The Exchanges

Q Well, I'd love to dive into this training ground story of Wellington going through your story as a classic homegrown talent. So why don't you take me back to those early steps in your recruiting and training as you worked your way up here?

A The recruiting is probably not as interesting as the training. So I found my way to Wellington, which was a very small company back in 1991 when I joined under 300 employees. I started as an administrative assistant. Very unusual. I only had two interviews, not the typical 30 that we have now. But the early couple of years was really about working in the research department and then 18 months in getting to work with Ed Owens. In Wellington, particularly on the investment platform, we talk about having an apprenticeship model, and I think I am the classic apprentice, particularly that first decade, but I would even say my second decade of learning to become an investor. So if I take a step back and think about that first decade and working with Ed Owens, it was really, one, getting to know companies. And working with him was pharmaceutical and biotechnology companies, getting the skills to do that. So that meant for me coming from an undergrad degree at Wellesley, going back to Harvard Extension School and getting accounting background, taking my CFA, and then taking biology courses, which was really necessary to understand what was happening in the subject matter that I was studying in the industry I was studying. What Ed taught me in those first few years, and it was really about observing him and being in every meeting with him, was really about how do you evaluate companies …

AI assessment note: “I started as an administrative assistant... and then 18 months in getting to work with Ed Owens.”

Q What are some of those norms that you said are a lot when somebody comes in?

A Let's say you're a business developer. We have more products than the average asset manager. We have about 250 products and with 60 teams. There's a real beauty to that diversity, but it can be overwhelming, particularly to some who are used to having a more narrow product set, or particularly if they're coming from a small firm, they may have one or two products, and all of a sudden they have potentially 250 products to get to know, and 60 major investment teams versus a few, and so that's probably the one we hear the most. One of the things about our investment platform that we've really worked very hard on breaking down silos, and so there's a lot of collaboration, not only amongst a team, but then the equity teams, and then amongst the fixed income teams, and all the way down the line, so when you come to Wellington, You may be a private investor, and getting to know all our global industry analysts might be important for your role. How do you meet 500 people over time? That could be overwhelming, because someone might have something that's helpful to you. Now, that's impossible to do all at once. People often ask me, what's the secret? What advice do you give me about being successful at Wellington? And one of my answers is, We're not a political organization, but we're a relationship organization. Getting to know people is important, and that's how you create networks and…

AI assessment note: “We're not a political organization, but we're a relationship organization.”

Q I'd love to walk through some of the history of how you've evolved as a business and some of the interesting dynamics and challenges that have come along the way from really that early start. What were the most important early strategic decisions in changing from that original boutique?

A So when I joined in 1991, it was the very beginning of what I'll call our research portfolio franchise. And I think we had just started the year before. That was a U.S. portfolio. And then after that, we had strategies that focused on international and global and various versions of the research analyst managing money. That was very unusual in the 19 nineties. So I think What resulted in that is that becoming a global industry analyst became a destination, and instead of a stop on the way to having to become a portfolio manager to be recognized and being able to run money. And so that became a, just a very important part of the model. If you take Wellington at its core, we're a research shop. Research insights is what we do really well. Having the ability of researchers To be able to express those insights in portfolios themselves, and not necessarily just through the portfolio managers, became a really important part of, one, retaining talent, which many of our peers, if you go back to the 19 nineties, the great researchers at the firms left. And so I would say also in the mid-nineteen nineties, we started a hedge fund business that was based on talent. So we have a thirty-year-old Long, short business, and that also allowed many of our really strong investors to have another outlet within the Wellington structure, and I think that just kept a lot of people at Wellington. That…

AI assessment note: “when I joined in 1991, it was the very beginning of what I'll call”

Q So if you go back to your early years here, And there are fewer people. Probably wasn't set up quite the same way. Was there more of an ethos of the firm that there was either a style bias or a certain way of doing research back then?

A So I think the way we do research is probably not dramatically different. I mean, when I came, we had a group of people in our central research department that were very long tenured, did deep research. So I think that part of Wellington is the same. I think we're just a broader, more diversified organization, so we've been able to take that culture that we had in the 19 nineties and expand it to many different parts of the market, and that has made the ecosystem much more robust. So when I started in the early 19 nineties, we probably were heavily dominated by U.S. value research on the equity side, and that has changed dramatically, so now we have a firm that's very balanced between equity and fixed income Multi-asset. We have growth and value and small cap and mid cap and global bonds and U.S. bonds.

AI assessment note: “we probably were heavily dominated by U.S. value research on the equity side”

Q You described as an apprenticeship business. Where do you get your training as a CEO?

A When it was announced that I was taking this role, I can't even tell you the number of CEOs, both in the financial industry as well as in the healthcare industry, that said, I want to help you. How can I help you? And so I did a series of about 30 interviews with CEOs of healthcare companies that I had known for a long time, and financial companies, and some of our clients, and as I started those, I got to ask the same question. What do you regret, and what did you think you did really well? Hearing answers to that, that was so helpful. Then I have a series of dinners I have with some Boston-based CEOs where we talk about being a CEO. I belong to some organizations that also other CEOs, and we talk about issues about being a CEO. There was a number of continuing education ways that I learned Everyone has different businesses, but the issues that you deal with can be quite similar. You just learn from others.

AI assessment note: “I did a series of about 30 interviews with CEOs”

Q With so much of the capital you manage being in the public markets, equity and fixed income, and active management has, generally speaking, been under pressure for a long time. How do you think about the future of active management?

A We're a proud active manager. Let me take it at first principles. I think our business benefits from the world growing, the world innovating, the world being productive, and then there are other things that impact the value of companies, such as geopolitics, elections, interest rates, monetary policy. I don't think those are static, and we're probably entering a period where they're less static than they have been over periods of time. So I think that active management will be just a very, very important part of the future of managing money. If I reflect back, very two important trends in the last decade have been the rise of passive. And I wouldn't say here that passive has peaked or will slow down. And the other big trend is privates, which I would consider active. But if we focus also on the public markets, you had a decade of QE, which led to less dispersion, and that's not as good for active management. And then over the last couple of years, you've had this immense concentration on a few companies, very rightly so, based on the earnings and the margins of those companies and what they've accomplished. Just as QE ended, you had the rise of this concentration. I think what will benefit active management is that Concentration broadens. I'm a big believer that those seven companies will be successful only if the benefits broaden to the economy around the world, and so I would…

AI assessment note: “you'll have a broadening of the market, and that's a really good environment for active management”

Q not how you would describe your investment management tech, request a demo at ridgeline.ai. And now back to the show. Actually work across the partners, so if it's merit-based, there's an implication that as you get maybe on in your career, maybe you don't have as much value as someone who's coming up or now running. What are some of the mechanics of how the partnership structure works for everybody?

A We have three managing partners, so I'm one of those managing partners, and our most important duties in that managing partner role is to nominate new partners, That the partners elect, so the partners are very involved. Appoint managing directors, which is a step before a partner. Determine a managing director bonus, which is sharing the part of the profits of the firm, and then allocating the profits of the firm to each partner every year. The partnership has to have a significant amount of trust in us. We have a lot of information to try to determine what is the fair allocation of profits over time. What is not fair to say is that people that have been here a long time Their impact is lower, because some people continue to accelerate their impact till the very end, and there are some incentives to continue, some incentives of the partnership that make that happen. So I think the philosophy of the partnership is we want the pie to grow.

AI assessment note: “our most important duties in that managing partner role is to nominate new partners”

Q Is there a commonality in the interview process across those of what you're trying to glean out of the candidates?

A We do a better job today of different people trying to get different aspects so you're not asking the same questions. So different people are assigned different aspects of that mosaic of a person. But I think the key asset, one, are they a good business person or are they a good investor? Do we think they have investment skill, number one, right? Number two, will they be additive and help us evolve our culture? And I think the key to that is Do they like to collaborate? So you can find that out through those 20 or 30 interviews. Do they want to come in? I remember when we were hiring our first portfolio manager in London, and I was involved in maybe 20 candidate interviews at the time. Other colleagues did a hundred, I think we interviewed a 150 to hire our first portfolio manager in London, which was critical. Like, that hire was critical for the equity platform in London. And you could tell when you ask those questions, do they want to just come in and do their own thing, or do they want to be part of the ecosystem? So the most successful people that come in, really, they will say we're much more collaborative than we say we are, than appears in the interviews. Our culture is stronger than appears in the interviews, and they often want to spend the rest of their careers here, so.

AI assessment note: “one, are they a good business person... Number two, will they be additive”

Q Great. Well, let's turn to some closing questions. Jean, what is your favorite hobby or activity outside of work and family?

A One of the things I've started to do in the last decade is learn to ski. So our family goes skiing every weekend in the winter. It's been a great time for us to be together as a family, and I will say that I did not know how to ski 10 years ago. And in fact, I've skied with the same instructor for 10 years. I've progressed a lot, but there was a lot of fear. I remember him asking me, what do you do in your day job? He bought me this book called Fear, and I'm like, I don't actually have much fear in my day job, but I had a lot of fear. But over the last decade, I've made a lot of progress.

AI assessment note: “One of the things I've started to do in the last decade is learn to ski.”

Q And does each boutique go about things differently?

A Each boutique has a philosophy and process. So their own philosophy and process on how they believe in investing. It could be a US growth philosophy. It could be a global core philosophy. It could be a global fixed income, which could be absolute return. It could be relative. So every boutique has, has their own philosophy and process in their way of making sure they cover their Opportunity set. And so you have some teams that are large and some teams that are smaller. I think everyone, though, does rely to some extent on the broad research department, both macro research and company-specific credit research and equity research. But that's the beauty of Wellington. You have these small groups of teams that work together. Like, I would say I spend most of my time with the healthcare team, but then you, you get the benefit of the broad collaboration at Wellington.

AI assessment note: “Each boutique has a philosophy and process. So their own philosophy and process”

Q Yeah. So within the broad partnership structure, how have you thought about organizational design of teams, boutiques, what's optimal? For investing.

A It goes down to every area of investing could be different, right? It's really dependent on the team. So when you think about healthcare, for example, you know, a decade ago, we had fewer assets, but the market changed, the number of companies in the market changed. So we have to be evolving and dynamic in that process. If you think about our global fixed income, that's a larger team because you're trying to have specialist Take risk in very specialized areas. So I think every area of investing is a different model. How we do Japan and how we do China is very dependent on the talent we have and, and how they want to form teams and what the opportunity set is. And so I guess we're very flexible.

AI assessment note: “every area of investing is a different model... we're very flexible.”

Q So if we unpack that a little bit of what it means to be a researcher, what were the building blocks?

A So when I think about our philosophy and process of our team now, the healthcare team, one of the things I say to clients is we need to know where healthcare is going, where healthcare is going to be in 2025. And in order to know that, you need to own healthcare and you need to own the research. So I think the roots of that all started when I was working with Ed. And that really is dissecting each company down to becoming very micro, but also really figuring out where change is happening. So in order to do that, we took a very comprehensive approach to research, meaning we look at all companies under our coverage. We have a broad breadth of knowledge in pharma and biotech, which was most of my career. That means knowing every therapeutic disease, knowing how it's treated, and then the key then, which is what I really believe I learned over time, is learning how to focus. So having that breath, and then knowing where change is going to happen, and then Using your research abilities to really focus in on that change, and then get all the data points you can possibly get around that change.

AI assessment note: “dissecting each company down to becoming very micro, but also really figuring out where change is happening”

Q And not a lot of traditional, say, long-only firms have done that successfully, and part of it is because of the differential compensation structure and the potential for stardom as a result. I know from my old business that Wellington's done a phenomenal job of building some outstanding hedge fund products. How did you make the business work in such a way that didn't jeopardize the culture of the firm?

A It goes back to the fact that Wellington is not a star culture. So that goes back to who we hire, If someone needs to be a star, they're not going to be a good fit here. So I think that's number one, that we have a lot of people who are humble and love investing, and we want to continue to create a culture where a new person who's 25 years old can challenge someone who's been here for 30 to 40 years, and that's something we strive towards. So we don't have a star culture. That's probably number one. Number two, again, it's back to the partnership economics and how the profits are allocated. By the managing partners and that trust that will be very fair in that process, I think also reduces that conflict.

AI assessment note: “It goes back to the fact that Wellington is not a star culture.”

Q We haven't talked a lot about the distribution side of the business. How does the investment effort get integrated with client service, client acquisition, client retention?

A We have a few groups here at Wellington. One is called Investment Products and Services Group. They're sort of in between the external part of the business and the investors, so they work really closely with us in terms of product positioning, in terms of Product integrity and being a liaison between the investors and the external facing relationship managers and business developers. And there's a lot of coordination. So one of the things we say about Wellington is that our core thing that we do is manage money for clients. And then how that gets into client portfolios and all the different channels, you know, we are very global. We have clients all over the world and almost every channel. And so how that gets there then is we have business functions all over the world. So our business platform began to globalize 10 years before our investment platform. So our business platform was started in about 1996. We started globalizing, and we have 15 offices around the world. So we have local, external business people interacting with our clients in those regions to figure out what needs do they have and how can we help solve those needs.

AI assessment note: “Investment Products and Services Group. They're sort of in between the external part”

Q What are the total assets of healthcare across all of the Wellington products?

A Across all the Wellington products, it's about a hundred and twenty billion. So it's a large part of our equity assets. And on the team, we manage about 65 to seventy billion of those assets. The reason why 12 is enough is it's a very long cycle industry. So it is an industry that is, even though there's a lot of change happening, that change happens over 10 years to bring a drug to the market. And so we want to make sure we're covering all the companies, and there is more change happening, but I think if you narrow people's focus too much, they won't be able to figure out that change. So that's the philosophy of our team, that you have people who have been at Wellington, and we can get into why people stay at Wellington, and so if you have very long tenured people, you have a company that focuses on the long term, we have an industry that we follow that's long term, and sort of the perfect match for our philosophy process.

AI assessment note: “Across all the Wellington products, it's about a hundred and twenty billion.”

Q On that quantitative piece, how do you think about process versus outcome?

A So we have the processes that determine yearly compensation, and then we have the processes that determine what is someone's philosophy and process. We have an oversight group at the firm that looks across all of the investment platform and says, how is the whole investment platform? Are there any outliers? Are there outliers that are doing too well? Are there outliers that are doing not too well? And then that allows us then to go down a little bit further and delve into a team, perhaps. That maybe is doing well or over earning alpha. And then we have a group in each department really that focuses on what's the philosophy and process of that investor. Are they actually doing what they're saying they're doing for clients? What's the alpha targets? What should they be delivering based on their philosophy and process? That's both on early career. What is your philosophy and process? How it might be different from your senior investor. Then we do it continuously over time because Well, it shouldn't change drastically, but it should evolve over time. We do then offshoots of that. So how do you incorporate factors into your philosophy and process? How do you incorporate ESG factors? How do you incorporate portfolio construction? That's the process part of it that becomes the output.

AI assessment note: “Are there outliers that are doing too well? ... focuses on what's the philosophy and process”

Q So when you first started moving in that direction, it's not hard to envision, certainly back then, all of a sudden everyone's going to want to go run a hedge fund. What happened at that time?

A Well, I think we had interest in running hedge funds in longshore portfolios because we had just great investors who really understood their sectors. They were looking for avenues to express the whole sector. I don't think it was really because of the compensation. I mean, the compensation was important, but I think it was really about a way to really express all the insights they had. We have portfolios now that are 1:40 40. Those allow you to express all your insights. We've had movement from being an analyst to being a portfolio manager and being a portfolio management team to an analyst team. I think people select what they like to do best. We have people that really love to be deep researchers, and we have people that like to be broad, and we have people that like to do long short investing, which is hard. I think you just have people who select to what their interest is. For many, many years, we had my colleague on the healthcare biotech team. He didn't even want to do pharmaceuticals. He wanted to just do biotech. And so we have that ability. What is the overlap between people's passions and what they're really good at, and what are the opportunities here?

AI assessment note: “I think we had interest in running hedge funds in longshore portfolios because”

Q And then on the other side, what did you hear from the CEOs about the things that they did well, that they had to keep doing well?

A I remember one large pharmaceutical company who had been very successful. One of the things he said to me, he's like, I've made four decisions that mattered. Four decisions that mattered over those 10 years, and he went through the decisions, and so that always sticks in the back of my mind. You're going to make a bunch of decisions, but in the end, it's back to the story of Wellington. It's like, Getting into research portfolios, and getting into hedge funds, and investing in fixed income, and globalizing, and going into privates. We've zigged in Zod, but those are the ones that have made Wellington what it is today, and that resonated with me. It's like, you're going to make a few really important decisions, and so how do you get the energy, and the time, and the mindset to make sure when those decisions come, you're ready to make them?

AI assessment note: “I've made four decisions that mattered over those 10 years”

Q how you would describe your investment management tech, request a demo at ridgeline.ai. And now, back to the show. In that evolution, When you've delivered a message to your clients at that point for decades that our strength is we're together in Boston, how do you change the story so that people are comfortable with this dramatic change in what you had historically told them to be your competitive advantage?

A We had told the story, but we had to shift what the advantage was, and so when we moved to have investors in London, we did it in our way. We wanted to make sure that investment culture was transported into our London office, and as we hired London investors, how do we make sure it didn't become siloed? So I think what we very successfully did was that it didn't become a London office. Investors in London are part of the Wellington investment platform and ecosystem, and it didn't become a siloed office. We were just very deliberate about that. Again, we had that message that our edge is being together, and so when we weren't together, we did a lot to make sure our edge was still together. I remember technology coming, our very famous morning meeting. Until 2000 and eight, it was always on audio. When all of a sudden you had video screens, the technology helped us make sure that it didn't become siloed too.

AI assessment note: “we had that message that our edge is being together, and so when we weren't”

Q Did we circle back to your path from the administrative assistant to the analyst, to the mid-level, to the portfolio manager, to partner, and now CEO? What has been different for you in your role as CEO?

A So I became a managing partner in, in, in, and that role is actually more similar to being an investor than maybe many people would suspect. You spend your days absorbing information. So that could be because you're reading. It could be because you're looking at a model. It could be because you're discussing something with a young person on your team. It could be because you've met five companies over the last few days, or you've been on a research trip to Europe. You're absorbing information, and the managing partner is very similar. When I think about being an investor in the managing partner role, the energy was very similar. And I would say probably the biggest surprise for me being CEO, the days are different. They're more dynamic. How do you balance the schedule of the short term with making sure that you're thinking really long term? Because I think one of the benefits of me and my skill set is I've been an observer of companies and who's done well and what great leadership looks like for my whole career, and so it's that balance of Making sure you're executing in the short term and really thinking about the long term. The day-to-day of being CEO is just very different than the day-to-day of being an investor. I have only a few more weeks of managing money and the luxury of sitting down and reading a research report and just absorbing things or coming to a close. For me,…

AI assessment note: “The day-to-day of being CEO is just very different than the day-to-day of being an investor.”

Q What's the framework that you use for succession?

A I'm 33 years at Wellington, and I'm not an unusual partner at Wellington to have spent, one, my entire career or a long career at Wellington, but I think it's a very personal thing when people want to leave the partnership and retire. Sometimes people stay well into their sixties, and sometimes people say, I've had a wonderful 25, thirty-year career, and they're in their fifties or early fifties, and they say, I want to do something else In the next chapter of my life. So I think it's a combination of what are the personal desires of our partnership and what they want to do after spending a lot of time. And part of it is when successors are ready. It could be a combination of that. Sometimes, hopefully not often, it's because of performance. That's our job as managing partners to make sure that everyone in the partnership is performing. The investment business. It is a really hard business. In order to be a great investor or a great business person in this business, it's an intense amount of work, and so I think people over time want to keep that intensity, and they're doing so well for their clients.

AI assessment note: “a combination of what are the personal desires... and when successors are ready”

Q Over many, many years, there have been more and more partners You add a new partner, they have a slice of the pie. Where does that slice come from?

A So there is a pie. When we determine merit over time, we can only split a hundred percent of the merit. It can't be more than a hundred percent. But over time, we hope that by adding great skills to the partnership, that we will grow the pie. As we've grown over time, what will determine the size of our partnership will be, one, the impact partners have. It will also be where we are in successions. It will be what capabilities we have. We would probably be a smaller partnership if we had not 60 teams, but 20 teams. We'd probably be a smaller partnership if we just stayed U.S. and didn't globalize. The size of our partnership will be determined by the amount of people that are having that kind of impact that allows us to grow, add capabilities, serve our clients in all parts of the world. We don't have a determined size. It's really based on impact, and are they adding something unique to the partnership?

AI assessment note: “we hope that by adding great skills to the partnership, that we will grow the pie.”

Q And as you aggregate that up into portfolio position sizing, do you have any rules of thumb that you use?

A Again, it's based on conviction. I invest in an area that is very volatile, and it's also an area that the insights happen over a very long period of time. And so, I guess my rules of thumb would be, I want to invest in an insight that's evolving over time, because you're going through, let's say, a phase two drug that's going to take five or six years for it to make it to the market. How does your view evolve over time? And I use position sizing as, is a really a critical skill to be able to know my conviction level. What I don't do necessarily is say, well, I think there's a 50% chance this is going to work, because otherwise you would never invest in anything. But I'd rather say, I think this is going to work, but what is my conviction level? Your conviction level can be really high, or it can be good, but maybe not quite as high, and you calibrate that over time. Also, like, one of the things I do in my process is knowing at any point in time what that is worth. So there's a long Time before this drug makes it to the market, and if it makes it to the market, it's going to be worth this, and sometimes it can get ahead of itself, so being very disciplined about scaling back positions, even if you still like them, adding to positions, leaning into liquidity, are all the things that bring that deep research into a portfolio.

AI assessment note: “Again, it's based on conviction... being very disciplined about scaling back positions”

Q How have you thought about incorporating the science of behavior and behavioral finance into portfolio decisions across the boutiques?

A Well, I think at Wellington, we bring in outside speakers to think about that. So I would say they're definitely Resources over time. We have a number of leadership and development programs that we've been working on, including something called the Portfolio Management Development Program, and about 80 investors have gone through that program now. We have a Leadership Excellence Program, again, which involves both business people and investors. How do you become a leader? Like, being a leader and being an investor has a lot of overlap, and I think this investment science will bring that to a new level. But I think most importantly, over the last decade, All investors go through what's called philosophy and process, and so we don't have one way of this behavioral science, one way of thinking, but we have this process now where, and you have to go through it many times over time, what is your individual philosophy of investing? What is your process for investing? And I think we've spent a large amount of our time helping that. And investors who really know themselves as investors, Both have a really strong philosophy and a really strong process, tend to be our best investors. So that has been a great amount of time and effort, and that will be continual.

AI assessment note: “we bring in outside speakers to think about that... leadership and development programs”