Group wants to avert next financial crisis

A dozen chief investment officers and other investment-related professionals from around the world, including three from U.S. pension funds, are working — in essence — to change the world.

The group, called The 300 Club, seeks to change the markets and investment management practices to avoid the kind of collapse that occurred in 2008.

The group was founded in 2011 by Saker Nusseibeh, CEO and head of investments of Hermes Fund Managers, London; its name comes from the legendary 300 Spartans. While the intent is to be outspoken and critical, Mr. Nusseibeh said, it's still early days. A few papers have been posted on its website, www.the300club.org, and it is still adding members.

Mr. Nusseibeh said the mission of the group is to “think about the big picture” and address issues such as:

• “How the market should behave for the benefit of all users.”


• ““How do you achieve long-term alignment between the provider of an asset management service and the pension scheme ... and underlying beneficiaries?”


• ““Is the very structure of benchmarks in themselves bias?”


• ““Is regulation tilting the ground toward short-termism? Does it influence behavior one way or the other?”


• ““Increasing data that show markets are neither efficient nor necessarily reverting to the mean — at least not over a meaningful period of time. How do we apply financial theory and do we need to rethink how we apply financial theory?”

David Villa, CIO of the Madison-based State of Wisconsin Investment Board, which oversees $97 billion, and Christopher J. Ailman, CIO of the $170 billion California State Teachers' Retirement System, West Sacramento, Calif., became members in July.

Robert Maynard, CIO of the $13 billion Public Employee Retirement System of Idaho, Boise, joined last year.

Members “stand the test of being really respected CIOs” or similar positions, “understand how the markets (work) and being thoughtful and thought leaders,” Mr. Nusseibeh said.

The club plans annual meetings of members, as well as periodic conference calls.

The members have a meeting in London Sept. 23-24, the latter date as a session as part of a Hermes conference for a 300 Club debate on the risk of investment theory and practice failing to accomplish goals of investors.

(Although it isn't involved in its operation, Hermes funds the club; Mr. Nusseibeh said it isn't much.)

“All it takes for evil to triumph is for a few good men to be silent,” Mr. Nusseibeh said. “Some managers, generally speaking, don't speak out.” A reason “they don't speak out (is) because they're afraid for their career. You are not going to speak if your firm is doing what you are attacking. Or you don't want to piss off the regulators because your firm is dependent on (their) good will. Or you don't want to piss off your clients because that's your business. But you know something is not quite right, but you won't quite face up to it, particularly if you are on the asset management side.”

“We are trying to reach (out to) senior investors, primarily ... our community of CIOs,” Mr. Nusseibeh said. “But eventually we are trying to reach policymakers as well” through posting papers and speaking engagements.

Mr. Nusseibeh added the club “is not quite a think tank because it doesn't try to do papers all the time. But it is the same kind of atmosphere, where we are encouraging pure research.”

What troubles him about the markets is complexity.

“The financial market is over reliant on complexity. Occam's razor — essentially a set of simple assumptions, simple solutions are better — seems to apply to most things but finance,” Mr. Nusseibeh said. “Complexity is something I worry a lot about.”

Too many investors treat financial theory like physics, as immutable, but “they forget there is a human aspect” to finance.

Mr. Maynard, in an e-mail responding to questions, said, “From my standpoint, the real value (of the club) is as a discussion/clearinghouse/interaction forum with people involved in the industry but without a particular agenda driven by "sales' or similar concerns, or from a particular regional perspective (such as North America or Europe).”

“And, one of the big changes in the investment world is that it is no longer U.S.-centric, either in assets or in investment ideas,” Mr. Maynard said. “While organizations and people selling particular investment products are actually a valuable window on other approaches, even with the best of intentions there is a filter that colors the particular product being discussed. Personal interaction and discussion with other people in the industry on an informal or semiformal basis without that filter is particularly valuable.”

Mr. Ailman, in separate e-mail responding to questions, said he was drawn to the club for its goal of contributing “opinion papers on the integrity of the global financial markets and creating a platform where points of view, independent from Wall Street, can be promoted.”

The “core and sole mission of the club (is) to be a voice in the markets and provoke discussion and thought in the industry,” Mr. Ailman said. “Someone needs to speak up for long-term investors, (rather than leaving it to) the investment management firms (or) the broker/dealers (or) banks.”

Mr. Ailman said he embraces the club's objective of “creating a platform where points of view, independent from Wall Street, can be promoted.”

“I expect to contribute the perspective of a large, leading long-term U.S. investor,” Mr. Ailman said. “My initial focus will be on long-term investing and sustainable investing. The U.S. is too focused on the last 24 hours and on deep thoughts in just 140 characters. I expect to be challenged and provoked to deep thought, discussion and active debate by other leading global CIOs from various institutions. Through that process, hopefully we can be a voice of integrity, common sense and long-term perspective in our fluid and highly-dynamic global financial markets.”

The hope is the club can “be the voice of reason when the world goes crazy like 2000 and 2007. But that's very difficult to cut from the herd and buck the trend.”

In terms of the club's name, Mr. Nusseibeh said, “I chose it for a reason,” even though the group of Spartans was wiped out.

“The Spartans ... when they went to meet the Persians (in battle) never thought and never believed they could stop the danger of the ... invasion, but they believed if they made a stand the other Greeks could stop the Persian invasion.

“So what I am saying is we (the club members) are not arrogant enough to think ... that we individually or collectively can change the system in such a fundamental way it can become a better system. What we believe is if we make a stand and make enough noise ... (other) CIOs, the regulators, the (asset) owners — will make the change to make the system a better place. Why? Because you want to avoid another 2008 happening again.”

While acknowledging that “lofty ideal,” Mr. Ailman said: “Having watched the 2006 film "300' again recently, I'm not sure we're all the warrior type, willing to sacrifice ourselves for an ideal; but I do know we are independent thinkers who can work together to sharpen our opinions and then speak as a group. Maybe in some small way we can be a voice of reason within the markets. After all, the name's better than "the CIO club,' which could be confused for a tech geek group.”

Mr. Maynard, embracing the club's inspirational ideal, added, “I would have joined the group and Saker even if they had called it "the Basket Weavers.'