Dec 15, 2022 · 51m · capital-allocators
Carol Geremia - Creating Long-Term Value for (almost) 100 Years at MFS (Capital Allocators, EP. 287)
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Ted Seides interviews Carol Geremia, President and Head of Global Distribution at MFS Investment Management, exploring the firm's nearly 100-year legacy, collaborative research culture, and long-term fiduciary approach. Geremia reflects on her 37-year career journey, critiques industry short-termism, and details how structural alignment and integrated risk management drive enduring value.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 13.5% of the talking time here. How this is scored →
Ted as informed peer 4.5 Guest teaching 5.2 Guest disagreement 1.8 Ted pushing back 1.5
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 45:00 Attacking short-term benchmark incentives
Carol rejects the premise that her critique of short-term alpha benchmarking is self-serving, arguing forcefully that industry incentives feed systemic risk.
Hardest push from Ted ▶ 38:53 Pressing on E and S integrationTed pushes Carol to detail concrete application by pointing out that while governance is straightforward, environmental and social factors are much harder to evaluate.
Biggest teaching moment ▶ 34:25 Educating on the structural flaw of active ETFsCarol explains to Ted why active ETFs conflict with fiduciary duties for active managers because managers cannot close the fund to protect capacity and performance.
Ted holds their own ▶ 29:02 Analyzing shifting market regimes and asset pricingTed articulates the shift in fixed income and equity valuation regimes, questioning how asset managers must adapt their strategies beyond long-running tailwinds.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Joining MFS and the Client-First Ethos | 4 | 4 | 1 | 2 | Ted guides the conversation into Carol's career beginnings at MFS with an open prompt. Carol recounts her entry-level start and shares an example of shutting down a fund to protect existing shareholders, illustrating fiduciary alignment. | |
| Career Evolution from 403(b) Specialist to Global Distribution Head | 4 | 5 | 1 | 1 | Ted asks about her progression through various specialized distribution roles. Carol describes becoming an expert in 403(b) and ERISA plans, building the pension business, and expanding into institutional global markets. | |
| Key Career Lessons: Moving from 'My Client' to 'Our Client' | 4 | 4 | 1 | 1 | Ted asks for the pivotal skills required to rise through senior management. Carol explains her fundamental shift from seeing accounts as 'my client' to 'our client' across legal, compliance, and operations. | |
| Centennial Legacy, Purpose, and Long-Term Cycle Investing | 5 | 6 | 2 | 2 | Ted questions how MFS balances product commitment with flexibility over its 100-year history. Carol distinguishes between 'client pleasing' and 'client aligning,' firmly rejecting short-term 1-to-5-year alpha chasing in favor of full market cycles. | |
| Bottom-Up Fundamental Research and Integrating Equity with Credit | 5 | 5 | 1 | 1 | Ted probes into MFS's research ethos and long-term outperformance framework. Carol explains how unifying credit and equity research analysts avoided severe pitfalls during the Global Financial Crisis. | |
| Structuring Global Incentives and Building Team Trust | 4 | 5 | 1 | 1 | Ted inquires about practical mechanisms that foster global collaboration across distinct regions. Carol outlines their compensation structure, where at least a third depends on teamwork and 360-degree peer reviews. | |
| Macro Volatility, Active Value, and the Limits of Passive Capital | 5 | 6 | 3 | 2 | Ted asks about macro conversations with clients and adapting beyond traditional long-only mandates. Carol critiques the limitations of passive capital and 'growth at any cost,' defending disciplined active management. | |
| Client Engagement Evolution, Vehicle Packaging, and Alternatives | 5 | 5 | 2 | 2 | Ted questions MFS's vehicle evolution and alternative asset expansion. Carol explains why MFS avoids active ETFs due to inability to close capacity, and why they restrict alternatives to protect liquidity. | |
| The Demise of the ESG Label and Integrating Material Risks | 5 | 6 | 3 | 2 | Ted asks how MFS integrates 'E' and 'S' factors beyond standard governance. Carol argues that the ESG label will disappear as material risks like climate transition and cybersecurity become standard long-term active fundamental analysis. | |
| Defining Industry Leadership and Challenging Short-Term Benchmarking | 4 | 6 | 3 | 1 | Ted asks what leadership and bold industry risks entail. Carol launches into a critique of standard industry benchmarking and short-term performance metrics that create perverse structural incentives. |
Statements from this episode (11)
Geremia: MFS closed high-inflow product to protect existing shareholder returns
“About almost 20 years ago, and I was taking over the institutional business, and so I had a lot to learn. And you're dealing with large institutions all over the world, but we made the decision to close a product that was receiving lots of flow. And I, at the …”
Geremia: MFS aims for full-cycle outperformance rather than 1-to-5-year alpha
“We do not believe that we exist to generate alpha over short measurement periods like one, three, and five. Our goal is to outperform over a full market cycle”
Geremia: Full market cycles take 7-10 years, but benchmarks measure half
“The measurements that the industry anchors around are usually half a full market cycle. Anywhere between seven and 10 years is a full market cycle.”
Geremia: MFS stock holding duration is 3-4x the industry average
“When you even look at the average holding of a stock inside our portfolios, it's three to four times the industry average.”
Geremia: Combining credit and equity analysts protected MFS in 2008
“It was the greatest differentiator for us in the global financial crisis. We could see our fixed income team knew and understood and started to understand the issues, especially in the financial sector, and really said, there's a lot of stuff here we can't val…”
Geremia: MFS ties at least one-third of compensation to teamwork
“So we changed compensation decades ago, first and foremost, to say that we are a team and that's the way we're going to incent people to operate. So you're not just going to get paid on your results. That's going to be a huge factor for sure, but there's going…”
Geremia: Investors take 5x more risk today for same 1990s returns
“Today, although that's starting to change as interest rates are rising, for the past 30 years, investors have been taking five times the amount of risk to get the same amount of return that they did 30 years ago.”
Geremia: Obsessive Growth at Any Cost and Passive Capital Have Hit Limits
“I think what we're seeing today is that obsessive growth at any cost is over. I think we're seeing the limitations of passive capital. I think we're seeing the limitations of short-term alpha. I think we're going to start to desperately realize how important l…”
Geremia: MFS Avoids Active ETFs Because They Cannot Be Closed for Capacity
“We have looked a lot at active ETFs as an example, but here's the problem with ETFs. You can't close the products. How do you manage capacity, and how do you protect performance as an active manager? That is the sole reason we have not offered an active ETF.”
Geremia: ESG will cease to be an investment term within three years
“The most exciting to me is that ESG will go away. It will not be an investment term in three years, and it has nothing to do with it not being super important.”
Geremia: Skeptical that investment personalization actually serves client needs
“I think there's a lot of talk about personalization, and I'm a little skeptical on that, because again, I'm not sure that's actually, it sounds good, and it sounds like it's about the customer. I'm not sure that's actually What the customer needs. I think it's…”