Large, multiproduct asset management firms are frequently delving into the ranks of fixed-income managers to find someone to lead their organizations.
Some of the recent hires: Margo Cook, senior managing director and head of institutional business at New York-based Bear Stearns Asset Management; Robert Gerber, chief investment officer at Lord Abbett & Co. LLC, Jersey City, N.J.; and Barry Evans, president of MFC Global Investment Managements U.S. business in Boston.
(Legg Mason Inc., Baltimore, also groomed fixed-income star James Hirschmann III to replace Raymond Chip Mason, founder, president and chief executive officer. But Mr. Hirschmann in April scaled back his role, focusing only on Western Asset Management Co., Pasadena, Calif., Leggs huge fixed-income unit.)
Fixed-income managers make good company leaders because of the product innovation required for success in the fixed-income market, the attention they pay to risk management and their quantitative approach.
Plus, if youre a fixed-income manager, you tend to have more customized mandates than an equity manager, Ms. Cook said.
She pointed to the evolution of core fixed income to core-plus and then core-plus-plus, and the liability-driven investment strategies now offered by many fixed-income managers.
As a fixed-income investor you talk to the CEO or CFO about their whole plan. You think about what you can do with the tools you have to help the CFO, Ms. Cook said. You go from being a basic portfolio manager to thinking about how to run the business.
As the asset management business becomes more competitive, portfolio managers for other asset classes will have to innovate more, Ms. Cook said, so it makes sense to have someone with a background of customizing for clients running the investment business. The sale of asset management is transitioning from a product sale to a solution sale, she said.
And fixed-income managers are usually adept at developing the new product a client needs. When youre a fixed-income manager, youre constantly looking at new products, new ways the sell side is carving up cash flows, Ms. Cook said.
Kevin Cronin, senior managing director and head of investments for Putnam Investments, Boston, is another fixed-income manager who moved much higher up the ladder. He agreed with Ms. Cook, saying: One of the things thats been a constant in the fixed-income market over the last 20 years has been constant change.
Among the changes: residential mortgages in the late 1980s; asset-backed securities market growth in the early 90s; the commercial mortgage-backed securities market in the late 90s; and syndicated bank loan and structured finance growth in the first half of this decade, Mr. Cronin said.
The pace of innovation has been slower in the equity market but we think thats beginning to change with the demand for options on a basket of securities and the growth of total return swaps that give clients exposure to entire markets or sectors, he said.
Mr. Cronin is part of an extended list of fixed-income specialists who moved to top money management jobs. Others include Dwight Churchill, president of investment services for Fidelity Management & Research Co., Boston, and Robert J. Manning, CEO, CIO and president of MFS Investment Management, Boston.
Mr. Cronin believes the growing focus on risk across different asset classes also has helped put more fixed-income managers at the top of large firms. Risk management was always important to fixed-income managers because relative returns were similar among managers, he said. Fixed-income managers had to focus more on risk to add a few basis points in return. Now, those risk models are more widespread, so risk management is more important to equity investing as well, he said.
MFCs Mr. Evans headed fixed income, then was promoted to president of the U.S. investment business when parent company ManuLife Financial Corp. decided to separate its investment and distribution businesses in the U.S. He, too, emphasizes the risk management experience.
We deal with risk a little more. Its very much a process of the bond managers decision-making, Mr. Evans said. Equity managers have been forced to fit tightly into style boxes now, and that has forced them to pay more attention to risk to make sure they adhere to those style boxes or other restrictions. That brought risk to the forefront and many fixed-income managers to the top of the heap, he noted.
Recruiters say leadership skills remain paramount to getting hired to lead entire asset management firms, but they do note that generally, fixed-income managers also have other traits and skills that fit well.
Fixed-income people are inherently disciplined, quantitative and mathematical, said Richard Lannamann, vice chairman of recruiting firm SpencerStuart, New York.
A quantitative approach is a good way to look at multiple sectors and asset classes because youll look at them with a more rational, less emotional approach, Mr. Lannamann said. Thats how most sophisticated buyers of asset management services approach it.