Training Grounds: Wellington Management – Jean Hynes (EP.423) AI transcript and summary - episode of podcast Capital Allocators – Inside the Institutional Investment Industry

Go to PodExtra AI's episode page (Training Grounds: Wellington Management – Jean Hynes (EP.423)) to play and view complete AI-processed content: summary, mindmap, topics, takeaways, transcript, keywords and highlights.

Go to PodExtra AI's podcast page (Capital Allocators – Inside the Institutional Investment Industry) to view the AI-processed content of all episodes of this podcast.

Capital Allocators – Inside the Institutional Investment Industry episodes list: view full AI transcripts and summaries of this podcast on the blog

Episode: Training Grounds: Wellington Management – Jean Hynes (EP.423)

Author: Ted Seides – Allocator and Asset Management Expert
Duration: 00:48:23

Episode Shownotes

Today’s show is our third in the Training Grounds mini-series, following Carnegie Corporation and Bain Capital to better understand how certain organizations have developed industry leaders. Wellington Management is one of the world’s largest, privately held asset managers, managing over $1.3 trillion in assets with 875 investment professionals across 19

offices and a nearly 100 year history with an unusually low level of turnover along the way. Wellington has developed, recruited, and retained leading global investment talent across public equities, fixed income, and recently private markets as well. My guest to discuss this training ground is Jean Hynes, CEO of Wellington, who has spent more than thirty years at the firm starting as an administrative assistant. Our conversation covers Wellington’s cultural values and boutique investment team model, including apprenticeship for junior talent, recruiting at the mid-level, and promotion all the way to partner. We then discuss Wellington’s evolution from a U.S. equity value shop to a global, multi-asset, multi-strategy powerhouse, and Jean’s evolution from a portfolio manager to CEO. Take Capital Allocators Audience Engagement Survey Learn More Follow Ted on Twitter at @tseides or LinkedIn Subscribe to the mailing list Access Transcript with Premium Membership

Full Transcript

00:00:01 Speaker_02
Capital Allocators is brought to you by TenEast, an investment platform for sophisticated investors to access private markets. 10 East brings benefits of having your own family office without the cost and headaches of doing so.

00:00:17 Speaker_02
It's founded and led by Michael LaFell, former Deputy Executive Managing Member of Davidson Kempner. Michael and his investment team offer members the opportunity to co-invest by offering at their discretion.

00:00:30 Speaker_02
Michael and his team source, diligence, and commit material personal capital to each investment.

00:00:36 Speaker_02
The opportunities shared on the Tennies platform offer exposure to private credit, real estate, niche venture and private equity, and other idiosyncratic investments that typically aren't available through traditional channels.

00:00:49 Speaker_02
The principals have over a decade track record of investing in these types of exposures across more than 350 transactions.

00:00:57 Speaker_02
Post-investment, the Tennies team conducts ongoing monitoring and reporting, just as you'd expect from an institutional investment organization.

00:01:06 Speaker_02
I've known Michael for about a decade, and after becoming impressed by the quality of 10East offerings, its research process, and high-quality investment team, I became an advisor to the organization and investor in multiple offerings.

00:01:19 Speaker_02
You can learn more and join me as a member at 10East.co. That's the number 10, East, dot, C, O. Capital Allocators is also brought to you by SRS Acquium. Want to make sure your M&A processes aren't stuck in the past?

00:01:38 Speaker_02
How about partnering with a company that's been defining the future of deal-making for nearly two decades instead?

00:01:44 Speaker_02
When it comes to M&A innovation, SRS Acquium has reshaped the way deals get done more than anyone else, streamlining processes for maximum efficiency and minimum headaches. Professional shareholder representation? Online M&A payments?

00:02:00 Speaker_02
Digital stockholder solicitation? Well, SRS Aqueum pioneered each and continues to set the bar for game-changing innovation. So leave the days of disjointed deal management behind and define your future with SRS Aqueum, the smartest way to run a deal.

00:02:18 Speaker_02
Learn more at SRSAquium.com. That's S-R-S-A-C-Q-U-I-O-M.com. Hello, I'm Ted Seides, and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation.

00:02:43 Speaker_02
Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access premium content at capitalallocators.com.

00:02:59 Speaker_01
All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their firms.

00:03:06 Speaker_01
This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions and securities discussed on this podcast.

00:03:19 Speaker_02
Today's show is our third in the Training Grounds miniseries, following Carnegie Corporation and Bain Capital to better understand how certain organizations have developed industry leaders.

00:03:31 Speaker_02
Wellington Management is one of the world's largest privately held asset managers, managing over $1.3 trillion in assets with 875 investment professionals across 19 offices and nearly a hundred year history with an unusually low level of turnover along the way.

00:03:51 Speaker_02
Wellington has developed, recruited, and retained leading global investment talent across public equities, fixed income, and recently private markets as well.

00:04:01 Speaker_02
My guest to discuss this training ground is Gene Hines, the CEO of Wellington, who spent more than 30 years at the firm, starting as an administrative assistant.

00:04:12 Speaker_02
Our conversation covers Wellington's cultural values and boutique investment team model, including apprenticeship for junior talent, recruiting at the mid-level, and promotion all the way to partner. We then discuss Wellington's evolution from a U.S.

00:04:26 Speaker_02
equity value shop to a global multi-asset, multi-strategy powerhouse, and Gene's evolution from a portfolio manager to CEO.

00:04:37 Speaker_02
Before we get going, I was walking down the street and saw my friend Brian Furtado, the head of the family office practice at Apollo, on the other side of the street with a handful of shopping bags. Brian is a very affable, can-do type of guy.

00:04:53 Speaker_02
So as I crossed the street to say hello, I was surprised when he appeared frazzled and mumbling to himself. He looked up at me and repeated a phrase twice, just keep buying, just keep buying.

00:05:07 Speaker_02
Since that December 23rd three years ago, just keep buying has become a mantra in our house during moments of holiday-induced stress. It's not really about retail therapy, although my wife Vanessa might mean it literally from time to time.

00:05:22 Speaker_02
It's about remembering that the sprint to the holidays can bring some stress, but the actions we take spread joy and cheer when the big day comes.

00:05:31 Speaker_02
So whether you're celebrating Christmas, the first day of Hanukkah, or anything else on December 25th, when you feel the inevitable pressure of the holidays, take a small action with the gift of giving in mind. Just keep buying.

00:05:46 Speaker_02
Thanks for spreading the holiday cheer with Capital Allocators. Please enjoy my conversation with Jean Hines. Jean, great to see you.

00:05:56 Speaker_00
Great to see you too, Ted.

00:05:58 Speaker_02
Well, I'd love to dive into this training ground story of Wellington, going through your story as a classic homegrown talent. So why don't you take me back to those early steps in your recruiting and training as you worked your way up here?

00:06:17 Speaker_00
The recruiting is probably not as interesting as the training. So I found my way to Wellington, which was a very small company back in 1991 when I joined. Under 300 employees. I started as an administrative assistant. Very unusual.

00:06:33 Speaker_00
I only had two interviews, not the typical 30 that we have now. But the early couple of years was really about working in the research department. and then 18 months in getting to work with Ed Owen.

00:06:47 Speaker_00
In Wellington, particularly on the investment platform, we talk about having an apprenticeship model. And I think I am the classic apprentice, particularly that first decade, but I would even say my second decade. of learning to become an investor.

00:07:02 Speaker_00
So if I take a step back and think about that first decade and working with Ed Owens, it was really, one, getting to know companies and working with him was pharmaceutical and biotechnology companies. getting the skills to do that.

00:07:18 Speaker_00
So that meant for me coming from an undergrad degree at Wellesley, going back to Harvard Extension School and getting accounting background, taking my CFA and taking biology courses, which was really necessary to understand what was happening in the subject matter that I was studying and the industry I was studying.

00:07:37 Speaker_00
What Ed taught me in those first few years, and it was really about observing him and being in every meeting with him, was really about how do you evaluate companies and take all that information in and then gain some insights.

00:07:53 Speaker_02
So is that one-on-one apprenticeship model common across Wellington?

00:07:59 Speaker_00
Yes, and I think it still is in existence today. So in our $1.3 trillion, it really is approximately 60 teams across equities, across research sector teams, across fixed income, long short strategies, and now private strategies.

00:08:17 Speaker_00
Most are small teams of anywhere from two or three to up to 10 people that spend most of their time together. And so for me learning those first few years, a typical week would be, which companies are coming into our office?

00:08:32 Speaker_00
Are we going to see Eli Lilly this week? Are we going to see this biotech company? And then you have a daily, a weekly, a quarterly cadence to how you do the work.

00:08:42 Speaker_02
If you look today across those 60 teams, how would you characterize some of the similarities in that training and apprenticeship model?

00:08:53 Speaker_00
If you look across the 60 teams today, there is a combination of people across their career spectrum. So we continue to have a really robust early career group at Wellington.

00:09:06 Speaker_00
So people who start out either right from college, a few years out of college or from MBAs that are starting their career in the investment management industry. We have people that we hire that maybe have spent 10 or 15 years or 20 years even

00:09:22 Speaker_00
in the industry. And then we have a series of people that are very experienced in their seats, either as researchers or experienced portfolio managers.

00:09:31 Speaker_00
So I think that's what's similar about it in the sense that you have the generations of experience on most teams. And that helps us with succession because we think succession is so important for the continuity of the business.

00:09:44 Speaker_00
And we have this concept of how do you build a bench in a team? And then there can be a lot of movement amongst teams as well over time.

00:09:52 Speaker_02
So let's break down that unit of the team. You talked about your experience early on, some of that initial training. That mid-layer, lateral hires, how do you go about that interviewing process?

00:10:05 Speaker_00
We have a very in-depth interview process. So by the time someone joins Wellington, and they will joke about it, like they will typically have gone anywhere from 25 to 35 interviews.

00:10:18 Speaker_00
I remember a few years ago, a new employee who had just been through the process said, by the time I was on my 25th, 26th, 27th interview, I felt like I was a Wellington employee already. I wanted to come. And by the time the Wellington employees

00:10:33 Speaker_00
have interviewed the person and get the feedback, we want them to come.

00:10:37 Speaker_00
Sometimes we're looking for very specific skills that we don't have at Wellington or that we want to replace if it's a succession or if we're in a new area of the market, something we want to add.

00:10:48 Speaker_00
But really importantly, it's about culture and it's about values. And that would be being a client fiduciary, having high integrity, being really collaborative. And you can interview for collaboration.

00:11:02 Speaker_00
If someone wants to be a lone wolf and doesn't want to collaborate, they shouldn't be at Wellington. It's not the place for them.

00:11:08 Speaker_00
There are many very successful investors who are probably successful in their own right, but we wouldn't benefit from them and they wouldn't benefit from the Wellington platform.

00:11:18 Speaker_00
It's shared values and it's collaboration are what we really get out of those interviews. And then we're also interviewing for the skills.

00:11:26 Speaker_02
How often does someone get near the end and then doesn't ultimately get an offer?

00:11:33 Speaker_00
After that number of interviews, people will usually go to offer. I think our hit rate on offers is very, very high. By the time someone's invested so much of their energy into the process, they want to come to Wellington as well.

00:11:49 Speaker_00
We don't make many mistakes in hiring and who we bring in the door.

00:11:54 Speaker_02
So when that person comes in laterally on that team, how do you think about the onboarding of that person onto the team?

00:12:00 Speaker_00
The onboarding happens deliberately and then very organically as well. So if someone's coming on a team, there's a few people they're going to work with every day.

00:12:09 Speaker_00
And so they're the main people that are going to make sure that that person has a good onboarding. But then we are also very deliberate over time of creating an onboarding plan.

00:12:21 Speaker_00
Because like every company, Wellington has its ways of working and it can be a little overwhelming to get to understand Wellington. Let's say you're coming in as a global industry analyst. You come in September 1st.

00:12:35 Speaker_00
How are you going to meet the portfolio managers and the other global industry analysts over the next number of months? Very, very deliberately so that you get to know people. By the time you launch in coverage, which might be

00:12:47 Speaker_00
between three and six months, you get to know a lot of people. So we're very deliberate about setting up an onboarding schedule.

00:12:55 Speaker_00
People at Wellington love to meet the people and they tend to already be in the meetings with them or in our investment meetings. So they see them. And so we try to do that pretty deliberately.

00:13:04 Speaker_02
What are some of those norms that you said are a lot when somebody comes in?

00:13:10 Speaker_00
Let's say you're a business developer. We have more products than the average asset manager. We have about 250 products and 60 teams.

00:13:18 Speaker_00
There's a real beauty to that diversity, but it can be overwhelming, particularly to some who are used to having a more narrow product set, or particularly if they're coming from a small firm, they may have one or two products and all of a sudden they have potentially

00:13:33 Speaker_00
250 products to get to know and 60 major investment teams versus a few. And so that's probably the one we hear the most. One of the things about our investment platform that we've really worked very hard on breaking down silos.

00:13:50 Speaker_00
And so there's a lot of collaboration, not only amongst a team, but then the equity teams and then amongst the fixed income teams and all the way down the line. And so when you come to Wellington,

00:14:01 Speaker_00
You may be a private investor and getting to know all our global industry analysts might be important for your role. How do you meet 500 people over time? That could be overwhelming because someone might have something that's helpful to you.

00:14:16 Speaker_00
Now, that's impossible to do all at once. People often ask me, what's the secret? What advice do you give me about being successful at Wellington? And one of my answers is, we're not a political organization, but we're a relationship organization.

00:14:33 Speaker_00
Getting to know people is important. And that's how you create networks and collaborative networks. People really want to collaborate. And so how does someone who comes into Wellington really form those networks is important over time.

00:14:49 Speaker_02
And then over time on an investment team, how do you go about your regular evaluation of talent, its reviews, and then changes, whether promotions from the junior level to that mid-level and mid-level to senior?

00:15:03 Speaker_00
Every year we have a feedback mechanism where you will have anywhere from 10 or 20 people that you work with most closely provide feedback on you.

00:15:13 Speaker_00
both qualitative feedback and quantitative feedback on your skill in your recommendations over the past year, but also the level of skill over time. So that's one part of the evaluation process.

00:15:26 Speaker_00
So if you take our director of research, Mary Prishak, who's responsible for all of the analysts, she will get feedback on the 60 plus global equity analysts, and it will be very rich and robust feedback.

00:15:43 Speaker_00
The other part of the feedback is quantitative. What is the one year, three year, five year, 10 year down to how good were they at recommending? How good were they at impacting portfolio management? How much are they impacted actual portfolios?

00:15:59 Speaker_00
What is their results in their research portfolios? Then there's self-reviews. So. I often tell people, spend a lot of time on your self-review.

00:16:07 Speaker_00
One, it's important for yourself that you are reflective about how well you've done and where you can improve. The manager then takes all of that information and provides a review of an individual. That happens at the individual level.

00:16:23 Speaker_00
And then at department level, it's like, who's done really well? Who has not done as well this year? And we have both short term ratings and long term ratings because we know in this business, there are always years where you don't do well.

00:16:36 Speaker_00
But we want people to be reflective of that because that's the short term client experience. But the most important rating is really how someone's doing over the long term.

00:16:46 Speaker_02
On that quantitative piece, how do you think about process versus outcome?

00:16:51 Speaker_00
So we have the processes that determine yearly compensation. And then we have the processes that determine what is someone's philosophy and process.

00:17:01 Speaker_00
We have an oversight group at the firm that looks across all of the investment platform and says, how is the whole investment platform? Are there any outliers? Are there outliers that are doing too well? Are there outliers that are doing not too well?

00:17:13 Speaker_00
And then that allows us then to go down a little bit further and delve into a team perhaps that maybe is doing well or over earning alpha.

00:17:23 Speaker_00
And then we have a group in each department really that focuses on what's the philosophy and process of that investor? Are they actually doing what they're saying they're doing for clients? What's the alpha targets?

00:17:36 Speaker_00
What should they be delivering based on their philosophy and process? That's both on early career, what is your philosophy process, how it might be different from your senior investor.

00:17:46 Speaker_00
Then we do it continuously over time because it shouldn't change drastically, but it should evolve over time. We do then offshoots of that. How do you incorporate factors into your philosophy and process? How do you incorporate ESG factors?

00:18:03 Speaker_00
How do you incorporate portfolio construction? That's the process part of it that becomes the output.

00:18:10 Speaker_02
When you gather all that information together, you get to compensation discussions and promotion discussions. How do you decide with all that information when someone's ready to take the next step?

00:18:24 Speaker_00
Our director levels have the decisions to promote someone to an analyst, and they have their frameworks and what they expect to reach that bar. You want to be open and transparent to everyone about what it takes to reach that bar.

00:18:38 Speaker_00
So if you're a research associate, what will it take to become a global industry analyst? If you're a team analyst, what will it take to become a portfolio manager on that team?

00:18:48 Speaker_00
So we have frameworks in place that are transparent throughout the organization. We also have frameworks about what does it take to become vice president, a managing director, and a partner.

00:19:00 Speaker_00
And those criteria are actually similar, but obviously the level of impact rises with each one. And so it's very transparent about character and behavior, skill, impact, essentiality of the role. Those all go into our promotion processes.

00:19:18 Speaker_00
And over time, we have tried to define what success looks like. So one of the other things we like to do is storytell. And so we recently named approximately 50 new managing directors.

00:19:31 Speaker_00
We have what we call a managing director advisory committee that helps the managing partners with a lot of the evaluation. They helped us narrow down all the input we've gotten across the firm on potential managing director candidates.

00:19:45 Speaker_00
And then we put out not only who was named a managing director, but we told a story about why. And so that's part of role modeling what it takes to reach the next level.

00:19:56 Speaker_02
When it comes to that prize partnership, what are those criteria that go into determining who will be the next partner from managing director?

00:20:06 Speaker_00
With all of our compensation and promotion processes, we gather a lot of input. For partners, it starts with partners.

00:20:15 Speaker_00
It's a nine month process, a very intense, robust process to get feedback from the partnership, to get feedback from our line management on who they would nominate for partners.

00:20:27 Speaker_00
And then the re-managing partners are responsible for nominating partners that will be elected by the partnership.

00:20:33 Speaker_02
Over many, many years, there have been more and more partners. You add a new partner, they have a slice of the pie. Where does that slice come from?

00:20:42 Speaker_00
So there is a pie. When we determine merit over time, we can only split 100% of the merit. It can't be more than 100%. But over time, we hope that by adding great skills to the partnership, that we will grow the pie.

00:20:57 Speaker_00
As we've grown over time, what will determine the size of our partnership will be, one, the impact partners have. It will also be where we are in successions. It will be what capabilities we have. We would probably be a smaller partnership if we had

00:21:14 Speaker_00
not 60 teams, but 20 teams. We'd probably be a smaller partnership if we just stayed U.S. and didn't globalize.

00:21:21 Speaker_00
The size of our partnership will be determined by the amount of people that are having that kind of impact that allows us to grow, add capabilities, serve our clients in all parts of the world. We don't have a determined size.

00:21:36 Speaker_00
It's really based on impact and are they adding something unique to the partnership?

00:21:42 Speaker_02
What's the framework that you use for succession?

00:21:46 Speaker_00
I'm 33 years at Wellington and I'm not an unusual partner at Wellington to have spent one my entire career or a long career at Wellington. But I think it's a very personal thing when people want to leave the partnership and retire.

00:22:02 Speaker_00
Sometimes people stay well into their 60s and sometimes people say, I've had a wonderful 25, 30 year career and they're in their 50s or early 50s and they say, I want to do something else. in the next chapter of my life.

00:22:17 Speaker_00
So I think it's a combination of what are the personal desires of our partnership and what they want to do after spending a lot of time. And part of it is when successors are ready. It could be a combination of that.

00:22:30 Speaker_00
Sometimes, hopefully not often, it's because of performance. That's our job as managing partners to make sure that everyone in the partnership is performing. The investment business, it is a really hard business.

00:22:44 Speaker_00
In order to be a great investor or a great business person in this business, it's an intense amount of work. And so I think people over time want to keep that intensity and they're doing so well for their clients.

00:22:59 Speaker_02
I'd love to pull on that thread of those instances where the performance isn't what it needs to be. Not necessarily the partner who's decided to retire, but along the way, what's that historical turnover been in the organization?

00:23:15 Speaker_00
The turnover in the organization overall is under 10% and turnover of investors is lower than that.

00:23:22 Speaker_00
So one of the things that is a benefit of being a private partnership is that we can take the long-term view on talent, but we also have to have a high bar.

00:23:32 Speaker_00
I've seen many successful investors who've had a downturn and then they've recovered and have gone on to do great things. And then there might be times that the market structure evolves and the investor doesn't evolve alongside.

00:23:44 Speaker_00
This is a job where you have to have a lot of resilience. in overtime, maybe something in someone's personal life or the toll of investing overtime, that that resilience isn't there. So those are the things we look for.

00:23:59 Speaker_00
And we'll go through an evaluation at the management level, the management line managers who manage investors. We often will get a lot of feedback from their peers. We often have peer SWOT teams to help.

00:24:12 Speaker_00
So the combination of, first of all, we want to try to help. And then it's a series of conversations to say, maybe it's time to leave.

00:24:21 Speaker_02
So when the turnover is that low, and some of it has come from some underperformance that doesn't work its way out, it sounds like there's not a lot of voluntary departures.

00:24:34 Speaker_02
And I'm curious, what is it about the culture of the investment team in an industry where there often are people who want to go somewhere and hang their own shingle that's kept so many people here?

00:24:46 Speaker_00
I think there are two things. One, it's the culture, that we have a very strong culture of great people that people like to spend their days with, because that's very, very important. Number two, we have this culture of collaboration.

00:25:03 Speaker_00
A lot of people in organizations will say they're collaborative. We are insanely collaborative. And that makes people better. So back to what we interviewed for. Do people want to learn from others and do they want to share their knowledge?

00:25:19 Speaker_00
You have a group of people who are better at their jobs because they're part of the broader Wellington ecosystem. I think that keeps them there. And that's what attracts people.

00:25:30 Speaker_00
We've had people come in and they do better at Wellington than they've done in their previous firms because of the collaboration. And then finally, it has to be a very positive economic.

00:25:42 Speaker_00
Our private partnership, the ability to become a partner and be an owner in the firm and The economics have to work out that they're equal to better than setting up your shingles someplace else.

00:25:55 Speaker_02
I'd love to walk through some of the history of how you've evolved as a business and some of the interesting dynamics and challenges that have come along the way from really that early start.

00:26:07 Speaker_02
What were the most important early strategic decisions in changing from that original boutique?

00:26:13 Speaker_00
So when I joined in 1991, it was the very beginning of what I'll call our research portfolio franchise. And I think we had just started the year before, that was a U.S. portfolio.

00:26:28 Speaker_00
And then after that, we had strategies that focused on international and global and various versions of the research analyst managing money. That was very unusual in the 1990s.

00:26:41 Speaker_00
So I think what resulted in that is that becoming a global industry analyst became a destination and instead of a stop on the way to having to become a portfolio manager to be recognized and being able to run money.

00:26:56 Speaker_00
And so that became just a very important part of the model. If you take Wellington at its core, we're a research shop. Research insights is what we do really well.

00:27:07 Speaker_00
Having the ability of researchers to be able to express those insights in portfolios themselves and not necessarily just through their portfolio managers became a really important part of one retaining talent, which many of our peers, if you go back to the 1990s, the great researchers at the firms left.

00:27:31 Speaker_00
And so I would say also in the mid 1990s, we started a hedge fund business that was based on talent. So we have a 30 year old long short business.

00:27:42 Speaker_00
And that also allowed many of our really strong investors to have another outlet within the Wellington structure. And I think that just kept a lot of people at Wellington.

00:27:54 Speaker_00
That mindset of both innovating for our clients and also innovating for our investors, I think has continued over 30 years.

00:28:04 Speaker_00
One more I will highlight would be going to the privates business that was driven by a growth investor who recognized that many growth companies were staying private for longer. Now that's

00:28:17 Speaker_00
It's very obvious to say that now, Ted, but it wasn't necessarily obvious in 2012 and 2013 when he was pushing the firm. That was a very talent-driven entry into that business. There's also strategic reasons to increase our capabilities.

00:28:34 Speaker_00
I would say in the decade of the 2000s, there was two big strategic endeavors. One would be, we had a fixed income business. But it was very small relative to our equity business.

00:28:45 Speaker_00
And there was just a real recognition of making sure we had all the capabilities. And that included technology, it included trading, it included hiring investors.

00:28:57 Speaker_00
And that led to a lot of growth over the next 15, 20 years that has now resulted in the fact that we're very balanced between equity and fixed income as a business.

00:29:08 Speaker_00
in the mid-2000s also was going from our Boston-based footprint to going to a global footprint. And you look back over 20 years, 30% of our employees and 30% of our clients are in our EMEA and APAC offices.

00:29:28 Speaker_00
We used to tell everyone that our edge was being together. in person.

00:29:34 Speaker_00
And in 2006, when our head of research said we're going to have investors be in our London office, our London office was a smallish business office and literally we almost fell off our chairs.

00:29:47 Speaker_00
He asked for volunteers to spend some time in London because I think he knew that in order for us to globalize our investment platform, we needed senior people and culture to make it happen. There was a bunch of us and we all decided we were going.

00:30:03 Speaker_00
We're going to London and there we had a foundation. Our foundation had a gala that night and we told all our partners and spouses we're moving to London that very day. In the end, it was only me. That's how it started.

00:30:17 Speaker_00
If we had not done that, and we had only looked at the Boston talent, we would not be where we are today.

00:30:25 Speaker_02
In that evolution, when you've delivered a message to your clients at that point for decades, that our strength is we're together in Boston, how do you change the story so that people are comfortable with this dramatic change in what you had historically told them to be your competitive advantage?

00:30:45 Speaker_00
We had told the story, but we had to shift what the advantage was. And so when we moved to have investors in London, we did it in our way. We wanted to make sure that investment culture was transported into our London office.

00:31:01 Speaker_00
And as we hired London investors, how do we make sure it didn't become siloed? So I think what we very successfully did was that it didn't become a London office.

00:31:11 Speaker_00
Investors in London are part of the Wellington investment platform and ecosystem, and it didn't become a siloed office. We were just very deliberate about that. Again, we had that message that our edge is being together.

00:31:26 Speaker_00
And so when we weren't together, we did a lot to make sure our edge was still together. I remember technology coming, our very famous morning meeting until 2000. 8, it was always on audio. And all of a sudden you had video screens.

00:31:42 Speaker_00
The technology helped us make sure that it didn't become siloed too.

00:31:48 Speaker_02
As you built out, particularly in some of the alternatives, say, starting even in hedge funds in the 90s, the compensation scheme is notably different in hedge funds than traditional active management.

00:31:59 Speaker_02
How did you deal with some of the potential frictions of people managing products that were more profitable than others?

00:32:09 Speaker_00
So we have a compensation philosophy that you want to treat everyone fairly based on their contributions. So fair is not always equal, but it's fair. And so we have our incentive compensation committee that looks at how all investors are incented.

00:32:24 Speaker_00
And there are different formulas depending on the type of investor you are and the business you're in.

00:32:31 Speaker_00
And I think being a private partnership and having the managing partners govern that, I think is also part of the secret sauce of making sure it's fair.

00:32:41 Speaker_02
So when you first started moving in that direction, it's not hard to envision, certainly back then, all of a sudden everyone's going to want to go run a hedge fund. What happened at that time?

00:32:52 Speaker_00
Well, I think we had interest in running hedge funds and long short portfolios because we had just great investors who really understood their sectors. They were looking for avenues to express the whole sector.

00:33:08 Speaker_00
I don't think it was really because of the compensation. I mean, the compensation was important, but I think it was really about a way to really express all the insights they had. We have portfolios now that are 140-40.

00:33:22 Speaker_00
Those allow you to express all your insights. We've had movement from being an analyst to being a portfolio manager and being a portfolio management team to an analyst team. I think people select what they like to do best.

00:33:35 Speaker_00
We have people that really love to be deep researchers, and we have people that like to be broad, and we have people that like to do long short investing, which is hard. I think you just have people who select to what their interest is.

00:33:50 Speaker_00
For many, many years, we had my colleague on the healthcare biotech team. He didn't even want to do pharmaceuticals. He wanted to just do biotech. And so we have that ability.

00:34:01 Speaker_00
What is the overlap between people's passions and what they're really good at and what are the opportunities here?

00:34:07 Speaker_02
So strategically, you've started to move into the private markets and that whole world exploded in the last 10 or 15 years. How have you thought about how to engage beyond the extension of companies are staying private for longer?

00:34:25 Speaker_00
growth companies right before they go public. It was just a perfect natural extension for us. And that's how the business started. Over time, it became what else makes sense for Wellington to win?

00:34:38 Speaker_00
And I think we take the lens on what are our clients interested in? Where do we, in particular, have places that we could do really well? You have biotech. climate technology and investment grade private credit.

00:34:53 Speaker_00
We recently have something in the venture growth lending strategy. And it's like, where does it make sense that investors will come in and they will benefit from being part of Wellington and Wellington will benefit from having them on our ecosystem?

00:35:10 Speaker_00
I think there is plenty of white space. And there are parts of the private market doesn't really make sense for us to win in.

00:35:16 Speaker_00
But if you think about our capabilities in sector based research, if you think about our capabilities in credit, we're a very large public credit investor across all the asset classes of fixed income.

00:35:29 Speaker_00
There are many, many places where we can continue to grow. That's the strategy.

00:35:35 Speaker_02
How do you think about getting there organically compared to, say, an acquisition, as we're seeing a lot across the industry?

00:35:42 Speaker_00
We are more open to hiring teams. Five years ago, we might say we were only going to hire a person and then build a team around them. We're more open to hiring teams.

00:35:54 Speaker_00
We've had plenty of luck hiring great private investors that I think we will continue down that path.

00:36:00 Speaker_02
Have you thought about strategic partnerships?

00:36:04 Speaker_00
I would say one of the things I think Wellington is really good at, and it might not be as obvious, is that we are a great strategic partner. We've had a great strategic partnership with Vanguard for 50 years.

00:36:17 Speaker_00
We're the largest sub-advisor in the world. And so I would say, if you think about what are strategic partnerships, those are strategic partnerships on manufacturing and distribution. I suspect there's going to be more strategic partnerships across

00:36:30 Speaker_00
many aspects of our business going forward, and we're not going to do everything. Those kind of things, I think, are much more likely in the future.

00:36:39 Speaker_00
I'm not sure we would have contemplated them, but I think the world is changing, that more of those type of partnerships will become.

00:36:47 Speaker_02
What have been some of the challenges to the scale that the business now has?

00:36:53 Speaker_00
The interesting thing is that we are a scaled business, over $1.2 trillion in assets under management, but the 60 teams make it very small. So think about each team being quite manageable.

00:37:08 Speaker_00
And the beauty of it is that you have scale and distribution across the globe, and we'll continue to invest on the margin there. Do we have scale in technology? Yes.

00:37:20 Speaker_00
That's probably one of the biggest changes, how much you need to invest in technology to do the investment management business versus 10 or 15 years ago when you got a paper printed out to do portfolio management.

00:37:32 Speaker_00
And so I think those part of it are scaled businesses. But everything else we do is really about the small boutique teams. And I think that's true on the private side, too.

00:37:46 Speaker_00
The only reason clients invest in privates is because you give differentiated returns. They take the illiquidity premium. So that's our approach.

00:37:54 Speaker_00
Where can we have a team that either does great research or has great insights and generates an outcome or an alpha stream that's really important to our clients? That's how you manage the scale.

00:38:09 Speaker_00
Importantly for the future, we have a few platforms that will take those small teams and put them together and package them. And that's on our long short strategies. That's on our 140-40 strategies.

00:38:24 Speaker_00
We've had a 30 years of our research portfolios, putting researchers together. I think we'll do it in the private space.

00:38:32 Speaker_00
You take all those small boutiques where people really spend their time and can optimize, but then we can scale them through platforms and vehicles.

00:38:43 Speaker_02
With so much of the capital you manage being in the public markets, equity and fixed income, and active management has, generally speaking, been under pressure for a long time, how do you think about the future of active management?

00:38:57 Speaker_00
We're a proud active manager. Let me take it at first principles. I think our business benefits from the world growing, the world innovating, the world being productive.

00:39:09 Speaker_00
And then there are other things that impact the value of companies, such as geopolitics, elections, interest rates, monetary policy. I don't think those are static.

00:39:21 Speaker_00
and we're probably entering a period where they're less static than they have been over periods of time. So I think that active management will be just a very, very important part of the future of managing money.

00:39:33 Speaker_00
If I reflect back, very two important trends in the last decade have been the rise of passive. And I wouldn't say here that passive has peaked or will slow down. And the other big trend is privates, which I would consider active.

00:39:49 Speaker_00
But if we focus also on the public markets, you had a decade of QE, which led to less dispersion, and that's not as good for active management.

00:40:00 Speaker_00
And then over the last couple of years, you've had this immense concentration on a few companies, very rightly so, based on the earnings and the margins of those companies and what they've accomplished.

00:40:14 Speaker_00
Just as QE ended, you had the rise of this concentration. I think what will benefit active management is that concentration broadens.

00:40:24 Speaker_00
I'm a big believer that those seven companies will be successful only if the benefits broaden to the economy around the world.

00:40:32 Speaker_00
And so I would suspect that you're in an environment in the next period of time where you don't have the QE of the past decade.

00:40:40 Speaker_00
I'm not saying those companies won't do well because they've done amazingly well, but you'll have a broadening of the market and that's a really good environment for active management.

00:40:49 Speaker_02
Do we circle back to your path from the administrative assistant to the analyst to the mid-level to the portfolio manager to partner and now CEO? What has been different for you in your role as CEO?

00:41:03 Speaker_00
So I became a managing partner in 2014. And that role is actually more similar to being an investor than maybe many people would suspect. You spend your days absorbing information. So that could be because you're reading.

00:41:19 Speaker_00
It could be because you're looking at a model. It could be because you're discussing something with a young person on your team. It could be because you've met five companies over the last few days, or you've been on a research trip to Europe.

00:41:31 Speaker_00
you're absorbing information. And the managing partner is very similar. When I think about being an investor in the managing partner role, the energy was very similar.

00:41:43 Speaker_00
And I would say probably the biggest surprise for me being CEO, the days are different. They're more dynamic. How do you balance the schedule of the short term with making sure that you're thinking really long term?

00:41:58 Speaker_00
Because I think one of the benefits of me and my skill set is I've been an observer of companies and who's done well and what great leadership looks like for my whole career.

00:42:09 Speaker_00
And so it's that balance of making sure you're executing in the short term and really thinking about the long term. The day-to-day of being CEO is just very different than the day-to-day of being an investor.

00:42:23 Speaker_00
I have only a few more weeks of managing money and the luxury of sitting down and reading a research report and just absorbing things. coming to a close. For me, I try to bring that in more. How do I make sure my days don't get too booked?

00:42:42 Speaker_00
And how do I make sure I'm spending my days right where I have that balance? My management team, they're the ones who are responsible for the 3,000 employees. And I'm responsible for the overall firm and accountable for the overall firm.

00:42:59 Speaker_00
So I have to be there and have my energy high to interact with the management team, to make sure that I'm iterating with them, problem solving with them and helping them run their businesses in whatever capacity I can help them.

00:43:13 Speaker_00
And also then making sure I'm thinking about the strategy of the firm long term and making sure I have that balance right of energy is very different than being an investor.

00:43:23 Speaker_02
You described as an apprenticeship business. Where do you get your training as a CEO?

00:43:29 Speaker_00
When it was announced that I was taking this role, I can't even tell you the number of CEOs, both in the financial industry as well as in the healthcare industry, that said, I want to help you. How can I help you?

00:43:41 Speaker_00
And so I did a series of about 30 interviews with CEOs of healthcare companies that I had known for a long time and financial companies and some of our clients. And as I started those, I got to ask the same question.

00:43:58 Speaker_00
What do you regret and what did you think you did really well? Hearing answers to that, that was so helpful. Then I have a series of dinners I have with some Boston-based CEOs where we talk about being a CEO.

00:44:11 Speaker_00
I belong to some organizations that also other CEOs, and we talk about issues about being a CEO. There was a number of continuing education ways that I learn. Everyone has different businesses, but the issues that you deal with can be quite similar.

00:44:29 Speaker_00
You just learn from others.

00:44:31 Speaker_02
When you went on that listing tour of other CEOs and heard about things they regretted and things they did well, what were some of the common patterns you saw?

00:44:40 Speaker_00
Two things across the board were unanimous was people felt lonely. So back to your previous question, how do you create a community and a network where you can share some of the things that get those off your mind?

00:44:55 Speaker_00
So I still work with my personal coach, my executive coach. So I've worked with her for 10 years. I find that incredibly helpful. And then peers who are also that I can talk to. But that was number one.

00:45:07 Speaker_00
And then the other thing is I took too long on talent. And I think I heard it from every single CEO. Every seat has to have the right leader, because that's what slows up organizations.

00:45:20 Speaker_00
If you don't have the right leaders in those management seats, and then it has to happen at every layer. The people who are managing all your employees are the ones that they interact with.

00:45:30 Speaker_00
And they're the ones giving the messages and they're the ones setting strategy of those groups. And if you have someone who's not the right person, it can really slow an organization. That was unanimous across all of those interviews.

00:45:44 Speaker_02
How did you act on that in an organization that's so methodical about the hiring process?

00:45:51 Speaker_00
take the same philosophy, making sure that every one of my direct reports that you're constantly have the right person in the seat. Even in an organization as nice and kind as Wellington, that's really important.

00:46:05 Speaker_02
And then on the other side, what did you hear from the CEOs about the things that they did well that they had to keep doing well?

00:46:12 Speaker_00
I remember one large pharmaceutical company who had been very successful. One of the things he said to me, he's like, I've made four decisions that matter. four decisions that mattered over those 10 years. And it went through the decisions.

00:46:28 Speaker_00
And so that always sticks in the back of my mind. You're going to make a bunch of decisions, but in the end, it's back to the story of Wellington. It's like getting into research portfolios and getting into hedge funds and investing in fixed income.

00:46:43 Speaker_00
globalizing and going into privates. We've zigged and zogged, but those are the ones that have made Wellington what it is today. And that resonated with me. It's like, you're going to make a few really important decisions.

00:46:58 Speaker_00
And so how do you get the energy and the time and the mindset to make sure when those decisions come, you're ready to make them?

00:47:05 Speaker_02
As you look out over the next five or 10 years, what do you think Wellington becomes?

00:47:11 Speaker_00
I think Wellington becomes a firm, I would suspect that we're going to continue to be an excellent manager of long assets. We have an amazing base of research across

00:47:29 Speaker_00
sectors in the economy and governments that we will excel at that and being an excellent long manager. And you know, if you deliver 100 basis points, 200 basis points, that compounding effect is so important.

00:47:46 Speaker_00
Really, really focused on delivering alpha. I think we have every right to be a much bigger player in long short investing. We have been in it for 30 years. We've spent quite a bit of time in the last five investing in that business.

00:48:04 Speaker_00
And so I suspect that will become a bigger part of our business going forward. And we should be a great place They fit into our culture quite well.

00:48:13 Speaker_00
And as long as we have people who want to collaborate and don't have big egos and want to learn from others, I hope and know that if I look at our roadmap for privates, that we will have more capabilities on private investing.

00:48:29 Speaker_00
And I'm a big believer that We might be going through a cyclical part of the privates market. But secularly, I do think privates are a greater part of the economy, both on the credit side as well as on the equity side.

00:48:44 Speaker_00
And so making sure that where we can really add value on that, that we continue to grow those capabilities.

00:48:53 Speaker_02
So Gene, as you step back and think about the takeaways of what's made Wellington such a great training ground over the years, what are the most important factors that you summarize as, this is what's made this place great?

00:49:07 Speaker_00
It goes back to the fact that we've earned the trust of our clients because we've delivered very competitive returns over long periods of time.

00:49:18 Speaker_00
We're a stable organization, and that has allowed our clients around the world to trust us, that we will be there for them in the good times and the hard times. What has allowed that to happen, I think, is our private partnership model.

00:49:33 Speaker_00
I think it's our ability then to attract talent, people who want to be owners of the business. So it's sort of a flywheel of the private partnership model, the culture. has allowed us to hire great people over time.

00:49:48 Speaker_00
And those great people work well together. They continue to earn the trust of clients. And together, they figure out what's the Wellington of the next five or 10 years.

00:49:59 Speaker_00
And so I think that's the flywheel that we have to keep continuing, making sure we're bringing in great talent, both a very early career and more experienced talent, and that we can have a thriving business over time.

00:50:13 Speaker_02
Well, Jean, thanks so much again for coming on and sharing your incredible journey and that of Wellington.

00:50:18 Speaker_00
Thank you, Ted.

00:50:20 Speaker_02
Thanks for listening to the show.

00:50:22 Speaker_02
To learn more, hop on our website at capitalallocators.com, where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more.

00:50:39 Speaker_02
Have a good one, and see you next time.