Karen Watkin: Welcome to AB Alpha Females, the Multi Asset Investment podcast. I'm Karen Watkin, and I'm a fund manager in the multi-asset solutions team here at AB. The Alpha Females are those women who have developed unique areas of expertise and made their mark in the investment industry. In this series, I've had the opportunity to talk to some of the impressive women here at AB who have helped make our multi-asset business what it is today. If you haven't already heard those conversations, then do go back and listen to them to be inspired, enlightened, and entertained. In this final episode, I'm reflecting on what I've learned from my guests and what stands out for me from all these conversations. Let's start with their key investment insights. One of the major considerations for any investment strategy is risk. How do you balance it against return? And how much can you rely upon past performance for what will happen in the future? That's a question that's front and foremost for Defna Ozaltun, who's Vice President and Portfolio Manager for AllianceBernstein's Multi-Asset Solutions team. In formulating risk within a portfolio, she says it's important to be able to take different perspectives.
Defne Ozaltun: I first try to zoom out and take a very high-level look at their longer-term characteristics. Then I try to zoom in and cross-check what longer term is saying with the here and now. There are all sorts of things that change in the shorter term versus the longer term. You have a portfolio manager with an underlying strategy changing, or you have an equity index, including a bunch of new stocks that behave very differently, or all sorts of things are happening in the here and now that is different from the history.
Karen Watkin: As I've heard from many of my guests, while history might not repeat itself, it often rhymes. Having in-depth empirical analysis is important, but so too is taking a more qualitative or macro assessment in what's going on across markets and in investment strategies today. Alla Harmsworth is the co-head of our institutional investment solutions team. As part of her work, she's undertaken research into which portfolio managers perform best and why. According to Alla, great management and great information still don't offer complete assurance of what will happen in the future.
Alla Harmsworth: We need to have the humility to know that history is not going to repeat itself but also have conviction and take a view and stand by it. Analysis and strong empirical evidence is very important, but there's all sorts of things and factors and qualitative and fundamental variables that also matter massively. I guess one of the key challenges, particularly for somebody who is quite quantitatively minded, is to combine those two in a way that is consistent. It's knowing how to weigh those various variables to give you an output. The best we can do is be as rooted in analysis and rigour as we can, but also think about things carefully and thoughtfully and remain humble and open to the fact that things change.
Karen Watkin: That point is echoed by Tiffanie Wong, Director of US and Global Investment Grade Credit. She says COVID and its consequences for the market was a stark lesson in the limitations of data.
Tiffanie Wong: Sometimes you have to go back to the key tenets of investing and understand when data is reliable and when data is not. Talks about COVID and how we basically had extremely poor liquidity during that period, and we could not rely on any of the pricing of bonds, we couldn't rely on a lot of our quantitative data. We had to lean more heavily to our fundamental analysts to be able to adapt to very rapidly changing data and projections. And so understanding that there are going to be periods in time where you're going to be tilting certain ways between fundamental and quantitative data is really critical. And there's no formulaic approach that works through all market cycles. And the markets are constantly changing, and history doesn't repeat, but sometimes it runs. And so we're not going to get it right all the time. But I think building out a very repeatable, consistent, data-driven and disciplined process can really bring you a lot of success.
Karen Watkin: Another factor in judging what to do in those unforeseen moments is to understand market sentiment and where consensus is building. That's according to Caglasu Altunkopru, who's head of Macros strategy in our multi-asset solutions group at AB.
Caglasu Altunkopru: There's a bit of an element of democracy to markets, meaning it's not enough that you think that things are turning, everyone else, or at least a critical mass of people need to think that things are turning, and then things take on a life of their own. To me, it reminds me a little bit about art. It's very hard to define what is art, but at the same time, there's an element by which it says, okay, there's a community, that art community, critics, collectors, and then you form some consensus around, well, okay, this is art. While there's a lot of hard data, you do see that consensus that drives the persistent market direction.
Karen Watkin: Multi-asset investing is about taking a broad and unconstrained approach in finding those companies or industries which offer the best chance of good returns. But how do you go about finding them? Arpita Bhabhera is an investment analyst and one of those people who's constantly looking for new trends and opportunities. It's fascinating for me to hear where she gets her insights.
Arpita Bhabhera: As an investor, you need to be switched on all the time. To give you an example from your daily life, perhaps, I remember coming back to work after COVID and noticing the footwear of all the commuters, and everybody has switched to sneakers to work. That led me to think that casualization is a real theme. Within sportswear, you always had an increased focus on fitness, but wearing sneakers to work, I thought was a new trend. Again, during COVID, you must have read articles about how chips are the new oil, because for AI, you need semiconductor chips. That's a sector that's seeing strong structural growth trends as well because you need chips everywhere. Rising geopolitical tensions means that all the countries wanted chips being manufactured in their own region. That's another trend that's driving growth in that industry. Really, ideas can come out of anywhere.
Karen Watkin: As multi-asset investors, it's about bringing all these different investment ideas and strategies together in a thoughtful way in one portfolio.
Alla Harmsworth: The way that you put funds together is just as important as the way that we identify or pick them in the first place.
Karen Watkin: That's Alla Harmsworth again.
Alla Harmsworth: We can have wonderful, really highly skilled managers, but if they're highly correlated with each other, for example, because they try to do the same thing, then that may not necessarily be optimal at the portfolio level. What we want to find is managers who are diversifying and those whose exposures are complementary to each other so that overall we end up with a portfolio that is diversified, that does not take any extreme tilts. That makes it relatively insulated from what I was going on out there in terms of the macro and market environment.
Karen Watkin: In the course of my conversations, I've also been hearing about the growing importance of ESG, Environmental, Social, and Governance-related factors. For Jodie Tapscott, AB's Director of Responsible Investing Strategy, this issue is personal.
Jodie Tapscott: I first noticed that there were fewer fish when I was snorkelling. Living in Australia, you travel throughout Southeast Asia a fair amount. But it wasn't just the lack of fish, it was also the pollution. I remember coming across a turtle who thought it was eating a jellyfish when actually it was eating a plastic bag. It's so sad and it's such a shame. That, again, really made me start to think about how I could leverage my investment knowledge and skills to pivot into responsible investing because really, from a motivation perspective, I wanted to ensure that the investment managers I was working with were allocating capital to companies and projects that were helping to solve the world sustainability challenges.
Karen Watkin: For us as investors, by better evaluating these material ESG-related risks, we can make better informed decisions for our clients.
Jodie Tapscott: This is really where the intersection of investment management and ESG and real-world environmental and social outcomes come into play. If we can estimate and value and cost those impacts and those opportunities better than others, then we can make better investment decisions, we can allocate capital more effectively, and we can also use our power as a shareholder to influence change within companies, to bring to light to them why managing environmental and social risks and opportunities are in shareholders' interests and to bring to the table the fact that investors do actually care about these outcomes.
Karen Watkin: In hearing Jodie, it's clear that for the ESG agenda to be successful, it needs to align with the financial interests of our clients. According to Tiffanie Wong, the tools for doing that are now better than they've ever been.
Tiffanie Wong: ESG risks are credit risks. We would be not doing our job if we were to ignore the potential material impact that environmental, social, or governance issues have on our credits. We have always included ESG scoring as a part of our credit underwriting process. But the key here is we care about material risks and opportunities. We want to understand and identify those factors that have an impact to financial materiality or the willingness and ability of a company to pay us back. One of the new developments that we rolled out late last year was our next-generation ESG scoring model. We're pulling in a lot of data. We're also doing web scraping and doing natural language processing websites from NGOs, data from NGOs and then we're using our proprietary credit research as well. We're coming up with a much more robust data-driven ESG scoring model. The data and technology infrastructure also needs to adapt to meet the changing regulatory environment and client demands, which includes the evolving ESG landscape. Jennifer Santangelo is the head of AllianceBernstein's Investment Business Operations.
Jennifer Santangelo:The industry has certainly evolved and also the need for real-time information, that is a must and a critical component right now for most strategies. In the past, you can get away with start of day, end of day information. Now it is real-time. We've built those tools. In addition, there's the evolution of ESG, of course, which we've had to solution a lot of our services to meet those client needs as well. That required some development capabilities as well. It's really staying abreast of the regulatory environment, what our client needs are, and satisfying our investment professionals at the same time.
Karen Watkin: Alongside the growth of ESG, the issue of diversity and inclusion has also become increasingly prominent in recent years. Having diverse teams can be particularly beneficial when investing. For our female investors in a male-dominated industry, it's not surprisingly a topic that's front of mind for them. But when we talk about diversity, what does it mean?
Arpita Bhabhera: Diversity is not just about gender and nationality or your age or what you see on the surface. Diversity of thought is extremely important. Within our team, we're a global team across countries. That's amazing because we all have our own experiences our own perspectives. In any investing team, that's very important because that allows any topic to be viewed from all sides, and it avoids group-think. That's very important when you're investing your client's money.
Karen Watkin: That's investment analyst Arpita Bhabhera. Having multiple perspectives leads to better decision making, according to Jodie Tapscott.
Jodie Tapscott: The research that we've seen across multiple sources is that diverse teams make better decisions. They're more risk-aware, and in fact, and you'll like this because you are one of these amazing ladies, there's a research study by Goldman Sachs that indicates that female portfolio managers actually outperform male portfolio managers on a risk-adjusted basis over the long run. It's common sense, right? When you've got a more diverse team within a business, whether it be a management team, whether it be a board, the diversity brings a wider variety of perspectives.
Karen Watkin: And diversity of thought isn't the only critical element of successful teams. Having a strong culture underpinning those teams is crucial to drive the right behaviours and better decision making. Honor Solomon is EMEA CEO and responsible for retail sales and marketing in Europe, the Middle East, and Africa. So what does she look for when building a successful sales team?
Honor Solomon: Contacts, chemistry, and culture. A salesperson needs to have deep contacts, knowing the right people at the right clients. I've seen salespeople who know a broader array of people, but if they're not the decision-makers, then it's not as helpful. But even more important is chemistry. When I'm speaking with a salesperson, how is their chemistry within the team? How does the chemistry work with their clients? Because people like to do business with people that they like. Finally, culture eats strategy for breakfast. I can have the clearest vision, the clearest strategy, but if it isn't embedded with a culture that is real, that people understand, then it's worthless.
Karen Watkin: The alpha females that I've been speaking to are a diverse group drawn from varied backgrounds and countries all around the world. But what unites them, and what draws them to this area of work? Here's portfolio manager, Defna Ozaltun.
Defne Ozaltun: I absolutely love it when we can deliver on a client's objective. It's the best feeling. I really like also bringing in new clients, talking through what their challenges are, how we can construct something that meets what they need, and actually winning a mandate. I get a thrill out of that. I love working with our team on a day-to-day basis, and when markets move, debating what the drivers are and what actions we should take in portfolios. Those, I think, are my favourite elements of the job.
Karen Watkin: That intellectual curiosity is definitely a shared element, as well as the willingness to take calibrated risks. Here's Head of Investment Business Operations, Jennifer Santangelo.
Jennifer Santangelo: In my tenure at AB, that's typically how I've progressed in my career, is really taking the risk of when asked to lead a new effort in terms of integrating new businesses into the firm, I always I just put my hand up and say, yeah, sure. That sounds great. That sounds exciting. We can make that happen. I think it's important to be open to new opportunities, to maybe not say yes right away, but to, of course, understand all the information and to put yourself out there to try something new. We may not always tick the box for all the qualities for a certain type of new role, but if you're a hard worker, smart, of course, you can do that. I think, try to say yes to new opportunities as much as you can.
Karen Watkin: That advice is well made, particularly for women in finance, where still only one in 10 fund managers are women. Role models like our alpha females show how women can thrive in this industry. Caglasu Altunkopru, who grew up in Turkey, is a great example of someone who sees no bounds to the opportunities for women in finance.
Caglasu Altunkopru: I went to an all girls high school, and while we were grumpy about being in an all girls school at the time, we did, I think, benefit from it because only a girl could be the newspaper editor. Only a girl could be school president. There were only girls on the volleyball team or whatever it is. You didn't really say, Oh, a girl can't do that, or a girl can't be good at biology. A girl can't be good at math. Someone has to be good at math. And guess what? It's going to be a girl because it's a girls' school. There wasn't this shyness about being good at academics. I think that was a big benefit. I was told later on by someone I met through the investment world that apparently the best ratio is two to one or something. But you don't want to have all single sex either. But at the same time, I think it is incredibly helpful for women to see other women or girls to see women in various roles and to start accepting that as a norm. We need to push it, but at the same time not get too frustrated and recognise that progress takes time, and it's going to be difficult, but anything that's worth doing is going to be difficult.
Karen Watkin: A particular challenge for many women can be how to balance careers and motherhood. But many of our guests show how it can be done with some useful advice on how to navigate this path without sacrificing one for the other. As a mother to two young boys, I've had to find the right balance myself. When I spoke to Tiffanie Wong, she was about to head off on maternity leave with her second child. What advice has she got for others in a similar position?
Tiffanie Wong: It's really helpful to have a great support system, that's first and foremost, both at home at work. At home, I've been very lucky, my partner is a true partner in every sense of the word. I think he might actually do more of the parenting than I do. But then at work is having a strong support system of other working parents, not just working mothers, but working fathers as well. I think having a supportive manager is extremely important as well. I've been very lucky that I've had all of that that has helped me retain my sanity. Having that support system is really critical. I don't view it as a balance. I think some people say you can balance work and home life. I think we just need to reset expectations that there are going to be times that you need to lean more into work or you need to lean more into your family life. And it's okay. You can't give 100% to both. It's finding that right way to toggle your time and your effort.
Karen Watkin: Finally, Honor Solomon has some great golden rules about creating both a healthy work life and a healthy home life, and how to create a culture at work where people feel valued and can be their true selves.
Honor Solomon: The first rule is that family comes first. I love my job, but my most important job is I'm a mum and I'm a wife, and I'm a daughter, and I'm a sister. That is what I feel is absolutely something that has to be recognised by myself, by my leaders, by my team, and that it doesn't have to compromise my role. And the second rule is that nothing goes left unsaid. And this is about transparency and conversation. I mentioned before a culture at AB where there's not politics, where there's not hierarchies, but that can only really exist if we're able to be direct with each other. There are times when you and I are not going to agree, similar with other areas of the organisation. But what I find doesn't work is if people do not feel empowered to share their disagreements. We need to create a space where that is absolutely encouraged and people feel empowered. That transparency is that key to that.
Karen Watkin: Over the course of this series, I've learned a lot from these alpha females. I've gained professional insights and also understood what makes them tick. What are my takeaways from these conversations? Firstly, a key investment insight I've noticed is that they all spoke about having a disciplined, data-driven investment process rooted in rigour and analysis, but that this must be married to a firm fundamental understanding of what's going on in the wider world today. Secondly, greater diversity of thought can bring better investment outcomes. When we talk about diversity, it doesn't just mean gender or other factors. It means including people who think differently. Diverse teams with broader perspectives where ideas can be challenged are more likely to reach better decisions. Finally, a common theme is paying it forward, making sure that we, as women, continue to attract, nurture, and develop more female talent across the industry so that there are ever more alpha females.
That draws to a close this episode and this series of AB Alpha Females: The Multi-Asset Investment Podcast from AllianceBernstein with me, Karen Watkin. If you haven't heard the previous episodes, please do go back and listen to them and subscribe so they automatically arrive wherever you listen to your podcasts. If you've enjoyed this episode, don't forget to tell your colleagues and friends about it. It only remains for me to thank you for listening. This episode was produced by Richard Miron from Earshot Strategies.
