Throughout Trusted Insight’s interviews with world-class investment professionals, we discovered that many industry leaders have gone through career path changes to get to where they are today. They are former lawyers, engineers, cancer researchers and military officers before they found a passion in institutional investing.
Is it possible to succeed in institutional investing with limited prior experience? Is it too late to make a shift after establishing a career in a different field? How important is a degree in finance? Here are the insights given by top LPs in the industry:
Build meaningful relationships. You never know where they will take you.
“[As a lawyer,] I had represented what was then the Lucent Corporate pension fund (today Nokia) for quite a while and got to know their business needs. I had a close working relationship with the private equity team and had spoken to the head of the team about how it might be interesting to work together at some point. About a year later, a spot opened up on her team. I jumped at the chance to transition to the business side of institutional investing. Over time, I was able to take on responsibility for the real estate and absolute return portfolios as well. “ -- Kathleen Browne, Managing Director, Wellesley College (Former lawyer and director of alternative investments at Alcatel-Lucent Investment Management Corp.)
“I knew the Textron team because they were originally a client of the consulting firm that I worked for. When they decided to turn their investment capabilities in house, they concluded their relationship with the consultant, which was too bad because I really liked the portfolio. I actually liked what I knew of the new CIO as well. I could see why he did it, because when you have your own market views, you have less need for many of the services that a consultant provides and does best. A couple months later, when his internal staff member wanted to take a different role within Textron’s operating division, somebody suggested that I should consider competing for this job.” -- Erik Carleton, Director of Pension Investments, Textron, Inc. (Former investment consultant)
“One of my co-workers at KB Home, where I was a land associate, left to go help start the alternatives program at another fund here in New Mexico. He had a prior relationship with some people at the fund, so they asked him to come over to help build the alternatives program. After he left, he called me up to see if I could help him with the private equity portfolio. He already knew my finance background and my research capabilities from our previous job, and he thought it would be a good fit for me, so I kind of just stumbled into the pension investing world. From that point, I did my research and decided that it could be something I would enjoy doing, and here I am today, and I'm still enjoying it.” -- Jude Perez, Deputy Chief Investment Officer, New Mexico Public Employees Retirement Association (Former land associate at KB Home)
“When I was in banking, I worked with health care systems from around the country -- capital raising, strategic engagements, M&A, et cetera for hospital systems. Through that I got to know many different CEOs and CFOs of hospital systems. One of my clients became the CFO for Memorial Hermann. They asked if I'd be interested in coming on board and heading up the treasury function, which includes investments obviously, and that's basically how I ended up here.” -- Chris Halaska, Chief Investment Officer, Memorial Hermann Health System (Former investment banker at JP Morgan)
Take advantage of your past experience and skills.
“A lot of people thought it was a funny transition to go from engineering to law to investments. However, I think the skills I developed built on each other – particularly with a start in private equity, which is so transactional and relationship-based. Engineering and law are very analytical fields. In legal practice, you also build communication skills; you learn how to listen, gather and interpret information and build trust and confidence with your clients. The skills I developed in those prior roles were very relevant for institutional investing.” -- Kathleen Browne, Managing Director, Wellesley College (Former lawyer and investment director at Alcatel-Lucent Investment Management Corp., studied electrical engineering in college)
“There are a lot of similarities between derivatives trading and institutional investing. Working within derivatives was a good education because you had to know the markets. We mostly traded in fixed-income and equity derivatives, but credit derivatives were also starting to come into play. It was a multi-asset class discussion. I like thinking about markets; you're always trying to think about if equity is going up or down, where interest rates are going to go, or whether you should do interest rate swaps or not. So when I interviewed for the position at the University of Wisconsin, there were a lot of topics that I could talk about.
“Secondly, derivatives were being used more in institutional portfolios at that time, so having a background in derivatives was helpful in considering whether to hedge exposure or not. The idea of synthetic exposure was starting to become more and more in favor...In hindsight, it was a more natural fit than I could have ever planned, but it makes sense as I trace through how one thing led to the other.” -- David Erickson, Chief Investment Officer, Ascension Investment Management (Former derivative trader)
“My background across various investment firms has offered me some insight on the relative risk-reward tradeoffs across a wide range of strategies. I began my career in credit, which conditioned me to be fairly risk averse and to constantly ask myself, “What could go wrong?” Later, I realized that investing need not be all pessimistic and began to back capable management teams leading companies enjoying strong, hockey-stick like growth, looking to disrupt industry incumbents.” -- Yup Kim, Senior Portfolio Manager, Alaska Permanent Fund Corporation (Former investor at Deutsche Bank, Silver Point Capital and Citigroup)
“When I was a land associate, what we would do is look for the parcels of land that the homebuilders put their developments on. My job as a land associate was to find these large pieces of land, negotiate with the landowners and then produce financial models, such as cash-flow models, to make sure that these investments or these land purchase would make sense from a business standpoint. From that point, we would write a business plan, and if successful, the company would get the funds needed to invest in these large parcels of land.That was my experience of investing and also why one of my co-workers wanted me to join him because I did have real estate underwriting experience. He thought it would work well in the private equity space. So I started out by concentrating on private equity, but that expanded as my career grew.” -- Jude Perez, Deputy Chief Investment Officer, New Mexico Public Employees Retirement Association (Former land associate at KB Home)
“One parallel [between the army and a pension fund] perhaps would be the military's focus on empowering people in order to motivate them to do a job well-done. You're working for something much larger than you. In a pension fund, you're also working for a program that is larger than any one individual and, with a noble goal, to make a return on investments in order to pay the beneficiaries. I think motivating people and empowering them to make decisions and achieve both their own career goals and the pension's objectives is part and parcel to any good leader. Most of our senior staff try to provide motivation to our personnel and promote team cohesiveness. Those attributes perhaps come out more naturally from the military side where it is a central theme in the culture and primary contributor to success. Lastly, the military tends to be very scripted and process-oriented, which are important attributes to balance in an investment shop as well.” -- Anthony Breault, Senior Investment Officer, Oregon State Treasury (Former U.S. Navy officer for 22 years)
You don’t have to have a finance degree to be an investor. Plus, you can always get one later.
“I think there's a huge value in taking a scientific approach when investing. With my background in biochemistry and biophysics, I was taught and trained in a scientific method to build an understanding of how things work: you start out with a hypothesis, but continue to question, challenge and refine the idea. What's the basis and foundation for how you do things? You're looking for proof and validity. I think it’s a good foundation for an investor. You learn a great deal about markets, fundamental rules and modeling in business school, but the study of science often teaches us to question what we think we know.” -- James Perry, Former Chief Investment Officer, Dallas Police & Fire Pension System
“I love science. After college, I came to the U.S. to pursue a Ph.D. degree in Pharmacology. Once in the U.S., I soon began to be fascinated by the economy and the market, which were quite different from what I experienced in China. Wanting to understand them, I started listening to The Marketplace (NPR) and reading the Wall Street Journal and still wanted to learn more. In the end, I decided to change my career. I did not continue my Ph.D. Instead, I got a master’s degree and worked in the biopharmaceutical industry for a few years before attending business school. There are a lot of similarities between fundamental scientific research and investing. Independent thinking is critical for both fields. In science, I read extensively, formed an independent hypothesis and then designed experiments to test my hypothesis. The same process can be applied to the investment world.” -- Sean Feng, Investment Director, Kresge Foundation
“I definitely do not have the standard degree of the investment professional. That's probably why I went to University of Chicago after my undergrad to study finance and economics.The thought process that I learned in the actuarial math program taught me how to solve problems and analyze. I don't think a lot of people realize this, but higher math is really right-brain thinking. When you come up through the lower math, that's very left-brain thinking. But once you reach higher math you need to be able to combine those different parts of your mind. It often helps you think outside the box, which is a term that is used too often. However, in this case being a problem solver and thinking of new approaches and looking at problems from different angles has been something that has stuck with me from my initial training in the actuarial program.” -- Ron Virtue, Director of Investments, JM Family Enterprises
“I think the benefit of a liberal arts education is that it teaches you how to learn. It is the conduit through which you learn how to learn, as opposed to learning something very, very specific. On the electrical engineering and computer science side, clearly, it's about logic. Thinking in systems and thinking in components and thinking in how things fit has worked out very well in a lot of our technology investments that we've made at Capricorn. Also on the art history side, it lends that macro lens that allows me to look at trends. In very simple words, art history was about connecting the dots. It’s using different works of art at different periods and finding the connection and reading the trends between them. Art history gives that top-down approach, while electrical engineering and computer science allow for the logical thinking. This allows for building systems and very technical due diligence. These skills are still being used today.” -- Alan Chang, Partner & Managing Director, Capricorn Capital Partners
“The way the humanities degree was organized at Yale, we would study different eras of history, mostly European history, and look at them through different prisms or disciplines -- through history, literature, philosophy and art. It required thinking about the common threads that you find across all of those different disciplines. That is similar to what you do in investing. You look at what’s happening with rates, in equities, in macroeconomic indicators and try to pull together a cohesive view of the markets and where opportunities lie.” -- Anne-Marie Fink, Chief Investment Office, The Employee Retirement System Of Rhode Island