Money management is just one of Orie Dudley's careers. He also has been a college dean and a rancher. In the money management business, Mr. Dudley has been an analyst, chief investment officer, marketing executive and chief executive officer. He has worked for Loomis Sayles & Co. and Putnam Investments, both in Boston; Barclays Group in Canada and London; and Scottish Widows Investment Management in Edinburgh. In between Putnam and Barclays, he returned to his native Idaho as dean of the business school at Boise State University, but said his penchant for outspoken criticism did not endear him to the administration. He left after one year and was settling down to manage his Idaho horse and cattle ranch when he was offered a job as head of Canadian operations for Barclays. Mr. Dudley still owns his ranch and is an avid horseman and devotee of both thoroughbreds (one recently won the Idaho Cup) and cow ponies. Now that he's executive vice president and CIO of The Northern Trust Co., he lives in downtown Chicago with his wife and two young sons.
Q Chicago was a good choice for you?
A I had my doubts, partly because my wife is from Madrid and you would naturally worry that there would be weather-related issues. But we thoroughly enjoy Chicago.... We actually think we landed in a very ideal spot for us. That has been a truly pleasant surprise.
Q Why did you decide to go to another subsidiary of a large bank?
A What's neat about The Northern - and it's not widely known - we are almost a stealth money manager.... We are not a typical bank and we are increasingly, I think, committed to being a professional asset management company. One of the three strategic goals of this institution is to be a global asset management company. If you look at our income streams as we exist today, we are three-quarters fee-based. We aren't a typical bank, in other words, now, and in the future, we'll be even less so. Banking as a discipline will probably always play a role, but banking is a service we will provide as part of our goal to provide asset management.
Q Did you think about going to a boutique?
A I wasn't looking for another job when this one came along. But in my career? Sure. I've thought about going to a boutique. Nobody's immune to the hedge fund phenomenon and the rest of it. I think in the company structure we're trying to do here, we combine the advantages of a boutique with the advantages of a large financial services company. This is ideal. Not a lot of companies have been able to do this. But if you look at our product range and how we've structured the product, like in our global growth equity team, you see that we have strong team structure within the larger bank structure, or rather, in a financial services company.
Q Can you foresee a time when the bank permits asset management to become even more separate?
A No. I don't think that's necessary. Unlike other firms that are worried about managers leaving, we don't have that problem. We are putting in place incentives for a serious equity culture for the whole institution, creating an environment where you don't need to separate the investment management company. We've got our own identity. We need to develop it better.
Q Please describe your compensation plans.
A We have base (salary)and a performance-based bonus, which I think are both competitive. In all cases, we offer broad ESOP incentive plans that are companywide. In addition, in individual cases, we use equity stock options. There's a very clear equity culture here and alignment of people's interests.
Q Do your portfolio managers think their performance has an impact on the performance of the overall company's stock?
A We don't have a problem with that. Our premium evaluation in the marketplace is in part driven by our very strong franchise in the high-net-worth area, and that franchise increasingly is focused on investment. Investment management recognizably has an impact on the stock price.
The portfolio managers watch how the company's strategy is articulated in various forms, the attention that is paid to their particular skill. They pay attention. The actual structure of the incentive plan does not seem to be a problem. In fact, no one has ever mentioned it to me.
Where we have disgruntled investment staff, it's when they feel their product is not being focused on and promoted. The nice thing is that we have all these great products that people want shelf space for.
Q Are there any plans for product expansion?
A We've been through that process already. We've filled out a lot of the product line. There are potentially a few niches that will be augmented. We don't have an active midcap or small value product; that would be something to add. We still don't have anything in emerging markets to speak of, but we don't have an immediate need. We have a pretty full menu.
We're not in the market for anyone, but we might get opportunistic. If things are happening, we might act on it.
We are always looking for talent. Talent is a key word for me. The whole process of converting this culture to an asset management one hinges upon talent. It's talent, process, infrastructure and culture, right? The biggest one obviously is culture, but talent ... it just constantly comes back that that is the key. We've been doing some recruiting of individuals to gain talent. Like Glenn Migliozzi for head of fixed income. (In terms of this talent march, we're I think making the right steps. We've taken some time to do it. We needed to improve our investment processes and structures since I came (in October 2000). I think we've made some good steps. And we'll be doing it some more.
Q What would you do if you left money management?
A Well, I did take that path. I love investment management. Let's assume they took that away, my approach to the world is fairly academic. I would probably be in some sort of professorial and writing role with a horse-racing side business. I would be combining those things.