paul Tudor Jones, another senior P.

Listen to what they were saying and how they were reacting this time around I felt that a lot of my junior yourself missed out on that but the senior people of Citadel we.

We decided to to be together I'm not cross like close discussion Hey, what are you seeing in credit what are you seeing in equities you know do you.

I think there's a miniscule.

And as I'm about to happen in bonds.

Explain commodities to everybody in the room, Yeah. We we had all of our heads of businesses and that was very transformational I think for us Chris.

Chrissy I mean, you've spoken about this.

This shift to.

Some sort of flexibility whether or not that's the right thing for each business are not where they were in house I mean.

Schema and people put on a tie, but I kind of imagine the last time that you put on ties we have shifted in the way in which we work at certain businesses of course feel that they need to be within to be next to each other how have you felt that'd be my yeah.

Yeah. So I mean, you know we were talking a little bit in the preamble to this comprehends that that in some ways. If you kind of look at where how people.

I'm very pandemic it was either all in or all out of the office and I think that was probably the easiest way to do it right. So if everyone is out of the office everyone is relying on remote means of communications, then you actually get that kind of coalescing and sharing of ideas. It just happens in a virtual format as opposed to being in the office and he found that efficient we found.

But suddenly we found it very effectively at 100 people, 100% of people out of the office and manage money very effectively over the course of the transition period, but to me that's not the hard questions. The hard question is how to hybrid right. So and when you begin to think about some people being in and some people being out it raises all of these questions right and the word that.

They should think about is curating randomness and I thought so much about about Joe in his comment there because at the end of the day I. If I look back on my career and I think about maybe the most interesting things that I doubt the most penetrating ideas that we've been able to put forward. They didn't happen in the context of a formalized setting are meeting they happen because you were reacting.

I O in the moment to a client problem or a client issue or because you happen to have a sidebar conversation with someone that you might not usually talk too sort of passed by your cubicle.

We're going to talk about diversity, we're in talk about flexibility I know a little bit later in this panel and I do want to put a pin there because I didn't get a similarly important that we'd figure work life integration.

Issues out and we use some of our experience in COVID-19 to do that but I think our challenge here is going to be you know how do we use technology, how do we use different ways of exploring how we work in the office to make hybrid are as effective as sort of the all in.

<unk> model and by the way I don't think we'll get it right. The first time I think it's going to be an experimentation process, where we try fail try fail try fail them. So.

So they're really important topics cause or how have you found the ear of the pandemic thing.

And a way that you've been able to think.

All uniquely as a team within the stress tests of being at home or in have you found that things have changed now that perhaps are coming into the office a little bit moral.

Uh huh.

We're probably closer to Christy than then the citadel. So we send everybody home and we took them home for quite a long time and I fully agree that we knew how to work.

We figured out quickly how to work apart, but the hybrid model is going to be the one that's going to be more difficult I think in it.

We want we obviously weren't lucky that the pandemic happened, but we're lucky it happened in 2020, instead of 2018 or 2016, because the technology allowed us to do things that we couldn't fathom.

I used to say no to any video conference three or four years ago because of it.

Detracted from the experience you know it was choppy you couldn't see anything you're looking at a conference room full of people you didn't know who was talking.

And I was actually at a conference not too dissimilar to this with the CTO of zoom back in 2019, what's do I hadn't even heard of it at the time.

Yeah.

And when the world build good meltdown.

Together I mean, not only could we have the technology tools to interact with people, we had enough bandwidth to be able to do it all at the same time I have three kids on Zoom School me in the other room trying not to do things in.

We found that our are quantitatively measure productivity stuff went through the roof and some of that was a bit of anxiety, we had nothing to do so.

Meltdown opportunity costs, but we're still seeing them quite hard.

It actually hasn't gone down from 'twenty to 'twenty to 2021, but we do know something's missing I think it's the it's the walking to and from the meeting where you catch somebody frankly, it's the exposure for younger people to more senior people just to help them as mentors and that type of thing that we're learning.

So it wasn't back to the office floor, but I've gone back with a few times that this is definitely the first time on where to tidy or in a house.

The second time I've worn Sox, though.

But if I go back into the office and you should take a little bit of risk and we're all comfortable we wouldn't be here, if we weren't comfortable with that level of risk, but then if you're just going to guess your desk and log into a bunch of video.

Together with and what's the point, yes, so there's a bit of a chicken and egg and we do know that as the senior people go in and magically. The more junior people are going to start showing up so we're trying to find that balance, but we're going to do an experiment for some time and where they can do it to Sigma does we're going to collect the data see what we're trying to measure the connectivity of people within the company.

Called the niche or things like relationships very difficult to do a subjective, but we'll do our best and we'll try to pivot to see I'm trying to do things that worked the best going forward, how can I think Gary I mean of course when.

When you're focusing in on the data what's your what's your data collection stress test it in any way when people working from home or indeed have you been using you know.

Tried amazing, which you analyze the market to analyze their inefficiency at work yeah. So so I'd say, we had a little bit of an advantage in that we have 23 offices around the world and so we've been connected since the firm started back in 2007. So I think we understood you know continental zoom and how do we connect to our people I would say, we do that in a number.

There are different ways you know.

Ton of surveys, where we're listening to our people and how they're doing whether it's an investment type issue that will ask asked all of our employees about or how their work life balances or whether they want to be at work and so that kind of activity. I think was was pretty you know has been very useful for all of our people to feel.

<unk> engaged I think the other thing that we really tried to do is build more and more transparency into what's going on at the company. So we continue to drive culture around the firm I think that was extremely important.

And I think you know pushing.

Pushing our managers around the globe of trying to innovate and just do different things adapt and so you know I.

Think about.

Somebody one of our general managers in India. He is Friday Fry arms will actually go around an interview a different person every Friday in the team and just a share and you know what are your favorite movies. We just get to know the people that you would if you were working and going to a water cooler or out to lunch, but doing that so that the whole team can kind of appreciate.

You know, what an interesting individually and get that kind of quality of of the culture of the firm and so you know it's a favorite movie what's my favorite movie Gotta be Shashank redemption thinking.

And your favorite movie as well at the moment, it probably present too.

As a parent of young women.

Well it was better than the original it definitely was I'm glad to see me on that now.

What did I Miss something trilogy, whereas.

Number three Luckily I can't sing along Neil you'll perspective of how you've thrives with cultural perspective.

Look I think the irony is that the people who need to come in the office.

The most are the young people because as you know, it's going to Joanne as point Christie's point, but I I really.

When you're looking at the younger generation and I have a fair share of millennials are children. They want to be more flexible they want to be you know be able to be remote and not be chastised. They don't want to have to be at the 830 meeting.

Meeting they want to work till 10 at night, they want that flexibility. So that's the irony that I see and I think from a culture standpoint, we were much we're much more on this citadel spectrum in the sense that we've had people in most of the time and we're in the state of Virginia, a little bit more open but.

But we did you know you did mandatory testing and and I think culturally I think we did hold it together.

But it's been a challenge and I think the hiring going forward, that's the part I didn't.

That's a really good point I mean this is the people you have in your walls now.

Nobody on this stage would say that that's it's necessary, but not sufficient for your business to continue to grow and compete and so you know these periods.

'twenty 'twenty and early 2021.

I'll be honest because it was a hiring boon for us and I'd love to kind of talk to the <unk>.

Morgan Stanley and Goldman Sachs, and say I can tell you about some of your people would never taken zoom meetings for an interview with quite a lot of the people on this stage, but hum.

So from that perspective, it was great, but but you know I think one thing I noticed I interview, everyone who comes into my Department No matter, how junior senior what they do you know these it's at that stuff sort of hiring blip in going forward.

Sometimes it was a bit transactional because if it didn't cost people much.

Much to go to these interviews, sometimes it kind of felt like being on a you know.

Like a date, where you didn't care, whether it worked out or not it was very you have to be very just you know you have to kind of have your own radar about whether somebody was very motivated to move when you're trying to get people to move you know how do you overcome the.

Personal connections they have to the place where they ought to come to your place you know where you're just a face on a screen maybe so I don't know if anyone how.

How youre hiring run through all of this and what do you think that's the model going forward like I said, one thing I'm sorry, Kurt So the other issue is that you learn that you a lot of what of your workforce.

Workforce live alone this was disastrous and it then you create these artificial hierarchies like well, it's easy to have the accounting team stay home. So you can have more social distancing, but the portfolio team has to be collaborative and has to be in the same room and I think those are challenges. Those are things you have to break down because.

I don't want to be you know in the wrong Department you feel you're not connected to you you'd be surprised people, who are in accounting or and in other parts of the firm administrative they want to know the direction of the firm they want to know what you're investing in they actually what they they care they have a stake in your business and so these are challenges that I think we're going to all have to deal with.

With us on the panel sorry to interrupt partner.

Youre, describing culture and it's one of the things that's challenging is bringing culture to life when you're in a remote environment. You can try to do some video things in the the Friday Fry them that sounded scarier than it is but that doesn't bring to life when you're in the it wasn't frozen two but okay.

I don't know.

But I think just quickly the barrier to exit has never been lower so it's easy to take an interview you don't have to actually go to your manager and say I have a doctor's appointment or another place thing I mean, I, even think when I'm old enough that you just have to call in sick to work and then people would email and now you're doing yourself quite a well.

Okay.

The gray hair.

But now you're just like you just set it up in your day and you just mark it off and you switch you know maybe from your work machine to your personal machine and then even if you're you are residing it's a lot easier to do over a video call then having them uncomfortable feeling of going so I just think it's become more transactional and I do think we have to take that into consideration when we think about.

What are we offering the employees that we have to entertain them and what are we offering employees that we need to attract them and that's definitely going to be different going forward and I guess, that's where maybe I would step out and say that you know I was really fascinated to see over the course of the pandemic how much our employee engagement scores went up rather than down.

And I'm showing that what we would.

Frequent surveys I ever employees, just to keep them on a number of branches statistics, and we would be able to compare it to employee surveys that we've done in the past and then of course to the immediately preceding survey and we saw really consistently high levels of employee engagement and I think the reason for that and I think it is really important I think it's because the pandemic.

Do me.

<unk> really gave life to a new way to lead them and you know I don't know what the right word for it as you know I call. It people centric leadership.

Before you know the office with this great homogenize or everybody's sort of came in and they have the same computer and the same just set up in the second cubicle and then all you have to do is just look at the background.

To make between you know behind peoples zooms.

The interference that happens with some people and not others doorbell dog babies like and it forces you to this just realization that managing your people is not managing a corpus it's managing a set of individuals', it's seen them as a whole person and I think the pandemic really well.

Do that it forced us to recognize that there is no short hand for connecting enter personally with your people for understanding their whole context, and managing within that and so the biggest risk that I see as we think about retention at BMO is that we take that short hand again, you know that as people come back in the office.

We use the power of that individual connection because it does take time and I think it is truly distinctive from from what we did in the past Gary you were mentioning you know with 20th relocations, you're already pretty savvy. When it came to having a culture of cross border is an audience question, saying you know.

From a large.

Maybe they claim basis and some other companies that have gone fully remote they might apply to visit the hybrid model is a waste of resources at this particular paas and all that not all the way if companies can maintain that culture. So when you are thinking was there a reason why you haven't decided to just sit here and then what was it that you needed to have in the location and what what is it when people off.

You want a high talent and in Texas or in a different locations not New York and then the other main hubs how do you make sure that they are involved as others who are in the office, that's where I think theres a couple of things one.

People touched on a lot of great great topics here.

One as you know and acculturated people transparency of how the firms doing you mentioned the accounting folks are illegal.

Folks and making sure they're part of that.

Our CEO has said it many times and rightfully. So is that intelligence is distributed evenly around the world, but opportunity is not and so being able to provide people those opportunities now that being said theres a balance its a very careful balance of what people want do they want to come into the office.

Do they want to be part of a team environment and you know when you go to lunch with someone and I think we've really tried to listen.

To our people and through a lot of surveys.

We want to listen we get frequent updates from our people about what they're thinking obviously abiding by proper regulations, but we wanted to give people the opportunity to.

To come in and spend time with their fellow employees.

Which I think is you know it is the right way to manage this situation, which as you know there's there's talented people all over providing them an opportunity to be successful and if they do want to come in.

Be able to have the you know.

The area to do that so that's why we.

We've got 23 offices.

And try to create environment, where we're really listening to our people as opposed to forcing them and saying youre coming in three days a week no matter what.

You know, we're really trying to provide that flexibility I mean, all of this of course comes to that.

Get the talent the retention of talent and also what the best decade for hedge funds.

Wow.

Yeah for hedge funds and a decade I'm pretty sure that fear is you're saying you know exactly what Goldman Sachs Morgan Stanley banks are doing on the I'm gonna seem to use a large extent Joanna but what are you what are some of the extraordinary ways or having to present to candidates to get them on board you don't have to do that or are you finding that you're having to of a more of the profit.

Towards them when they come on as the hops traders within you is is it sort of becoming more of a quick to get people on board.

No I don't think so I think it's always.

Everybody on this stage will will will stay the same but now really leave it but you know we want we want the best people.

And the best people always have choices and so you know what was used to dealing with people who are.

Either that come in place is going to want to retain them or they'll have other options I think.

Firstly before mostly we want to focus on generating.

Fantastic.

Take risk adjusted returns for our investors and you know there's there's nothing succeeds like success. It's it's you know it's a trite thing to say, but it's true people love being on a winning team. So you really have to understand how you win.

And you know and instead it out it is a place of.

Great learning agility this high expectations, but there's a great you know meritocracy to the debate around investing.

Operational risk, what's the best way to run our enterprise bits of the firm how our engineers.

Our integrated with it.

And.

No.

And some of those moments, they well actually arise out of out of assignments I've found in many rooms.

Can other people and we're just sitting there in silence for five minutes and nobody feels particular need to fill out silence, because we're thinking about something and to watch that's a very natural.

Natural way of how we work you know to be thoughtful and to be challenging and that was just so awkward and alien for us when we were not together and I think you know when I interviewed people. The first thing they say is.

You'll such a presence and named.

Our market you know you have such a reputation for trying to be best in class in a certain thing and that's not just on the front office. So no I think that there's there's been.

That has to be a poll people have to feel like pull towards you as well does that push from wherever they are coming from and.

And.

Our results and what we do and us being out there, saying this is the Korea, we're going to offer you and we're gonna be that shepherding do you see it in person I think you know that's that's proved to be a big pull for us cause to pull people in our two largest end we're seeing you know an anti.

Todd trade of teams, joining sudden hedge funds and that being all said well, 8% to 20% in terms of pay out that there are suddenly all the instead of pass through fees to recoup some of the cost of getting on the winning team that you're gonna high is that is that good for the investor.

Oh, we have a very different model.

There are plenty of firms who use models like that have been massively successful both in the near term or short term last year or over a decade.

We think that innovation comes through collaboration so we want to incentivize people to work together, we don't want to have individual silos.

I certainly agree with the points made that people want to join a winning team.

I think back to what Neil said about millennials and what we found is that as a prerequisite and I completely agree that the best people have compete.

Competing offers and you do have to present more than just the best compensation.

People are asking what is the purpose of the company what are the mission what are the goals how do you support things outside of just the business.

The objectives of the company in ways I, certainly think exacerbated over what happened in 2020, more so than perhaps what I with a 25 year old.

And different options. So it's not just about hey, we'll pay you more I'll give you the best option I think.

It's a highly competitive market you can't paint less you'll probably end up with.

A weaker team, but it's not it's just one piece of the puzzle to us So it's who you're gonna work with how you're going to collaborate what types of problems you're being asked to solve and then some of the bigger picture stuff about what went to my colleagues what are they going to look like how can I learn from them and how can that ultimately how can the company reinvest in me as an individual to make me better Christi water.

My colleague Gonna look like.

Is that is it reflective of me although women all the people of color is that diversity, that's something that everyone's had to confront now announced himself and soul searching questions. Because this is a health crisis and economic classes and social crisis.

As you know thinking about what you were saying you've got thoughts on divesting.

Inclusion of any really passionate about it.

How have you been able to not just talk the talk.

So you know I would say first of all you know I think as you know and asset management industry, we really need to ask ourselves some very tough questions about the representation of females and people and culture and people of color.

Well I haven't seen probably the most recent statistics.

Several years ago with Morningstar did a study and really that was globally and they looked at the number of Pms that were women. They looked at the number of analysts that were women's specifically and about 11% of named P. M. So I went out at about 13% of analysts. If you look at the asset management generally you know Gen asset management industry generally not just at obviously people who are you know.

Practicing.

Investments I'm, if I'm the only one in five people in senior management and it is a woman and it's the only area of financial services that it's been retro aggressive since 2017 in terms of its pipeline. So I would say I think the thing that we've done at BMO, which I think is distinctive as we've looked at.

The problem very Holistically like we don't look at just what's happening inside our organization, we actually supposed to take them much more macro and global perspective. So it's not just how do we create people and get people to work inside of our organization is how do we support women and people of color as entrepreneurs, how do we ensure that they have access to the kind of capital today.

To actually grow and managed businesses and it gets to that whole notion of authenticity wished I think Carter was really hitting on when he talked about purpose. You know at the end of the day I think people are looking for you to say what you stand for but they're also looking for you to kind of pass that test up and down your rank and so I I think diversity is a critical element of that.

The other thing that I would say is I keep waiting for the tsunami here and maybe I've just been in asset management, too long and seemed to little change.

But you know I think we have to be considering what our social license to operate looks like into the future. I think we have to be considering who comes into our business and actually actively disrupts it because if you.

Look at it statistically we're just all wrong on diversity, and we're not making enough change quickly enough I think to really secure the future of our industry I think I think that that's important.

My son, I think Neal what's interesting is it does become a moment why we're not your employee stakeholders not just employees.

He wants to know what you like what you stand for what you invest in it the investors as well want to understand who they are investing in and also what theyre investing in and that sort of dovetails into this the environmental as well as the social as well as the governance and there is a fear out there in the amendment that I use that for the moment.

Does he phrased greenwashing, how how are you using data at the moment to be understanding that ESG is within your portfolio and then it's true it's actually what the dates are saying if I could just go back to what Chris has said about diversity.

Diversity, and then I'll and then I'll answer your question if that's okay.

So you as a firm like you have.

Two in.

In order to have changed because like for example, I think the statistic is half the law students are now women right that that's a change from when I went to law school way back win so change can happen and you have to believe it but you have to also consciously take steps. So you know we have a health room, you can have a doctor on staff so that that person.

Can help navigate to a specialist we have a vacation policy I believe somewhere but I have no idea. What it is we don't care like so if you're if you're a mother and you want to you need it you just need a day.

You don't have to explain it to anybody just that's the way that you can work virtually and you can call in so you have to and we we put women and all the.

At least one woman is on every board of all of our products. So you have to lean in and you have to take steps, we can do better and we do track how many women we have how many people we have a color and we reported we were fortunate we have gone out to the ESG question.

We have European clients, they demand it and and so.

You you need the you need the investor base to demand. It you need your workers to demand it and and I think that's how change happens. So what we do in terms of ESG a I think we do two different things. One is we're invested in opportunity zones in the real estate side and we see from our first fund our.

The board and we have put in we brought in consultants and we actually track. The data. Various says you know very specifically and I think that's in the government has to help their the bite administration has talked about requiring certain reporting metrics totally applaud that that's how you get change. The other thing we do is we know we.

Advocate you were in Washington D C.

We've advocated and we actually in a lot of credit goes to my partner Manny Friedman who's more expressive than I am on many things, including this topic, but he you know we work really hard with members of Congress, including Maxine waters, who deserves a lot of credit.

Two.

Push in our program and Treasury for minority depository institutions and community development financial institutions C. D. F EIS and that is a that's how you get changed you know you have a crisis.

Winston Churchill Rama manual doesn't matter you have to you it's hard in our system to you need consensus.

That's why it's you know that's how our government has set up any massive consensus or a crisis that that's foments consensus and that's what happened. So that's how you can finally get this kind of legislation in and create programs that can move things forward, but I think it's a combination of your employees the government and investors and investors I think particularly in Europe.

I think we've done a very good job pushing us to make change and pushing people like us to make changes sorry for the long winded answer no long winded at all Gary I think this is something that you've thought deeply about it you know who you're investing and how you're investing.

It's the very first question that people are asking right now.

Thank you.

In terms of you know yesterday, and even even broadly I think the.

The issue has been it's been a you know.

Readily topic for the last months or years I think one of the great things that was touched on is the disclosure of more and more data companies are being forced or being told that there needs to be more and more transparency into how their business practice.

Practices are what they are.

Mental footprint, what type of emissions that they're doing and I think that will be you know for a group like us and potentially for for perfect Carter.

<unk> is a great thing of our bags. So we don't have to go in and get the gory details and speak to every single company, but rather there's more and more legislation going on of what pieces of.

If data are important and informative and that feeds into the various ways that we can analyze that information and kind of comply with any E. S. R. G will really find signals of whats not necessarily reflective reflected in prices and so I think that's a phenomenal trend again Europe has certainly started.

Youre seeing a lot of this in in Asia.

You know people are adopting more of these principles and so I think you know that.

That is a trend that's here and I think there's just a vast amount of you know with that data to be able to create different ways of trying to extract value out of the market. So I think it's a phenomenal trend that is.

You know certainly here to stay and the other thing I just wanted to point out in terms of yeah. The fight for talent that we talked a little bit about you know one of the things and bringing their authentic selves and educating people. We have the good fortune of having you know a little over 700 quants that have roughly about 1400 degrees. So they're used to being trained and.

And I think you know as we train people on technical acumen and different AI or techniques. There's also training them on how do they adapt to a workforce how do they think about bringing their whole selves to work what are the proper things to say and not to say.

In terms of how they're interacting with people and so I think you know investing in People's whole self.

<unk> not just their technical acumen, but also you know what they bring to the table how do they how do they adapt how do they react and what kind of things are are appropriate in a workplace and what's not and I think you know trying to trying to educate their whole selves as something that we spent some time thinking you're back to talent Joanna interesting at the thought you were saying you know.

You want to be more software built in how he wants to be able to own that process largely from a risk perspective, but just in general and another question from the audience, saying front office roles, but also back office trade as analysts.

How much do you think will be automated in the next five to 10 years is how how much talent do you think you need to bring into your.

Yeah.

On.

On the risk side.

I would say you know why was a younger person in this job and when I first started leading teams.

The production side I, you know producing a risk report that that was a it was.

One of the job, but some people and maybe you know in some banks. It is a job I personally don't believe it is a job and and so you know one of the things. We've been doing is saying look I I actually want to spend less time on production I wonder.

And sit it out from the risk perspective, but if I speak to my other colleagues.

Lakes they they they would they would can come we all want to build as much intellectual property as possible that so that doesn't mean, you're a whole process in your whole what flooding a whole understanding even on some spreadsheet that when that person walks it kind of like we walked with them like brakes. The next day, which always seems to magically happen.

As a policy you know.

We then sit it out certainly within my team. We're all about building intellectual property risk I'm not means codifying that enshrining our processes culturally how we believe we should do risk and I'm, putting that in workflows in our software and I know the same thing happens with my colleagues in.

Treasury in how we manage the liquidity of the firm and how we think about operational risk. We are a pretty big hedge fund and that's something we we we you know we do think about but in our own way, how we think about.

Reputational risk, how we manage all prime broker relationships and optimize those for.

Our counterparts as well as ours. So I, you know having people who really understand.

Having having engineers software people, who you go to them to say Oh, you know you know I wanted to do this and you give them no idea of your workflow and you're not going to get a very good answer to.

Your solution. So you know for US My team is three groups of people its risk managers, who are domain experts in market. There are quants, who will go away and so you know I can't get my one of my risk managers, a two month homework assignment on something if it's something heavy quantile home people will do that research.

<unk> will work with them. So it's a really I know that's exactly how it works in the other bits of the firm and so we you know we aim to create an entire workflow.

We've got about seven or eight minutes left and it was always going to happen.

One kind of off of that type thing and and Neil you started by talking about fintech and the opportunities that disruption.

And our regulation that you see I mean, there's this question comes in attending them a seven kind of panel comment on your view on the future kept him market to what extent, you'll find us exploring budgeting space are you exploring it and given the regulatory well talk of regulations.

No. That's it's a great question. So we we kind of have a picks and shovels approach if people want to.

Mine gold, great, we'd love to invest in companies that sell the picks and shovels. So what do I mean by that in the bank context, it's banks as a service and this is an emerging trend. It's been a it's been a great theme for us and I am not going to name specific names, but the banks that are basically they have a bank charter, but they are.

Not really truly a bank the regulated.

One in particular, a couple of them in particular focus on you know the block chain, you know payments and block chain trading. So depositors can go to that bank and then trade very seamlessly on the crypto currency exchanges. The bank doesn't have to pay any interest for those dollars.

Dollars 99.5, and in one case per cent they pay no interest on deposits because the depositors there because they want the bank charter and institutions to facilitate trading on the exchanges online gaming online gambling. Those are all those banks that just focus on these very specific areas, they're not they're not putting out mortgages and not.

Doing auto loans, they're focusing on specific emerging technologies in crypto is a big one. So that's you know there are some issues in asset management about custody in crypto and that could create some issues and I'm sure everyone has the view on the panel, but we find it's more important to just focus on picks and shovels and and the convergence between the regulated world and.

And the emerging.

Merging areas and behaviors by by frankly younger people and millennials and wanting to trade crypto right. So just focus on how do you sell picks and shovels.

I think needs. His question is he wanted to panel hasn't yet had a conversation about.

<unk> been asked a question about it.

It sounds like we will rather be off more and more questions. On this subject what questions do you want to know have while you'll hear it Mel can walk for you Carter is it's only all top of mind. What is worrying you and what is exciting is that you want to go.

A lot there and have a conversation that called out either later this evening.

I think it's the beauty of milking. It all comes together and we're always encouraged as attendees here to go listen to paddles are experts outside of your field and I went to a dinner on Sunday night.

Blown away about how little I actually knew about what's going on not just in the V seaworld, but specifically in biotech and obviously.

The pandemic has brought that to the front of all of our minds and I do love coming here because immediately we might start thinking about well how can I gather data on that we might start looking at how can we invest in those things, but all of you the social issues building better diverse workforces to me that's all about improving the outcomes that were hired to do for our clients.

And.

I, just love, having that collection of data through conversations we're gathering data the old fashioned way here through conversations I didn't realize how much I Miss that until we started having it again, so when I think about cocktail hour Tonight, I love coming here, because it'll be an expert in policy an expert in health care, you know someone that we compete more directly against in the investment world.

All with different perspectives and our view is that that's how you're successful at creating a 360 day review of all of these different pieces of data that will inform the future prices of securities and how can we gather all of that put it into our process and hopefully make good solid predictions of the future.

Rather than going and this thing about the future of Psychedelics for example, what.

What are you focusing in on what what are you passionate about or worried about.

Yeah. It was I was a little bummed I missed that I'm talking yesterday about this.

It would've been fun, but it was my first time, so I'm, a newbie I think like yourself as well, but you know there's just such a great Buzz big focus on diversity I think.

You know we went through a great panel yesterday with one of our own from Walmart University, and just where is education in terms of you know there is such a focus on you know we have an online.

University that has a master's in financial engineering, and where is that relative to what schools are doing now even the gentleman from UCLA <unk> talked.

Well, maybe it shouldn't be a four year program. It should be a three year program and just a lot of the flexibility of thinking about ROI of education and whether it can be done online.

Even more efficient way, we certainly some of it is piqued my interest in <unk>.

So yeah, it could owe British way. Meanwhile, cause me what are you thinking about Tonight.

Yeah, well you know I.

I guess I was just actually the same that you know I think one of the wonderful things about milk and milk in it that you couldn't possibly predict the conversation that youre going to have ever dinner last night I sat at dinner and I had a woman that's all make around one sided philanthropists around the other you know a fascinating conversation about so many things and probably well that's interesting.

Things like you know how you could use documentaries to really you know.

I think elicit a much deeper amount of emotion around climate change just a fascinating conversation, but I guess, if you asked me kind of where my personal passion is and I think it probably is not surprising given some of the commentary that I've made on this panel, which as you know I am extremely concerned about women in the workforce.

I'm concerned that one in four women is considering opting out I'm concerned that survey results show that over 50% of women or are at least on the verge of having a mental health crisis because of the multiple pressures, which have fallen uniquely I think two to women over the course of the pandemic. So I'm really hoping to continue.

For us there's conversations I think there are things that we need to explore all of our solutions to be have I'm sorry, other solution to be had that you see.

I do and you know I think you know one of the things that I'm thinking about right now as you know what's the release out about for women you know do we need to consider some sort of sabbatical program for women to catch their breath.

You didn't look like how would it not set them back you know, they're just you know I think we have to be very creative about solutions and I think we have to very much confront the fact that while COVID-19 I would say in our industry dramatically increased our productivity and I thought some of his thoughts that Carter's shared where were very powerful and that did not come without a cost and we have to figure.

What would that need repair I think the fabric of the work environment and the integration that that women need to search out and find in terms of their work and life.

No I think I was going to say so I have five daughters for whom are working age and they have each individually separately.

About how other pulled me aside and said dad you have to realize like I have really nice you know people, who I work for but they'll say some things that are just really offensive to women and they just don't realize it. So my solution to the extent I have one and I think it's a challenge for folks like Gary and Carter and myself.

You have to give a your employees like have someone come in your office close the door a woman and say you know.

How are you finding things here no holds barred tell me exactly how you feel about things and I think because you have to educate right. That's how you have changed and so hearing that from my daughters as is.

You know, it's an epiphany five four times over but but I think that doing that in the office is really really important and you have to you also have to strive to put people in leadership roles that are that are that are women and because they have a you know there's going to be a different conversation as a result, any women like christiani women like Joanna has the leadership role as a female.

Mt.

This is all of course, and what are you gonna see cat in terms of conversations and I wonder what bearing into your mind that you're worried about or seizing an opportunity on I think look my just by virtue of the people I've been around I've been very familiar with the role of philanthropy and how that can really get things done in a very direct way.

Way I'll finish where I started in very quickly.

Talked about the scale of this deficit.

And you know with with a biden government like the huge all of the government and in this country I'm not least as you know they buy all the bonds that.

Do you think about some huge spending program.

I think you know interacting with with some of the government officials I spoke to child, well was it yesterday as well you know a couple of things like that.

I really would love them to be to continue to educate themselves about about some of the you know the businesses in our securities business being one but you know just generally the retail investing phenomenon I think.

I hope that they spend this money wisely I think they have like one shot to eat to lead an amazing legacy for future generations of this country and the other central banks around the world in the same position or to leave like a huge burden that that people will never be able to get out from under.

Whether that's you know.

Body paying taxes, whether it's a you know any young person a man or woman and so I think you know this having seen having seen a philanthropic side of it having some exposure to the the government policy side of it and I'm, saying, how you know both of them can get the solutions, but but I think.

The U S is on the precipice of needing to to really get this one right and I hope they do.

So if you find any of these fine panelists Tonight and you have some real thoughtful policymaking focus whether its policy, whether it's divesting whether it and coming together have come from it at all.

The mouth, but for now I think it's been touched.

Joy to be on that.

Religion, we need to be in the room to have this what felt like a very private conversation, but distributed to the masses, when nunes Atlanta and Christine. Thank you. So much constant Gary what are you willing to.

We will give it out from kind of.

We hope you.

Enjoyed the discussion please make your way to the next session.

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