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Exclusive Q&A: Lela Prodani, Senior Investment Analyst, Mercy Health

by trusted insight posted 2years ago 3849 views

Lela Prodani is senior investment analyst at Mercy Health. Prodani began as an investment analyst at Mercy in November 2013 and was promoted in November 2013. Prior to that, she was a senior technical products and performance analyst at Mercer and an equity trader and mutual fund specialist at Smith, Moore & Co. Prodani holds a bachelor's in international business and an MBA from Webster University. She holds a certificate in investment performance measurement.  

Ms. Prodani was recently names to Trusted Insight’s ranked list of the Top 30 Women Rising Stars in Institutional Investing. She graciously spoke with Trusted Insight on August 8, 2016. The following interview has been edited and condensed for clarity.


Trusted Insight: Finance is traditionally a male dominated industry. To what degree does this still hold true?

Lela Prodani: My first job out of college was working the trading desk of a small legacy brokerage firm. When I started out, the majority of the financial advisors were men, and the majority of the back office were women.  All the trading events I attended were significantly dominated by men.

Even today, in the institutional investment area, females remain a minority.

That being said, I don't think gender is deterrent for success. By the time I left the brokerage firm, a couple of women had risen up through the ranks into positions of authority and power. You can succeed in this industry, whether you are a male or a female. Discrimination might have been more prevalent a long time ago but I don't think this is really an issue anymore. I believe any woman who goes into the investment industry to succeed can do so, as long as they have the drive and passion for it.

In the case of the Mercy team, our four investment professionals are equally split between males and females. I find this very encouraging and expect to see other teams follow suite in increasing diversity.

Trusted Insight: Is there anything that the industry could do in general to foster engagement of women into the industry?

Lela Prodani: Yes. I was actually just talking to Elizabeth Jourdan, our deputy CIO at Mercy about ways to increase women’s engagement in the industry.  She is part of an initiative at the Saint Louis CFA Society that is working towards encouraging more women to join the investment profession and pursue the CFA Charter. There are both male and female members, in the group.  

They are thinking about various events they can do – ranging from getting together a group of women investors to talk about topics like negotiation skills and career opportunities, to organizing social gatherings where members can share their experiences about what it is to work at an investment firm or have the CFA designation.

I feel like whenever we talk to women, there are not too many females that play golf.  Whenever there's a business event that involves golfing, very few women want to go. The group is thinking to organize a golf outing & clinic, where they could have someone teach some basics and golf etiquette before the actual play. This could help more women participate in business events that they otherwise wouldn't do just because they don't know how to golf.

I think we should also gear these events towards college students - get them educated and excited about pursuing careers in investing. Increasing awareness is key to getting more people involved, especially women in the industry.

Trusted Insight: The Mercy investment team takes a generalist approach. Can you tell me about the team dynamic and division of labor?

Lela Prodani: Right now we have four people on our investment team. Tony Waskiewicz as Chief Investment Officer, Elizabeth Jourdan as Deputy CIO, myself as Senior Investment Analyst, and Mike Werner as Manager of Operations & Risk Management. We also have an assistant, Beth Gray, who is the one that keeps us all organized. We are currently looking to add an additional member to the team, who will be focused on risk management.

As you mentioned, we take a generalist approach. However, our roles are a little bit divided. Elizabeth and I focus on the investment due diligence side. We are responsible for the initial screening of ideas, keeping close contact with our current managers, and monitoring portfolio positioning and exposure. Mike is in charge of the operational aspects of the funds. Tony oversees both the investment and operational aspects of the portfolio; while challenging us every day to think outside the box about innovative ways to improve the portfolio and proactively address issues.

While the tasks are a bit segregated, we constantly communicate with each other – we get together twice a week for formal portfolio review meetings, or more often as needed, to discuss the portfolio and make decisions.

Trusted Insight: What do you look for in an investment manager? How does that differ between public markets and private markets?

Lela Prodani: It depends on the asset class. For example, on the public equity side, we look for a manager who is very concentrated, different from the benchmark, and has a high active share. Otherwise we would go with a passive, liquid, and cheap option.

On the fixed income side, we have four different sub-buckets: emerging market debt, non-investment grade, investment grade, and treasury / agency allocation, all with different objectives. For example, the long term objective of the investment grade allocation is to provide income and modest principal growth. In this category, we would look for a conservative manager with a robust risk management system, focusing on downside protection and liquidity. Since we usually go the separate account route in this area (due to the liquidity concerns in the markets), accounts customization and flexibility are key characteristics that we look for in a manager. On the non-investment grade and the emerging market debt side, we would want to generate high income and capital appreciation, so these managers will have different profiles.

On the absolute return, we look for managers with low beta, absolute return focus, that are able to provide diversification and different return streams from what our equity or fixed income managers have provided. Of course, we'll have some higher beta and higher volatility names, but overall the absolute return portfolio should play a diversifier and volatility mitigation role.

Then on the private investments we look for managers that are able to generate high returns. On the real assets, it's a combination of things, but mostly we're looking for inflation protection and returns.

In general, we like firms that have an established track record and institutional presence. At the same time, we don't shy away from smaller firms that are kind of more boutique and focus on niche opportunities. As long as we are comfortable with the firm and the team, we encourage partnerships in first time funds, especially when we are able to create seed agreements and arrange good economic terms. 

Trusted Insight: Mercy Health practices socially responsible investing. Tell me about that mission.

Lela Prodani: That's such a good question. Right now, our SRI (socially responsible investing) has only a tobacco restriction, but we are going through an initiative to expand our social responsibility mandate. We are actually working with Mission here at Mercy as well to help us formulate good ideas and a good structure.

We have an investment committee meeting coming up, and we are preparing to address socially responsible investing, the ESG (environment, social, governance -- the three pillars of sustainability) initiative and approaches to the process.

These approaches could range from exclusionary screening (similar to the no-tobacco restriction that we currently have in place), to investing with managers that incorporate ESG screens in their process, to more direct approaches, like impact investing.  As of right now, we plan to educate the committee about the topic and its application. Once we have a good discussion with the committee about the way Mercy wants to approach social responsibility, we are going to implement it.

We have started conversations with our managers about SRI and ESG already. A lot of our managers do incorporate ESG into their investment process. Also, we currently provide a list of restricted securities to our current managers with separate account mandates (plan to expand this list further, beyond the no tobacco restriction in the future). As of yet, we haven’t done much on impact investing. We think social responsible investing is very important, and we're working towards expanding its scope.

Trusted Insight: Would you say social responsible investing is a fundamental change in the industry, or is it a fad that a few conscious institutions are adopting?

Lela Prodani: A lot of European investors have been engaged in SRI mandates for quite some time now. I think we're a little bit behind here in the U.S, but from recent conversation with peers, more and more people are taking on socially responsible investing initiatives, especially nonprofits firms or those with an affiliation with a mission or religious order. I feel like investors want to do something more than just invest, they want to impact the community as well.

One of the hurdles of SRI / ESG investing is that it impacts performance. A lot of people think that if they invest in SRI and ESG, then they are going to forgo returns. We have done some research in this area and don’t think this is necessarily true. We think that sustainable investing can provide returns that are in line with their respective benchmarks. However, as with every manager, we think manager selection is key in this area as well.  

Trusted Insight: Hospital investment offices, in general, are a relatively new entity within the healthcare industry. What role do you see hospital investment offices playing within the broader healthcare industry?

Lela Prodani: Healthcare investment offices comprise themselves of intelligent, innovative people always trying to get ahead of the curve. There is a strong sense of comradery between the different investment teams of healthcare institutions.  Whenever you meet at conferences or talk to our peers, we have similar conversations:  "Okay, what can we do better? How can we meet our goals and objectives in this low return environment? How can we find creative ways to take advantage of market dislocations and opportunities? Can we be creative and add value through more customized solutions, like credit vehicles, things like that? Maybe being seed investors with other partners.” It is not about competitions, it's more about sharing ideas and trying to help each other.

Trusted Insight: That collaboration sounds rare within investment.

Lela Prodani: I feel like at university endowments, there is more competition. I don't feel that in the healthcare. We communicate with other peers and share ideas; I would call other investment teams from other hospitals for ideas or questions regarding managers. “Have you talked to this manager?” They are very supportive of sharing ideas. We are the same, I really like this aspect.

Trusted Insight: What unique challenges do healthcare investment offices face?

Lela Prodani: Low returns are a big challenge. That's not just for healthcare. It's probably the same issue other industries face as well.  It is very hard to meet our goals and objectives in this environment. You would either have to go higher on the risk spectrum or forgo some liquidity in order to get more attractive returns. Sometimes, you don’t even get compensated enough (return for the amount of risk) by taking riskier projects.  It's definitely a challenge. In this environment, you have to work on reducing fees, or going into private investments to get the higher returns. That's not a challenge just for healthcare, that's overall, but the returns are definitely affecting the goals and objectives of the funds.

Trusted Insight: Who do you consider to be Mercy Health's peers? What sets you apart from them?

Lela Prodani: I would compare Mercy to other healthcare institutions in the $2-$2.5 billion range with small investment offices of four to five people. Teams that like to make independent decisions around their plans, but since they're so small, they still need to rely on their consultants quite a bit. Those are the peers that I'd compare Mercy to. If I wanted to differentiate our office from other peers, I would have to say that we have a pretty high allocation to alternatives, about 50% is in alternatives, and 50% is in traditional investments.

Also, while we invest with well-known, well-established managers, we are not shy of investing with boutique firms or unique opportunities. We engage in partnerships that might be more beneficial for us. One example is our seed investment in a high yield dislocation fund. We wanted to take advantage of the illiquidity in the high yield market. We proactively had several conversations with current and prospective managers, and said, "Okay, there is illiquidity in the credit market, what can we do to take advantage of it?" This led us to become one of the initial seed investor in this fund.

As another example, we worked with another manager to take advantage of the BB CLO Mezz opportunity. I think this is a differentiator for us, always looking for ways to enhance returns for the plan.

Trusted Insight: You said you have a relatively high allocation to alternative assets. That takes a high degree due diligence to invest in a private market asset. Is that challenge with such a small team?

Lela Prodani: Yes, it's definitely a challenge. This is the part where we do rely on our consultants quite a bit, especially on the operational due diligence. We work with Aksia for Hedge Funds and Opportunistic Credit, Cliffwater for private investments and Summit Strategies for the traditional assets. I would characterize our relationship as very collaborative. We often bring different manager suggestions to our meetings, and have very open discussions about the merits of each one. Together we form an opinion and ask our consultants for further due diligence.

Trusted Insight: What advice would you give other young women that want to enter the institutional investment industry?

Lela Prodani: You definitely have to be passionate about investments.  You need to have the desire and will to excel especially when you are a minority in the industry. Find an amazing team to work with that cherishes knowledge and financial acumen. Never stop learning.

Trusted Insight: Is there anything I failed to ask that I should know about you, Mercy Health, women in investment, or institutional investment in general?

Lela Prodani: I’d definitely like to see more women in the industry.  We have to work harder to encourage young women who have passion for finance, to choose institutional investment as a career choice. It's a very exciting career, and for people who like continuous learning, a dynamic and challenging environment, this is a great place to be.

 

To learn more about women in institutional investing, view the full list of Top 30 Women Rising Stars In Institutional Investing.