Part 2: Man Group CEO Robyn Grew says ESG investing isn't one-size-fits all

Robyn Grew, the first woman CEO of Man Group, the world's largest listed hedge fund manager, sat down with Pensions & Investments for a wide-ranging interview, discussing ESG, the economy and what's at the top of her worry list. Questions and answers have been edited for style, clarity and conciseness.

A: I think that it depends where you are in the world. So remember, we're global, and so we are the custodians of many, many pensioners' money, millions across the world. When I talk to clients in Europe, I almost can't have a conversation without them talking to me about the importance of RI, responsible investing, or ESG factors in their portfolios. That's very, very different from when I sit down and talk to somebody potentially in the Middle East or when I sit down and talk to certain parts of America even.

We think about it like this: I'm going to sound a little like a broken record, but what matters to us is what our clients want and what our clients need, and so when I'm talking to pension funds in the Nordics and they want something and it's reflective of the needs of their underlying investors, when they're looking for something that has an RI factor, it's decarbonization or whether it's a impact on social or whatever it may be, that's what I'm there to help them find and navigate.Back to the fact that I show data around ESG through quant lenses every day. We are 35 years of data science and quant and analytics, therefore, we throw everything through those lenses. It allows us to quantify these things in a much more transparent way for clients. And sometimes it takes us months, and one instance, it took us two years to get to the right place where the solution we were coming up with actually worked for the client and they understood how this would work for them from a carbon-neutral perspective. If I talk to a client in another part of the world and they don't have any interest in RI, that's fine too. I'm not here to be an evangelical leader of ESG. What I'm here to do is ensure that we are responding to clients' needs and that as we do so, we do it with clarity, with transparency, and with the capabilities that we can put to work to make that happen, and that applies to ESG, too.

A: This is one of those things where you don't want to say something that can get too easily bottled, but it's complicated in some ways. Culture is massively important. We run an organization which believes in what we're here to do, believes in the value that we add to our clients and those underlying clients. We believe 100% in collaboration that we are better when we are together, when we have the smartest minds in the room. I have said this out loud, I'll say it again, if I am in a room and I'm the smartest person in the room, I start to worry. That's not a good thing. I enjoy having the quality of people that we have in the organization and that brings about the best result. It's also about investment.

That secret sauce is about the fact that we have invested over decades, but certainly the last decade in quant capability, tech capability, data science capability, and we are very focused on ensuring that we are diversified. We are not a single-fund platform. We have discretionary investments, long-only and hedge fund. We're across macro, we're across equity, we're across credit. We have a private markets business. We have a dedicated solutions team that work across each of those engines that also understand what it is to put tail protection in there or overlays in there. So that takes hard work. I wish there was a secret sauce in some ways which you could just buy off the shelf, but the truth is it's all of those factors that come together, and because we believe we should be doing a brilliant job that we have a single mission to return alpha at scale to our clients, and that keeps us very honest.

I think the other piece is we're not singularly owned. We are here and we match the maturity profile of our clients. We've been around for 240 years. I don't know whether we're going to be around for another 240 years. I hope so, I can't predict what the next 240 years brings.

When we talk to pension funds or endowments or annuities, whatever it may be, we're on that same journey. We understand that their needs are for today and for the next generation and for the generation after that, and we are here for tomorrow and the next generation and the generation after that. And that intergenerational equity, that look for future-proofing or understanding of the future needs, the maturity profiles of the future is important, and we will see social movement, I'm quite convinced, in those underlying people, those teachers and those doctors and those metal workers and those ambulance drivers.When you talk to my son, he has a very different view of what the world should be doing and how much he wants to be putting his future savings, of which he has zero, to work, what he thinks about what we are doing as a generation in looking after the planet, for example. So we are going to see these changes, I think, in the needs and in the underlying client demands of the allocators, and we're here to be aligned with the allocators in returning that value and meeting those needs. So we are in that position and that combines into less of a secret sauce and more of a secret dessert.

A: Nobody's gotten it right. What I would say is this: We've been in a zero-interest-rate environment and a zero inflationary environment for the last 10 years. People are certainly feeling the dramatic change in interest rates from zero to 5%, but let's be clear, 5% is nowhere near the historical highs of interest rates that have happened before.

Inflation is out of the bag and it's difficult to control and it's difficult to control because it requires both fiscal and monetary policy, and that takes political and emotional will, and it also takes a recognition that to control inflation is painful and is difficult. We've also had quantitative easing that's meant that the pain of those interest rate moves haven't quite been felt as profoundly as they might have been felt in other times. So we have, for example, you have residential real estate holders in the U.S. who have fixed their mortgages for 30 years at 2%. We're not coming out of that anytime soon, but what it does mean is the actual pain of interest rate rises isn't actually being felt in the same way. That's my point about it not being quite so profound.

So do I think interest rates go up a bit more? Yeah, I do. Do I think that inflation goes away? No. Is there a sense that in some ways interest rates could go up much further if you really want to try and dampen inflation? Mm-hmm, but it does require some fiscal policy in there, too. We're running at, what, an 8% deficit in the U.S., probably 8% deficit again next year? So I think what we're going to have is a point of inflation breeds volatility, volatility and dispersion. You need to have active managers who understand how to navigate those markets.So I think that we are not in a passive beta world anymore that we have been for the past 10 years. There's been a denominator effect because of the liquidity pieces that we have seen both in the U.K. and in the U.S., which has meant that allocations are probably slightly overweighted in the private equity space. Not that private equity's all bad, and I'm not here to say that at all, but it does mean there is a gap and there's a gap for maturity, there's a gap for volatility, there's a gap in managing dispersion, and that's why you need your liquid alts managers to be leaning in with you.

A: Yeah. Listen, I think that there are a number of different points in there. One, how people want to, or what they think their risk in their current portfolio looks like is something that requires analysis, and quite frankly, some allocators have a better understanding of that than others.

When we talk about solutions and when we talk about what we're trying to achieve, it isn't because I sit here and I know everything, it is because we talk to those clients, we are skilled, we have great knowledge between us, and we're trying to fix a problem or a challenge or a question together, and that requires all of that Formula 1 team to be put to work, and it then is about marrying the alpha engines and the different diversified products we have within each of those engines to bring them together. There is a danger that people can, sometimes with quant, they think more is better. Sometimes it isn't. Sometimes you're going to have high correlation there. Knowing that is important, understanding how portfolios perform under certain market conditions is important. Do they suddenly correlate in a way that you did not expect them to? We help with that, we understand that, we work on that and we work on it within our own solutions, within our own multistrategy products, and within the bespoke solutions that we might come to and with for our clients.

A: If you were an asset owner in the last 10 years, what's really interesting, if you look at the adjusted returns across bonds or equities, it's pretty much the same. Now, you didn't need quite as many tech stocks because they were more volatile, but your risk-adjusted basis looked great because you had certainty, you had predictability. No inflation, zero interest rates, predictability. In environments that we're in today, that volatility is and that dispersion is going to be part of the next 10 years of navigation, and it's quite important that it's not just about active management leaning in, and I do think you need active management, I do think you're going to look for alpha capturers, because ultimately what allocators should be looking for is more than that 5% return. If we used to say 5% return a while back, everybody would go, "Thanks very much. That's terrific." You can get cash-free 5% return in T-Bills.

Now some people say, "Well, how long is that going to last?" I think perhaps longer than you might think so. But absent that, it's our job to do better than that. So it's not just about alpha active management capture, it's about skilled alpha active management.

A: Two things, and it's sort of the same thing wrapped together. One of the things I say across the organization is the next best idea that we have is unlikely to happen in the executive committee room on the fortnightly basis that we have those meetings. My executive team are going to kill me for saying this out loud, but it's unlikely to. The likelihood is a next brilliant idea comes from a sales guy in, I don't know, choose a jurisdiction in Hong Kong, or it might be from actually an ops guy sitting in the U.S. or whatever.

So No. 1, I don't want to lose those ideas. So how do I make sure we capture them? How do I make sure that the culture is such that those ideas get to us and get to a point of action and execution?No. 2, innovation. Keeps me awake. We need to be innovative, we need to capture alpha. I need new sources because alpha decays quickly. So my drive is about diversification, alpha capture, keeping that at the top of the list. So do I worry that I don't have an excellent team? Do I worry that I don't have great investments that are going to continue to reap value and content in any of the engines? No. What I care about and what I worry about is us being innovative, that I can hear the voices in the organization, I have enough difference in the organization so we challenge ourselves so we get better at what we do. Those are the things I care about.

A: That wasn't a plan. It was an opportunity. And then when my boss rang me up and said, "How'd you fancy coming to New York?" And I went, "Sure," and I upped and we moved to New York, and phenomenal opportunity, and therein began my love with New York, I think, actually. My son was born here. I was five months pregnant when we moved here. So at every point when somebody said, "Would you like to do this job or would you like to go to this place?" I've said yes, even if it didn't kind of look like it made sense. And what that has done over the time and over ime has it's just equipped me with just an extraordinary amount of experiences and stories and I suppose the ability to understand from different perspectives how the world works, how business work, how people work.

And I'm very lucky. I've collected people in some ways en route. There are people at Man Group who work for me way back at that U.S. investment bank that I just talked about, and that journey has been just brilliant. So if you'd have asked me 10 years ago, "Was I thinking of becoming the CEO of Man Group?" I would not have said, "Yes, that's exactly where I'm going to be." It just wouldn't have happened. But I have been lucky and I have sought out and I have tried to make sure that I'm relevant in conversations where there is an opportunity, and I have had terrific bosses and terrific sponsors in every organization that when they've gone, "Hey, we might have this problem over here. Can we throw Robyn at that?" They know I'm going to go, "Yeah, pick me," and that has served me well.And I think the other thing is that I have never minded, in fact, I have always embraced being the different person in the room. I come with a different perspective. I don't come from financial services. I don't come with that Oxbridge Ivy League education. I come with a difference as a woman. I come because I identify in the queer community. I come with a lot of things that kind of go, "Well, that's different," and I've used that as a superpower. It's enabled me to provide a different perspective and a different opinion, and I've not been shy to do that. So I'm hope that answers the question, but largely, I have built a career of very strong bricks from very different places, and it served me well to be in the position and to be able to be asked by the board to take this role.

A: I can't not say being asked to be the CEO of Man Group because it has to be that. On the day and through the process of the announcement and all of those things, it was something that I was in business mode and commercial mode about, that I was thinking about how I do this well, how do I equip myself, how do I take the firm forward, how do I work with my great team on all of those things. When I was proudest was actually when I reflected, when I spoke to my mom and dad and when I spoke to my son and they said how proud they were, and that was the moment that touched me.