A trip to the organized chaos of the Chicago Board of Trade from her junior high school in southwestern Indiana first ignited Michelle Seitz' passion for trading and money management.
From that seed, she carefully crafted her career path, majoring in accounting and finance at Indiana University, Bloomington, with a minor in psychology. Ms. Seitz then began her career as a U.S. equity manager at NationsBank, Charlotte, N.C. In 1996, she joined William Blair & Co. LLC, Chicago, as a U.S. growth equity manager with some asset allocation responsibilities. Five years later, she was named head of asset management division, which, with $35 billion under management as of Sept. 30, has grown into the largest business unit of the financial services company.
Still driven by the need to succeed and control her own destiny, Ms. Seitz says her 22 years of experience not to mention important down time with her three small children has helped her stay calm amid the storm that is the ongoing financial crisis. That composure has also helped her see opportunities amid the wreckage of stock markets around the world.
Many experts think we've plunged into a global recession. What do you think will happen next? We anticipate that global (gross domestic product) will slow down. The decoupling we talked about (emerging markets not moving in tandem with developed markets) wasn't ready for prime time. There's more dependence on the developed markets for continued growth. Since 95% of our assets are in long global funds, we are feeling the full force.
It would be impossible to over-dramatize what's occurred in the course of the last 45 days, let alone what's played out with this credit bubble, and then the unwinding of leverage in the system. We believe it really will change the entire landscape of asset management.
How will the investment business change? I think it will change how plan sponsors, corporate treasurers and states manage the liabilities that they have to meet. What we believe has changed is this trend toward absolute return investing somehow being able to capture uncorrelated alpha. It doesn't exist. The hedge fund industry will see significant changes. At a conference recently, a joke from a hedge fund manager was that down 10 (percent) was the new flat.
How well is William Blair prepared for such changes? What we have seen anecdotally is that plans allocate to where we have performed predictably. Absolutely, returns are still negative, but we have done what they expected us to do. Because of the market crash, our asset levels are down to three years-ago levels. On the flip side, our resources have never been stronger. The teams are all intact. We have more quantitative infrastructure. We have more trading infrastructure. We have a global environment. All of those things put us in much better stead than we were three years ago.
What are the challenges? When you think you are hiring mangers to perform a certain role in the portfolio whether it's hedge funds or absolute return or structured products or fixed income not only is (the strategy) not performing as expected, but it's a whole lot worse than you ever expected. I think that is having real ramifications in addition to not being able to get out of these strategies to reallocate back to your target asset weights. We have heard from some of our clients that they are trying to think through how they are going to pay their benefits because there are such dislocations, and what they thought to be the most liquid part of the portfolio to pay the benefits is not.
What are the opportunities? We think there is a tremendous opportunity for the markets to be more rational, to truly go back to economic value investing, to go back to basics. We still believe in international investing. The degree to which companies have been decimated with no fundamental disruption to their business is just unprecedented. The world is on sale. The investment opportunities are that are being presented are close to unparalleled. Given the backdrop of strong fundamentals, it's a great environment to be reallocating to non-U.S. investments.
Where do you see the future growth for William Blair in particular? Small-cap value, and possibly broadening that to small-mid value and mid value. We need more market share gains and client success in U.S. domestic growth and value. We will continue to broaden our product strategies on the global footprint. There are a lot of thematic things we could do, including rolling out a vehicle around a global macro hedge strategy.
How were you able to drive the growth of William Blair's asset management? When I joined Blair in 1996, the intellectual capital was all there; the investment teams were all there; the performance was all there just nobody knew about us.
I remember I was approached (for the job) by people saying, 'We would like to talk to you about money management at William Blair.' I said, 'I didn't know that you did that.'
(At William Blair) there was an immense respect for the profession of managing money. It was almost to an extreme, where perhaps we weren't effectively managing the business. It really just needed someone to capture that potential, to channel the potential and then a lot of things fell into place. So I just tried to balance those, that it wasn't a bad thing to grow, it wasn't a bad thing to actually attract assets.
What are the key milestones? Personally, key milestones are seeing us achieve the respect from the industry, and achieving the respect from each other. It's when we look at each other and say, 'We did a great job.' It's the esprit de corps. Key milestones aren't $15 billion, $25 billion, $35 billion.
What have you learned about being a leader at William Blair? Leading an investment organization is truly about leadership by persuasion. They don't lead because you tell them to; they don't follow because of what your title is. They follow because they believe you are leading them to a good place. They follow because you inspire them. But the moment you do not is the moment you lose your team; you lose your culture, franchise ... It becomes much more of a holding company, which many companies have reverted to. It's a very different culture than a truly integrated money manager culture. The reason they revert is because there is a strong, intense desire for investment professionals to be in charge of their own destiny. It's a very strong DNA and I have it, too. One of the partners came up with the observation: 'You will succeed because they want you to.' And I said, 'What are the other way is there?'
All William Blair portfolio managers are based in Chicago. Why is that, especially when you invest so much money outside of the U.S.? We want to focus on the investment process of leveraging intellectual capital. We then apply it on a worldwide basis. Cohesion in an investment organization is instrumental. ... We have an agnostic opinion about geography. It's about finding the best companies in the world.
Contact Jing Zhou at [email protected]