Curtis Arledge discusses the future of BNY Mellon, the markets

Curtis Arledge was plucked from his perch as BlackRock (BLK) Inc. (BLK)'s chief investment officer of fixed income to be CEO of multiboutique giant BNY Mellon Asset Management in September 2010. In 2011, he added wealth management to his remit, becoming the first person to hold the title of CEO of investment management in an organization dominated by the Bank of New York Mellon (BK) Corp. (BK)'s custody banking business.

Snapshot

Doug Goodman

Curtis Y. Arledge

• Current position: Vice chairman of BNY Mellon and CEO of BNY Mellon Asset Management
• Assets: $1.2 trillion as of Sept. 30, 2011
• Employees: 5,300
• Age: 46
• Education: Princeton University, Bachelor of science degree in electrical engineering
• Personal: Married, 4 children
• Charity work and board service: Board of Directors of Autism Speaks, Member of U.S. Treasury Borrowing Advisory Committee
• Performance (all periods are through Oct. 31):
  Newton Real Return
  • 1 year: 2.39% Benchmark: 4.66%
  • 3 years: 12.65% Benchmark: 4.84%
  • 5 years: 9.36% Benchmark: 6.90%
  Standish Global Core Plus (USD hedged)
  • 1 year: 1.70% Benchmark: 2.78%
  • 3 years: 10.50% Benchmark: 6.52%
  • 5 years: 7.82% Benchmark: 5.08%
  Urdang U.S. REIT
  • 1 year: 13.13% Benchmark: 10.34%
  • 3 years: 21.57% Benchmark: 16.39%
  • 5 years: 2.77% Benchmark: -0.98%
• Newton returns based on sterling; Standish/Urdang returns based on dollar values. Benchmarks, respectively: LIBOR + 4%; Barclays Capital Global Aggregate; FTSE NAREIT Equity Index

Related Content

Sponsored Links

At the time, some observers said BlackRock — where successive sizable acquisitions were quickly subsumed within the acquiring company's dominant culture — wasn't an obvious place to find the next leader for a multiboutique, multibrand powerhouse. Mr. Arledge said he hit the ground running, spending his first year circling the globe, getting to know the executives and investment professionals at each of the group's 18 boutiques, and learning what each firm could use in the way of support to further build their respective businesses. Among a number of trends, he said BNY Mellon will look to build up its local investment capabilities in regions such as Asia and Latin America, while supporting an environment where the company's boutiques can better work together in providing solutions to clients.

Can a guy steeped in the “One Blackrock” culture find happiness in a multiboutique environment? I think the multiboutique model is the best way to manage money. Investment is something that's done best in a highly focused, accountable fashion. You can be focused and accountable in a more centralized model as long as management creates (proper incentives) but the multiboutique model takes it to the next level.

What's on your agenda? I was brought in to evaluate the platform and ensure its continued success, and also grow it in areas where major trends are going to affect the future. Growth in Asia is clearly something that we are focused on. (Closer to home) you've seen the regulatory environment pushing traditional banks away from having as much exposure to non-investment grade assets — think high-yield bonds, leveraged bank loans, real estate credit markets. Many of those assets are, we think, going to move into the asset management world, and be owned by pension funds, endowments and other investors looking for more yield, more return, but less volatility than they've had in the past in traditional equities.

Another major element is to ensure that clients globally fully understand the incredible capabilities of BNY Mellon's investment management firms. As they operate under multiple brands, in many cases clients (aren't aware of the) full breadth of all the things that are going on here, and everything BNY Mellon does to ensure investment quality — from our investment oversight process to working closely with the boutiques around product development and thinking about where the world is going. One of our key focuses here is to continue developing holistic client solutions that involve many of our boutiques — thinking through the challenges clients are facing in a market where rates are very low, and returns are hard to come by. So we've spent a lot of time investing in holistic client relationship management, and holistic solutions development that involves many if not all of our boutiques at some level.

There's talk you're looking to fill a new position for a global head of sales and client service. It's true. It's a change. We want someone who can make sure we're delivering the best we can to clients — whether they be retail investors requiring our investment expertise through mutual funds or the world's largest sovereign wealth funds, pension funds or others — that we're allocating the appropriate resources and leveraging knowledge across our platform. We're looking for someone who can bring it all together, understand the power of the platform and what it can do for the broad array of clients.

Do your boutiques offer a full complement of the products you feel investors need? We have a very large presence today around absolute return and asset allocation that's going to grow even more as investors look for improvements in their risk-adjusted returns. When markets were going up, investors weren't focused as much on the risks they were taking to get their returns. But with those risks proving to be a (significant) problem three times over the last decade.

Three times? The tech bubble, 2008 and ... ? And now, 2011. While it hasn't been as bad as either of those, it's had moments of feeling like it might be. You haven't had the losses, (but) the volatility levels have been very high. I think investors are saying, “We just can't take the volatility.” And it isn't just pension funds and endowments. We've got people who are 70 years old saying, “I've lost a quarter of my wealth twice, and it looked like I was going to lose it again.”

And the answer is? Products like absolute return, where you focus not just on a return target but also a risk target. We think there's going to increasingly be a move on the part of investors to look at those products as a place to allocate money. Asset allocation — meaning finding ways to improve returns by being nimble, moving capital from debt to equity, across the globe — is going to be increasingly important. We're very strong in both of those, but we want to continue to build our capabilities there. And two others: taking advantage of this macro trend away from banks owning assets, especially in non-investment-grade corporate credit and real estate credit. We think there's going to be a lot of return potential in those segments. Also, growth in Asia. One of the things I think is ... going to accelerate: more investors ... are going to want their investment firms to be local. I want to build local investment capabilities in those markets.

BNY Mellon's last major acquisition was London-based LDI specialist Insight Investment Management in late 2009. Is growth over the coming years likely to be dominated by acquisitions or organic gains? I think it's going to be significantly organic — (more a matter of) hiring people or teams to join existing platforms. ... (But) that doesn't mean we're against acquisitions.

Since you've joined, your parent company has seen a change of CEOs, and a volley of lawsuits over foreign-exchange trading. Is any of that affecting your asset management operation? We've been very focused on our clients, their needs, what we're doing for them. That's really what drives the dialogue.

What are you worrying about these days? The things that are much more difficult to assess or analyze fall into the category of political risk. It's just very difficult to do investment analysis, probability weighting analysis of how politics might play out — in Europe, in the U.S., the way changes are happening in the Middle East. ... But we're spending a lot more time doing the best job we can at it, looking at scenarios that might play out, assigning probabilities and adjusting them every day.

— Contact Douglas Appell at dappell@pionline.com