When we asked this question to institutional investors who were already at the top of their game, many gave us the same answer: passion. Without an insatiable passion, curiosity and love for this job you won’t get very far. Institutional investing can be tedious, exhausting and demanding, and you have to truly enjoy the work that you do in order to excel at it.
We have interviewed over 40 institutional investors. In this week's edition of Trusted Answers, we look at what it takes to be successful:
Be passionate about the business and have a very high level of curiosity.
Be passionate about the business and have a very high level of curiosity. That’s the one thing about this job: there aren’t a whole lot of titles and promotions in investment management, like there are in some areas of banking or other fields where you can move from title to title on a fairly frequent basis.
What we do have are lots of opportunities to explore new asset classes, new areas within asset classes, new managers within those asset classes, new geographies, new structures, new ways of thinking about things. At the same time, the markets are constantly changing. If you knew the space pretty well five years ago, it doesn’t mean you know it very well today. Things are changing pretty quickly in a number of areas.
Exploring, being curious, learning about what are the underpinnings that will create value in a portfolio at this point in time, over the next five years or in a private equity investment, over the next ten years or more, is what really drives people who are very good in this business versus people who aren't as strong.
The number one thing I would tell people: choose a good team. You will get the best experience with a good team - a team of quality people who are going to invest time in developing you and making sure you are learning the lessons.
I would advise people to be intellectually curious and be continuously looking for new and interesting things, because it’s awfully hard to say what the next great thing is going to be. If you have a broad block of knowledge, which is to my point about having diverse teams where people have different strengths, it is important. It is hard to predict which thing is going to take off at any moment and being able to translate what you’ve learned in one area into another is important. It goes back to having good teams and having a good base of support.
...My background, my passion, was always best-in-class and globally-diversified. I was an active portfolio manager, so I always knew the performance benefits and risk management benefits from portfolio management. I was never going to rely on beta so I was never a believer in passive and never an ETF player.
It’s about staying curious. I think that’s been one of the greatest attractions about my job at Capricorn: the variety of opportunities to get very curious about.
For example, what can you do when you can launch a cell phone into space? By the way, these engineers got reprimanded by NASA at first. They were like, “What are you doing launching a cell phone into space?” Then NASA turned around and created a what they call the PhoneSat and the CubeSat program.
Sometimes it’s about staying curious, it’s about orthogonal thinking. Hard to say, but their thinking likely wouldn’t allow them to prosper and do well at NASA. So they decided to start a satellite/hardware company when the whole venture industry in 2011 or 2012 was focused around social media. That was the time when Groupon was a hot company and people were focused on flash sales, but it was important to think orthogonally and find contrarian ways of thinking. It’s not staying contrarian for the sake of being contrarian, but trying to find ways to see if you can find a way to… to borrow the Apple phrase of “Think Different.” I think that allows for a lot of great opportunity.
Also, staying mission aligned is important, which for us means making investments that we think will solve big problems in the world, but also benefit all of us and of course the capital behind us financially. When you make good choices, sometimes you don’t have to give up financial returns. When you make good choices for the world, and when you find opportunities and investments that can potentially solve huge world problems, sometimes things work out financially as well. That is also a great way for one to stay passionate about your work. Find a way to feel very passionate about your work, and it’s a great way to wake up in the morning.
...The ones we want to invest in have a proven track record, great team, interesting strategy, are intellectually curious, honest with themselves, are trustworthy and don't have an ego. And we know there are a lot of egos in private equity! This is a partnership and we're looking at it as a long-term relationship.
A lot of the time, students will ask me what's the secret to success. Probably a lot of leaders have said this, but I truly believe it can be summed up in one word: passion.
...If your goal is to move your way up into management, managing director, CIO, etc., it's about developing the ability to lead a high-performance investment team, whilst also managing both internal and external constituents.
A lot of the time, students will ask me what's the secret to success. Probably a lot of leaders have said this, but I truly believe it can be summed up in one word: passion. Be passionate about what you do. Love what you do. Don't chase the money. If all you care about is the money, there is a good chance you will not be successful. If you define success with money, you may not have the work-life balance to enjoy it and be happy. At the end of the day, you may get paid well, but it's really about lifelong fulfillment and giving back. You're going to spend more time at work than you probably are anywhere else, so really love what you do. And it can be anything, it doesn't have to be a career in finance.
If you're an entry level analyst, who is really excited about what you do and believes in the vision and the mission of the firm, then you have a much higher probability of being successful. You're going to end up doing a great job and learning from mistakes that you make. Hopefully have a good mentor and good management that's going to help guide you in the right direction so that you can succeed. If you do love what you do, and you're passionate about it, life can be fulfilling and the money will follow.
Jeremy Wolfson, Chief Investment Officer, Los Angeles Water and Power Employees' Retirement Plan
Read the full interview here.
Always work very hard to continue to develop your skill set. Always apply that skill set in the best interests of your client. Everything else tends to take care of itself.
Trusted Answers is a weekly series that delves into some of the most pertinent issues within institutional investing, and shares some of the insightful responses from the 40+ institutional investors we have interviewed in the past year. Take a look at some of our other Trusted Answers.