The transcript from this week’s, MiB: Linda Gibson, CEO, PGIM Quantitative Solutions, is below.
You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.
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This is Masters in business with Barry Ri Holtz on Bloomberg Radio.
00:00:06 [Barry Ritholtz] This week on the podcast, I have yet another extra special guest, Linda Gibson, CEO of PG imm Quantitative Solutions. She has a really fascinating background, very eclectic, a combination of math and law. She has run a number of firms and a number of divisions at large firms and traced a career arc that’s just very unusual compared to the typical person in finance. Eventually leading her to a point where she’s managing quants, running about a hundred billion dollars in assets. Really a fascinating background, and it just goes to show you how broad and flexible the world of finance is, that there are so many different ways you can find yourself in a senior management position in, in this industry. If, if you had to guess someone would run through this path, you would, you would never assume, well, you’re gonna come outta law school and eventually you’re gonna be general counsel.
00:01:15 How does that lead to running a group of quants? But that was Linda’s career path. There are a few people in the world who are more knowledgeable about the management of asset managers and what it’s like to actually run a global organization and interact with lots of aspects of the business of finance, whether that’s acquisitions or compliance, or dealing with all the legalities of multi-jurisdictional regulations. She, she really has been the person who’s lived this and, and walk the walk. And I found this conversation to be quite fascinating. And I think you will also, with no further ado, my conversation with Linda Gibson, CEO of PGIM, quantitative Solutions. So let’s get into your background, which is really kind of interesting. You, you get a, a BS in Mathematics and a JD from Boston University Math and Law. Yep. Not the usual combination.
00:02:16 [LINDA GIBSON] Not, not at all, Barry. It is something, math has always come easy to me since a child. So I was a math major pretty much because it was an easy a for me,
00:02:27 [Speaker Changed] Math is truth. It’s, it’s
00:02:29 [Speaker Changed] Absolutely, it is. I loved the fact that my grades weren’t subject to the subjectivity of my professors and that there was always a right and wrong answer. And the one that,
00:02:41 [Speaker Changed] Well, that’s, that’s until you get to applied Mathematics where it all goes off the rails,
00:02:44 [Speaker Changed] Which if you notice, that is where I stopped. I didn’t get an advanced degree in math.
00:02:50 [Speaker Changed] But you do get the, the jd and, and you said you weren’t a math nerd. You, you were not looking for a job in finance. What happened?
00:02:59 [Speaker Changed] I was not, I was waitressing one summer, my final summer after my senior year and a friend called and said, I just interviewed with the financial services company. I’m not interested in the job, but you might wanna reach out. And I literally reached out. It was Mass Financial Services. I reached out, I got the interview and I got the job. And I started the next week. Didn’t really think about going into financial services. I thought it was going to be honestly a math teacher. I was thinking about teaching in, in boarding school. So
00:03:29 [Speaker Changed] Wait, so you go to MFS, is that 00:03:31 [Speaker Changed] M
00:03:31 [Speaker Changed] That Right. And was this between college and law school or after you graduated law school?
00:03:35 [Speaker Changed] It was between college and law school. Okay. So first job out of college
00:03:38 [Speaker Changed] And, and you discover, Hey, this finance stuff is kind of interesting. What then led you to go to law school instead of business school?
00:03:46 [Speaker Changed] I worked with a bunch of lawyers. So I worked at the third party administrator distribution arm of mutual fund family at Mass Financial. So it’s called the banking services group. It was back when banks couldn’t offer and distribute mutual funds. So we had clients like Chase and Citibank and JP Morgan and all of those. And so I worked with a bunch of lawyers and our company was going through transition at the time, and I thought I always wanted, I knew I wanted to get an advanced degree. My father is still a practicing lawyer at 85, and my grandfather was a
00:04:17 [Speaker Changed] Lawyer. So you come from a long family of of attorneys.
00:04:21 [Speaker Changed] I do. But my father advised me not to go into law. He always wanted to be a stockbroker, even though he is entrust in estates. Yes. So he was never really interested in pushing me to go into the law. And even though he worked for his father’s law practice with the name on the door, literally. Right. That was not an option for me.
00:04:41 [Speaker Changed] That, that’s so amusing. ’cause I immediately imagined getting pushback from the family. Hey, everybody here is a lawyer. We, our name is on the door. You’re you’re turning your back on the family business. No such
00:04:55 [Speaker Changed] Thing. Nope. They were at a point where they anti-nepotism or nepotism was an issue. And they said, Nope, you will not be coming to work for this firm. So don’t even think about it. Huh. So I was literally sitting on the roof deck one night and I was balancing law business school, which one made more sense for me and didn’t really know that much about either, but I was very logical by nature. And I was working with a bunch of lawyers at the time. And I also love the fact that, well, it took one more a year to get through school, three years versus two. But when you come out, you are something, you’re a lawyer, you have something. And so off I went to law school.
00:05:30 [Speaker Changed] I I thought you were gonna say indebted, but it it really that too. It, it really doesn’t matter when you, when you come outta business school, you’re an MBA, when you come outta law school, assuming you pass the bar, you’re JD and you’re to practice. How soon after law school did you realize I don’t wanna practice law?
00:05:50 [Speaker Changed] Pretty soon. I, I went into second 00:05:53 [Speaker Changed] Year, third year law
00:05:54 [Speaker Changed] School. It was pretty much the third year of law school. I was an immersive mock trial program where you spend the whole year and you work for the DA’s office and the prosecutor’s office. Right. I thought I wanted to be a trial lawyer. Lawyer. LA Law was what it was all about.
00:06:08 [Speaker Changed] Everybody did it. Exactly, exactly.
00:06:09 [Speaker Changed] It was so cool. And so I thought that’s what I wanted to do. I I got into it. I wanted every single one of my cases to settle. I did not like law, especially trial work at all. And I was walking on the street and I ran into somebody I had worked with at this banking services group of MFS, which had spun off and become Signature Financial Group. And the woman said to me, you might wanna come back and work for us. Have you thought about it? And I said, absolutely. I’m in. What do I need to do? And I started working for them part-time during my third year of law school, and then worked for them 10 years after.
00:06:44 [Speaker Changed] Huh. That, that’s interesting. When, when did the Harvard Advance Management program come along?
00:06:50 [Speaker Changed] That came along much later. So I spent the first decade of my career as a mutual fund attorney, which was really
00:06:59 [Speaker Changed] In-house for, not for a law firm, but for a, a mutual fund related company.
00:07:05 [Speaker Changed] Right. This was the Signature Financial group. And that was a great opportunity to learn, frankly, because not only was I writing, offering documents, I was reading, I mean, how many people do you know that have read the 40 Act and read the various use its directives, which is the, basically the UK equivalent to the 40 Act.
00:07:23 [Speaker Changed] I know a lot of people keeping on the nightstand in case they get a little, little
00:07:26 [Speaker Changed] Case. They’re tired. Tired. No.
00:07:27 [Speaker Changed] If they have getting sleep, yeah. Puts ’em right out.
00:07:30 [Speaker Changed] Right. So that was just a really good foundation for me. I, I also sat, as I said, we were the third party distributor for all of these major companies. So I was on 12 different boards, not on them, but I was the officer, so I was taking minutes. So I was learning just a ton about the mutual fund industry and working with these big global companies. But then this company, I’m getting off topic of the advanced management degree, but this company launched a new investment fund structure called Global Hub and Spoke or Master Feeder, you might have heard of it. Yep. And I was chosen by the CEO to go travel globally with him to not only get big firms, the likes of HSBC, Julius Bayer, those types to adopt this fund structure, but also to get regulatory approval. So I was traveling all around the globe. This is, I was in my twenties and pregnancy. That
00:08:19 [Speaker Changed] Has to be a lot of fun on the company dime. It 00:08:21 [Speaker Changed] Was very, very fun. We were front of the bus, front of the bus, hotels, everything. Yeah. Well, we actually had a flat in London bet. So I was going to Luxembourg, Germany, Switzerland, the UK trying to get regulatory approval of this mutual fund structure. So it was really, really a great foundation for me. And I, I did that for about 10 years. And this is where I, I moved over to UAM at the time, which is the first multi boutique investment business. And I moved over there into their third party mutual fund business as general counsel.
00:08:56 [Speaker Changed] So that, that’s the real interesting question is why General counsel in-House when given your background, you could have gone to any of the big firms, Skadden elsewhere. It is. And, and made a ton of money working as an attorney working for these big fund companies.
00:09:14 [Speaker Changed] It’s ironic that you, you said that, you said Skadden because,
00:09:18 [Speaker Changed] Not ironic at all. When
00:09:19 [Speaker Changed] I was thinking about going to Old Mutual, I was offered a job at Skadden that same day for the same amount of money. And I knew UAM was potentially going to be acquired, and I knew it was a riskier business, but I thought I can go work for a law firm and then eventually become a general counsel, or I can just skip the law firm step, especially working at a firm like Skadden and go directly to the general counsel job, which I thought was much more interesting to me. So even though Skadden had such a big name, I decided to go to UAM. And it’s,
00:09:54 [Speaker Changed] It’s a really challenging life work balance at my, my friends who all went to big firms. Like you hear stories and, and they, all they do is wine. Why don’t you quit? I can’t leave. I’m making so much money. Right? But you’re miserable. I’m just gonna do this for another five years. I, I’ve heard every 10, 20 years it keeps going. So you skip that, went in house, never looked back,
00:10:17 [Speaker Changed] Never looked back. And the firm got acquired. Pretty much a year later, I was told to shut down my division or my business unit, which I did. And more interestingly, given my UITs background and the fact that I had traveled globally, this was a South African based firm. So Old Mutual, but it was listed in London. So the head office was in London. They were very interested in my global experience and my regulatory experience. So they said, Hey, you wanna become general counsel of the holding company? Why wouldn’t you? Right? So I then put all of my 40 ACT work aside, and that’s when I really learned the art of negotiation. They had 44 affiliates at the time. We had to convert them from revenue share to profit sharing. We had to put equity in the hands of the founders and their management teams. We were doing m and a work, we were disposing of firms that weren’t strategic. We were acquiring firms. So I ended up negotiating with so many CEOs, CIOs, and founders that was really eye-opening when people have self-interest and it infects their wallets. They are very interesting people. So I had to pivot and just, that’s a
00:11:23 [Speaker Changed] Very polite phrase. Interesting people. Were you New York based, London based, or nylon back and forth?
00:11:30 [Speaker Changed] I was Boston based. We were Boston based, but we had, our parent company was in London, and then the ultimate Insurance company was in South Africa. So I was in London quarterly. And then we had affiliates. We had 44 affiliates, and they were all over the us but they were also in the UK and Tokyo at the time.
00:11:50 [Speaker Changed] Oh, so you were really on a plane a lot global. Yeah, I think, I think the flight from Vancouver to Tokyo is faster than the flight from New York to South Africa. That’s a, that’s a bear of a flight, isn’t it? It
00:12:02 [Speaker Changed] Is. But South Africa is really amazing. And it was interesting going into Cape Town and looking around. The brand old Mutual was like Coca-Cola here. Oh, really? It was on every building everywhere. Huh? It was really interesting. They had offices in Cape Town and Joe Burke. I preferred Cape Town, of course. But,
00:12:19 [Speaker Changed] So the obvious question, given this background in, in law and working on mutual funds and eventually becoming general counsel, how does this prep you for the role you have today? Essentially herding cats and managing a whole bunch of quants.
00:12:38 [Speaker Changed] Again, the learning and negotiation skills really helped a a lot in, in dealing with managing investment professionals as well as managing quants. As you know, quants have extremely high IQs. I mean, our firm PGM Quant, we have 29 PhDs. Our CIO is literally an ex rocket scientist who used to work at nasa. Right. And then we have an advisor to the Chancellor of the Ex Checker in the UK as ACIO. So these are very, very smart people. Managing them. You, you definitely have to adapt your style a bit. So you have to learn how to deal with smart people as well as introverts. We have a lot of introverts at our firm. They sometimes have trouble talking to clients. Sometimes they have trouble talking to me. So I need to adjust my management style. But what I learned really early in my career is that it’s not about iq, it’s about, well, it is about iq.
00:13:30 We need very smart people. But EQ is equally important. So I, what I have to do for them is I have to lead them, direct them, manage them, and then sort of push them, but then just leave them alone. I wanna make sure I’ve got, give them the resources that they need, but also give them the direction that they need. And, and having this legal background, what was really great about it is when you’re a lawyer, you’re in every important meeting. So you’re in all the board meetings, admitting everything. You’re in the board meetings, you’re in the compensation meetings, you’re in the internal audit meetings. So you really learn everything about a business, everything that goes right and everything that goes wrong. So that really helped me understand what it was like or what it would be like to manage a company. And then I had this strange seven year stint of heading global distribution, which is, that was very interesting. I didn’t want that job at all. The CEO of our firm came to me and said, I don’t really need a chief operating officer, but what I do need is a global head of distribution. Can you build a centralized global sales team? And oh, by the way, your compensation’s gonna be tied to assets raised, which is the first time that had ever happened in my life. Right.
00:14:41 [Speaker Changed] Interesting. Perspective change, eating what you kill, right?
00:14:44 [Speaker Changed] Yes. I had never sold anything either. So again, what I had to do there was be comfortable with hiring really smart people. So I analyzed the landscape, figured out where there was demand for our products, made sure we had the right products to sell, made sure that the regulatory and the expense hurdles weren’t too high to go in. And then I had to build a lean team of very smart salespeople that could sell our products in these various jurisdictions. But also, when you think you’re managing people so far away from you, the distance is so vast that you have to trust them. We had people in Dubai, I need to make sure those people are doing what they say they’re doing, and that I can trust them. And nevermind. Also, we had people in China, Hong Kong, Tokyo, sometimes we had language barriers. So again, I had to make sure that I hired the best people that I could really trust to do what they needed to do. And then again, let them go. I also needed to learn fast that when somebody is not right or not a good cultural fit, that you need to make a change very, very quickly.
00:15:40 [Speaker Changed] Yeah. No, to say the very least. So let’s talk a little bit about your work with PG imm. They are one of the world’s top 20 asset managers. Well over a trillion dollars. What was it like settling into such a giant firm coming from more reasonable sized firms in, in the early part of your career?
00:16:01 [Speaker Changed] Well, I came from a more reasonably sized firm. It was a very, very easy transition for me because I spent 17 years at a, an insurance owned, multi boutique at the head office in various executive positions. So it was a surprisingly easy transition for me
00:16:21 [Speaker Changed] Because of the insurance background or because of just
00:16:24 [Speaker Changed] The multi boutique background. So I wasn’t on the insurance side. So I was at the asset management arm of the old mutual insurance enterprise. And I worked at the head office. I was after I was general counsel, I was chief operating officer and head of affiliate management. So I oversaw 19 different investment boutiques that frankly spanned the gamut of offerings. We had timber, we had real estate, we had global fixed income, quant equity, fundamental equity, managed futures, everyth, you name it, we had it. And,
00:16:58 [Speaker Changed] And Old Mutual is
00:17:00 [Speaker Changed] The main South Africa, London, New York, Boston.
00:17:03 [Speaker Changed] Boston. Okay. So you, you’re used to working across timelines and regions.
00:17:08 [Speaker Changed] Absolutely. And having worked in that environment for so long, made moving over to PGIM and P GM Quant Solutions, a pretty easy transition for me. I was really excited about it. I had been watching PGIM, I had been watching their reputation and their brand grow exponentially under David Hunt’s leadership. And then I had also known a lot about PGIM quant at the time was called QMA. And we had a firm at Old Mutual two firms, Acadian and Analytic, who are both quant firms. And I sat on both of their boards for years. And as head of affiliate management, you’re responsible for their p and ls. So you are in their shorts with respect to their strategy, their product development, any lift outs they would do, making sure they had appropriate distribution resources and funding, made sure their succession plans were set and were executed seamlessly.
00:18:00 So I spent a lot of time with quantitative firms, and I really, really liked it. Coming from a math science background, I very much liked the systematic nature of a quant firm. But I also liked, at PM Quant, we like to call it the fusion of art and science. So you have the fundamental insights plus the systematic. And while I am a math science person, I am very, very artsy and creative. I love a good craft. My daughter got married two weeks ago, and I spent my winter, last summer learning how to decoupage oyster shells with maps of the cape and gold gilding along the edges. So I, I spent, I don’t know how many weekends doing 200 of these over the winter last year. So that is, that is a little snapshot into my life. But to take it back, so I very much like sort of the art and science of quant investing.
00:18:53 So it was a natural fit for me to come to PGM, but also to come to PGIM quant. And it’s been, it was remarkably easy to transition to the firm and more interesting to me when I became COO, I expected, frankly, organ rejection because I didn’t come from the investment management side of the business. Right. And often you think that investment professionals want CEOs who are investment professionals. And I was shocked and delighted, frankly, when I was appointed Chief operating officer of PGM Quant that the investment group embraced it. They loved the fact that I would support them and lean into them and really let them do what they do and not micromanage them. So
00:19:40 [Speaker Changed] CIO and CEO are very, very different skill sets. CIO you’re essentially dealing with a, a probabilistic process trying to make assessments about an unknown outcome in the future. CEOs have to manage people, they have to manage budgets. It’s much more blocking and tackling and less probabilistic than the investment side. So the fact that you are now CEO of this group of quants, but don’t have a background as ACIO that I don’t think that at all would work to your disadvantage.
00:20:14 [Speaker Changed] Yeah. And I saw it in real life when, you know, being part of a multi boutique and being on the boards of 19 investment managers, I saw the difference between the CEOs that had been investment professionals or CIOs and the ones that were heads of distribution or were an operations. It, it is interesting though, the majority are either in distribution or CIOs. Right. They don’t tend to be lawyers. So, but regardless, I I do think that CIOs tend, if I’m going to stereotype, they tend to do better managing money
00:20:49 [Speaker Changed] Than people. I think. So. You know, that’s absolutely, I I don’t think that that’s over generalizing at all. What’s, what’s kind of interesting is, I thought the ease going from Old Mutual to PGM given both of their insurance backgrounds might’ve been that. But you’re suggesting it was less had to do with that and more had to do with just running a broad assortment of different groups, departments, division, strategies, et cetera. Yeah,
00:21:18 [Speaker Changed] Both PGIM and all Mutual are similar with respect to their investment management. Businesses tend to be pretty separate and distinct from their insurance businesses. So they report in and they have, you know, quarterly business reviews and all of that stuff. And they, they dovetail nicely, but they, they really are run separately.
00:21:38 [Speaker Changed] So you were general counsel and, and how to manage a large group of attorneys, and now you’re managing a large group of quants. Any similarities or differences that, that are noteworthy between herding each herd of cats over there?
00:21:53 [Speaker Changed] There are similarities in that they both tend to be meticulous. So they’re, they’re both type A, they’re both very, very smart and they tend to get into the weeds and the details. So you have to constantly take them up. So at our firm, putting portfolio managers in front of prospects and clients, we constantly have to train them, give them presentation training. We need to often bring in CPMs to help translate their knowledge into layman’s terms.
00:22:23 [Speaker Changed] CCPM being?
00:22:24 [Speaker Changed] Being client portfolio managers. So these are the people that explain what we do in layman’s terms to
00:22:30 [Speaker Changed] Prospects, client facing.
00:22:32 [Speaker Changed] Yes. And many of our, as I said before, many of our investment professionals or introverts, they do not wanna be in front of clients or prospects. Lawyers can be the same. And you often have to get lawyers to think like business people. You do the same thing with investment professionals. They don’t have to think like business professional as much as lawyers do, but they still need to adjust their thinking a little bit. And I often need to change my leadership style. And I learned early on, I took a personality profiling test, I don’t know if you’ve ever heard of it. It’s called Insights Discovery. And they put you into a color bracket, and I’m red, which means I, I tend to like people to be, be bright, be brief, and be gone. That’s how I like people to interact with me. But there are a lot of people that want a lot of data. They want a lot of information. You need to spend time with them. You need to ask them how their kids are. Some are extroverts, they don’t care about the topic. They just wanna have fun. You know, others care more about socializing. There’s a lot of different ways people like to take in information. So when you’re managing lawyers and you’re managing quants, there is something similar there. Managing distribution people is a whole different ball of wax though. That, that, that was fascinating when I managed distribution group
00:23:47 [Speaker Changed] Salespeople respond to financial incentives.
00:23:50 [Speaker Changed] They do. They’re all, they also can be very needy. Oh really? They can, and they can require a lot of your time. And they also want to be praised quite a bit, huh. Which is interesting. Although everybody, I think everyone likes praise,
00:24:03 [Speaker Changed] I guess. But I, I, if you are on a variable comp system, depending on how successful you raise assets, it’s there in black and white on the sales log, you’ve raised X, Hey, do I really need to tell you? This is fantastic. You did a great job this quarter. You
00:24:20 [Speaker Changed] Do actually, what I did learn is you do, and the more you do it, the better they perform. Now. Now, I think again, that works everywhere. What do they say? You have to say something positive X number of times that you The
00:24:30 [Speaker Changed] Sandwich. Yeah. If you’re gonna say something negative, you gotta put something positive on either, either side of it. Either side of it, the criticism sandwich. Okay. I find that amusing. So let’s drill down a little bit to the various quant strategies that PGM utilizes. Is it different asset classes, different geographies, different strategies? What is the full spectrum of offerings PGM has for their quant group?
00:24:53 [Speaker Changed] Short answer is all of the above. So PGIM quant is divided into three platforms. We have our quant equity platform, which manages risk control equity portfolios that are, we’re quants. So they’re model and factor driven. They cover core value, opportunistic equity and indexing. Then we have a multi-asset platform. The multi-asset platform manages things like offerings that give you inflation, hedging against inflation. So we use publicly traded real assets and commodities. We do defensive equity strategies. We also do asset allocation and overlays. And then we have a third platform, which PIM quant acquired right before I Jo joined, which was another interest of mine, was integrating a new firm into the fold. And this is PIM Wanni, it’s our London-based liquid alternatives firm. It offers global macro trend following. It also has inflation hedging products, as well as macro tail risk products. So we kind of cover and, and we go up and down the market spectrum from micro cap all the way up to large cap. And then we go across geographies. So we’ll do, you know, US International, EM, Ex-China, you name it, we, we offer most of it in quant form. The one thing we don’t offer is privates. Huh. Really? Our, our sister company does that.
00:26:19 [Speaker Changed] What’s the name of the sister company?
00:26:20 [Speaker Changed] We have, well, P GM Private Capital. We have p GM real estate. We actually have six sisters. We have p Fixed income, Jenison P Portfolio advisory, and PM Investments. Those all wrapped together make up that $1.2 trillion. That is p gm.
00:26:38 [Speaker Changed] Really interesting. So let’s talk a little bit about multi-asset opportunities. Starting with, you have a year, like last year, 2022, stocks are down, bonds are down. All these asset classes are under pressure. How does that affect all the various strategies that you guys are running?
00:26:57 [Speaker Changed] Well, clearly the markets affect our strategies, but that, that’s one of the reasons that we feel strongly that that quants excel in volatile times. Mostly because they have a long- term approach. They’re data-driven. They’re disciplined. They’re diversified. So we have 300 plus stocks in our portfolios. We look at hundreds of pieces of data on 10,000 companies every day. So we’re very, very diversified. But the other thing about being a quant, which is nice, is it it removes the, the emotional bias from picking socks. So you don’t get caught up in what’s going on in the market and, and freaking out in essence and, and making bad decisions. You have your models to ground you Sure there’s fundamental insights on top and there are people here back to that fusion of art and science. But we have the models as our bedrock.
00:27:53 [Speaker Changed] So given what 2022 is like, and obviously very challenging, what’s it like when the calendar flips, really it was last October, 2022 when markets bottomed and, and took off. How does that change in, in market regime affect how you’re going about your business? Or is it, you know, still the same thing, just whether market’s going up and down, you’re still applying the same strategies?
00:28:18 [Speaker Changed] We’re applying the same strategies. But having said that, and, and again, we offer so many different strategies, but what we do have, and IT people have been very, very interested in them, are sort of that infl, the inflation hedging strategies that we offer. The custom mandates. We’re all about sort of solving our clients’ needs, not only today, but tomorrow. So how do we work with those clients to figure out what they’re trying to solve for? Some are want downside protection. So we’ve been recently putting together portfolios that have downside protection. They might limit the upside a little bit. We can adjust that depending on our client’s preferences and needs and wants. The macro tail risk products, the inflation hedging products, all of these different things that are helping clients right now move away from the 60 40 portfolio is just not working for clients right now. And sure, they, they wanna put money into privates. Privates are big right now. And PGIM is leaning into our privates and our alts, meaning PGIM at our head office. But at the same time, people need liquid investments. And so what we provide for them is liquid solutions to help them navigate through these turbulent times.
00:29:32 [Speaker Changed] Huh. Re really interesting. So, so the bulk of of what you’re doing is liquid. You don’t need a gate to get out. These are all stocks, bonds, other assets that are readily tradable any given day. Yep.
00:29:50 [Speaker Changed] All liquid, including publicly traded real assets and commodities. Clearly liquidity’s a little tougher with sort of the micro cap and the small. Sure. So what we do, what our models do there is they assess the trading costs of getting in and out of companies. ’cause we wanna make sure, of course, that you don’t pay more in trading costs to get out than your alpha. So we have to pay attention to that. We also have people that use us for overlay strategies and they often have to get out on a dime. So we need to make sure that everything is very, very liquid.
00:30:19 [Speaker Changed] Hmm. That, that’s really interesting. How bespoke are the portfolios and the solutions that you come up with for clients? Are they really customized for individual institutions or how do you think about that approach?
00:30:37 [Speaker Changed] They’re extremely customizable across all of our platforms. So even, I’ll give you an example. Our quant equity platform, we have an ESG solutions offering. We had a very, very large ENF endowment and foundation come to us and say we need to get, we need to solve for our ESG needs and we want to do that. We wanna track a certain index, but we wanna take energy out of the portfolio. So what we’ve been able to do is we’ve been able to help investors solve for their ESG needs wherever they are in their journey. And I, and I get that it’s different for different people. Sure. But that’s what’s really unique about our offerings is that we’re able to sit there and talk to you and say, Barry, what’s important to you? Do you care about water usage? Do you care about women on boards? Do you care about energy? Do you care about carbon footprint? How much do you want it to impact your returns? Or maybe you don’t want it to impact your returns at all. So how do we work with you to create a portfolio that does what you’re, you know, what you wish. So that’s been really interesting and we’ve gotten a lot of traction there. Huh.
00:31:44 [Speaker Changed] Really super intriguing. So you mentioned some people are looking for inflation hedging. I would imagine that would’ve been really useful last year. Are you still getting demand for that? Given how far CPI has fallen from the peak, when was that? June, 2022, something like that. Is there still a demand for inflation hedging?
00:32:07 [Speaker Changed] There still is. It may not be as in demand as it’s been, but if you think about where we are, the macro environment is so uncertain. People still don’t know whether we’re gonna have a recession. People don’t know. People are assuming there’s gonna be a recession in Europe. So people just don’t know. So I think they’re really trying to, pardon the use of the word hedge, but hedge their betts and make sure that they have downside protection. And people get a bit scared in, in this type of environment and they wanna diversify their portfolio. So we just, what what we wanna do is we wanna partner with our clients and they might have any number of needs. They might have, you know, risk parameters, they might have liquidity needs, they might wanna track a benchmark. They might wanna just absolute return. They might want real return. Whatever they need, we will solve for.
00:33:03 [Speaker Changed] So about half of your clients, ballpark are large institutions. You mentioned endowments and, and foundations. And given the background of PGIM with insurance, I think about future liabilities. Is there a lot of matching, Hey, in 2035 we have this sort of expected demand on, on our capital. How important is, is future liability matching to custom solutions?
00:33:31 [Speaker Changed] It’s not, we don’t do as much of that at, at PGM quant. So we do manage money for the Prudential general account, but it tends to be in equities. And we do manage some money for them through our P GM wood one. But as you know, insurance companies have various constraints and they need to solve for these things. And they have much smaller buckets of risk assets. So should insurance companies invest in equities, we very much want to be a part of that. And we do manage equities on behalf of our parent company. But lucky for us is, is we don’t, we don’t have to think about paying claims. We just have to think about managing the money in the best way that we can.
00:34:11 [Speaker Changed] What about, since people are talking about hedging, how do you think about risk management? Are you looking at a series of small wins or is there sometimes a Hey, we’re gonna take a big bet ’cause we have a lot of conviction here. So
00:34:26 [Speaker Changed] Risk management is very much embedded in our process. So it’s not an afterthought. It is something that we pay attention to. And clearly you have to take risk if you’re gonna get gain. So, but what our models try to do is take the, the risks, the risks that are going to benefit us and then manage the risks that are not, we tend to take a lot of singles and be consistent, but it depends on what our clients are looking for. So I say that with respect to our equity book. But then we have also, we take much, you know, larger betts with our P Jim Wood one platform as well as if you’re thinking about maybe a small cap investment versus a large cap investment. So it really goes up and down the gamut, depending on what our clients are looking for, what their risk tolerances are, we try to solve for their risk needs. And again, quants can do that pretty effectively because of their process.
00:35:18 [Speaker Changed] So how big a differentiator is PGIM quantitative solutions to PIM? Again, given the insurance background, I don’t know of a lot of other large insurers whose financial arms are leaning this heavily into the quant side.
00:35:37 [Speaker Changed] I think it’s a, it’s a big differentiator for PGIM one. I just, PGIM has one of, as you mentioned, one of the broadest asset management offerings out there. And I feel like quant is a very important component to the offering. Especially how, if you think about how technology is advancing and it’s becoming more and more a part of our lives, AI is evolving and we’ve been doing that for a long, long time. So I think it’s just natural to have a quant manager as part of your stable of offerings. But yes, I do believe that it’s a differentiator for peach. M huh.
00:36:10 [Speaker Changed] Really, really intriguing. So, so there’s a couple of quotes of yours that I have to ask about ’cause they’re kind of fascinating. Quote, softer skills are more valuable than ever. They are what clients want. So, so first I have to ask, what do you mean by softer skills? Tell us about that.
00:36:30 [Speaker Changed] I often refer to softer skills when I am talking about women in management. Actually, when you think about the ability to connect with people, to really listen, to understand what their wants and needs are, that many people don’t do that. And I feel like, I feel as though softer skills, especially in this tech enabled environment. So in a hybrid environment, when you are streaming and dealing with people by zoom and teams and you’re not seeing people in the hallway, these softer skills really, really differentiate you. And one of the things that I’ve been doing as CEO during co, what I did during Covid and I’ve continued to do now, is you lack that ability to run into people in the kitchen and to, to connect with them and really build a relationship. Because I do believe that building relationships is important to building trust. Building trust is essential to building working relationships with your business partners.
00:37:33 And so what I started doing was, I started doing a video series, if you think carpool karaoke, I would drive my, my dog to the dog park in the mornings and it was about a 40 minute drive and I would do a lot of reflecting and thinking about strategy people, whatever I was doing at work. And instead of
thinking about it, I thought, I’m gonna do some little video segments, two minutes, didn’t really think about what I was gonna say, just got on the video and talked to the employees of our company. And I did that regularly so they would know what I’m up to, what I’m thinking about. They knew a little about me personally, but they also knew what I was thinking about, what the management team was thinking about and what we were up to. And that’s an example of a softer skill that it’s that ability to connect with people and to think about how you can connect with people in different ways to build their trust and get to know you better.
00:38:29 [Speaker Changed] You, you mentioned the various hybrid work options that especially what took place during the pandemic. Are you guys still operating on a hybrid basis and and what does that do for you?
00:38:43 [Speaker Changed] We are, we’re working in a hybrid three days in the office. Two days work from home. And I believe that it’s the best of both worlds because we have those three days to collaborate, to continue to get to know each other, to brainstorm. And then we have two days that we can do heads down work, meaning the, the work from home days. And I also feel that we get a lot of credit for doing that with our employees, our employment, our employees are happier in this environment. It’s what they want, it’s what they’re getting used to. And I was just listening to actually Bloomberg this morning where they were talking about how the trains are getting busier and workplaces are going, are, are changing their hybrid schedules. So I’ll be interested to see what happens in the next year or so with respect to hybrid. But I think right now it’s a pretty good balance.
00:39:38 [Speaker Changed] Does it, does it help with employee retention and, and even new hires?
00:39:43 [Speaker Changed] It does. We’ve actually had certain people that wanted full work from home, which we don’t do. So it, it is something that I believe companies need to do. They need to pay attention to that. I think you, our offices are in Newark, New Jersey, so hybrid is pretty appealing and I, I do think it’s a differentiator or maybe it’s not even a differentiator. It might just be table stakes,
00:40:11 [Speaker Changed] Right. Amongst the big banks, a lot of them have been gone back to JP Morgan, chase, Goldman Sachs, Morgan Stanley, a lot of these have gone back to five days in the office and there’s been some pushback, not so much from the young 20 somethings who really need to be immersed, but the, the slightly older generation, late twenties, early thirties who, who really know how to work remote.
00:40:36 [Speaker Changed] Right. I believe it’s important for the younger generation because you want that mentoring. You wanna be able to, again, run into people in the halls, get to know them, get to understand what they do. And, and I do think that’s important. I think flexibility is also important to, many, many have either young kids at home or they have ailing parents or they have hobbies or they just have wellness goals. So getting that balance right can be tricky. But this is again, why I think the three days is, is a good balance. It, it’s a nice way to solve for our employees’ needs, but also get the work done and build a culture, building a culture. We haven’t talked much about that, but it, it, one of the first things that I did when I took over as CEO was work with the employees to reset our values and then not only reset them, but then drive them home and live by them and make changes based on them. And I think that building that culture, it’s very, very difficult to do if you’re in a fully work from home environment.
00:41:38 [Speaker Changed] Yeah, no, that makes, that makes a lot of sense. Last, last quote of yours. You’ve talked a lot about leadership and diversity, especially when it comes to women in finance. Tell us a little bit about your thoughts about the best strategies for leading in an industry that’s spent so many decades as a male dominated bastion.
00:42:04 [Speaker Changed] Again, it’s lean into those softer skills. I think it’s a trifecta of opportunity right now for women. So you have companies and boards that are trying to increase their diversity stats so they’re more open to women in senior leadership positions. The hybrid work environment makes it easier for women that are balancing multiple, multiple different chores and responsibilities. And then you have the benefit of women having these softer skills that work in this new te tech enabled environment. So I think it’s a, a great opportunity for women going forward. I think the issue really is the pipeline. And one of the things that I’m passionate about and we’re doing a lot with at PGM Quant is we’re going out and doing community work. We’re reaching out into the newer community and we’re working with kids as young as elementary school kids. Wow. So we’re, we’re getting them interested in asset management. We’re doing things like Shark Tank and job fairs and things like that, that are kind of mock job fairs. And it’s just been really rewarding for us because we have to start at such a young age. So these, these women and other diverse populations will continue to have an interest in asset management. You’re,
00:43:20 [Speaker Changed] You’re playing a long game, you’re planting seeds 10, 15 years in advance. ’cause none of this is gonna pay off for a long time.
00:43:29 [Speaker Changed] We need to be patient as, as we invest for the long term, we need to be patient. So, but not complacent.
00:43:36 [Speaker Changed] Not complacent. So, so let’s jump to our favorite questions that we ask all of our guests. Starting with, Hey, what kept you entertained during the lockdown? What are you, what are you streaming these days?
00:43:47 [Speaker Changed] Gosh. Meaning streaming on television.
00:43:52 [Speaker Changed] Sure. Television podcast doesn’t matter. Yeah. What whatever, whatever audio, video is entertaining you. So
00:43:58 [Speaker Changed] I like documentaries. So what I was looking or watching this weekend was fantastic fungi, which I highly recommend. This is all about the medicinal and healing properties of mushrooms. If one has ailing parents or is having health issues, I highly encourage you to tune in. But it is also a beautifully, beautifully filmed documentary. Hmm. I also live on the Cape, so I had to, you know, the shark population is booming, so I had had to watch after the Bite, which is all about the, the shark population on Cape Cod. But other than that, as far as sort of more mainstream, I, I did like Ted lasso very much. It was what’s not to love. Right. Entertaining. You always got a good tidbit of knowledge. Like be an authentic leader, you know, lean into your insecurities. I never turned that off about picking up some little tidbit of information. As far as podcasts, I get most of my news by email feed. So I tend to do that more as a hobby. So I do, I’m very interested right now in longevity and health. So I listened to something called the Cabral Concept by Dr. Steven Cabral, which talks about all sorts of things. One of the things I was looking into was an infrared sauna and a cold plunge. So my husband and I just recently purchased both of those things.
00:45:24 [Speaker Changed] We, I have a buddy who is crazy into the cold plunge and whatever that breathing technique is Yep. That you need to do. And I committed to doing a cold plunge next summer. So we’ll see how that goes. I, I’m in the ocean every Memorial Day weekend. Wow. That’s my cold plunge. ’cause that’s like, you know, 60 degrees. But what these guys are talking about is high thirties, low forties, really, really cold.
00:45:50 [Speaker Changed] Yeah. Ours is 49 degrees. Wow. And, and it’s cold. It takes about a minute and 30 seconds to, to numb up. So, so that’s an interesting podcast for me. I do tune into this other podcast, it’s called your CEO Mentor. It’s by the author of No Bull Leadership. And this individual’s name’s Martin Moore. And I totally skipped your conversa your question about the AMP program, which is an advance management program. It’s an elite executive education program. But he was a buddy of mine at the AMP and he wrote a book on leadership. He was the CEO of a company and he wrote a book called No Leadership. And I of course read it out of courtesy because I don’t normally get a lot, frankly out of leadership books. It’s very intuitive to me. But I got quite a few nug nuggets of information from this book and he’s just very entertaining. And so I tune into his podcasts frequently and I get little tidbits like, it’s about respect, not popularity, it’s about excellence, not per perfection, different things like that. It’s just interesting. And he’s Australian, so he’s really interesting to listen to.
00:47:03 [Speaker Changed] So, so you mentioned mentors. That’s my next question. Who are your mentors who helped guide your career?
00:47:10 [Speaker Changed] I have one mentor. She was the lawyer that hired me for that job out of college. Her name is Molly Mugler. And she worked with me my entire career. Her entire career. She’s now retired. So she hired me. I then became general counsel. I moved to Old Mutual. I brought her with me. And what was amazing about her is she believed in me before I did. She had such confidence and vision for me and my future. And she kept referring to herself as my sticky asset that she’d stay with me, but wasn’t. What was inspiring about her is she’s so intelligent and she’s such an accomplished lawyer, but at the same time she was militant about balancing her personal life and her professional life. She prioritized watercolor, painting and tennis equally with her job as a general counsel of a big firm. So to this day, I am still connected with her and I am still constantly inspired by her.
00:48:08 [Speaker Changed] Huh, that’s interesting. Let’s talk about books. What are some of your favorites? What are you reading right now?
00:48:14 [Speaker Changed] My nightstand is a bit eclectic right now. So I have, again, another book on longevity called Out outliving, which has again, to do with health and longevity. I have the Rain barrel effect, which is again, about what you put into your body and how it affects again your health and longevity. But the, the real shocker on there is, I believe it’s called the Modern Textbook of astrology. During Covid I started thinking a lot about astrological charts and I found them fascinating. And they are tied a lot to math and science and they’re very, very technical. And I had my chart read and I said, you know, I’d be interested in learning how to read, read charts. That doesn’t seem that hard. He said, oh, trust me, it’s hard. He gave me the name of three books. He said, start reading and then get back to me.
00:49:05 I might have to postpone that to retirement ’cause it is quite technical, it’s very math forward. But it’s, it’s still interesting. For fun, recently I read the Lincoln Highway. I really liked, I loved, I think it’s called Beneath the Scarlet Sky. What I liked to do back when I was a lawyer, everybody would say, oh, have you re-read the most recent, you know, fiction book on law, you know, Tom Clancy kind of stuff.
And I just don’t wanna read things that I’m living. So I don’t wanna read books on investing. I don’t wanna read books on the law. I wanna read books that transport me to another place in time where I can just learn about memoirs of Aisha was, you know, interesting. Oh really? Things like that. Just get outta my own head and think about something different. We do enough re as a lawyer, think about how much you have to read when you, when I read, I wanna read for fun or for gaining knowledge of something different.
00:50:01 [Speaker Changed] Huh, really interesting. Down to our final two questions. What sort of advice would you give to a recent college grad interested in a career in either investment, finance, management, or law?
00:50:15 [Speaker Changed] As we’ve been going through this podcast, I, I’ve realized the benefit that my legal profession has had on my management abilities. I, I never quite tied those two things together so much. The broad knowledge that you get from being a business lawyer, i i is quite extreme. So depending on what that person’s interest in interests are, I would say network, network, network. It’s all about talking to people and understanding what they do and understanding what’s out there and really building relationships. That’s really what it’s about. That’s what it’s about in business. That’s what it’s about in dealing with clients, building relationships. It’s, it’s just what it is about life. But it it, but it’s very hard to make that decision. Again, I fell into my career and I’m pretty fortunate that I’ve had a lot of opportunities come my way. But I’m not somebody who says you need a goal and you need to follow it. Because I think if you have blinders on for that one goal, that you’re gonna miss all of these other opportunities that can lead you in a direction that might be much more fruitful for you. Huh,
00:51:23 [Speaker Changed] Interesting. And our final question, what do you know about the world of investing today you wish you knew 25 years or so ago when you were first getting started?
00:51:34 [Speaker Changed] Gosh, that one’s more tricky for me. I feel like I was pretty informed back then. But if I can flip it on its head a little bit, maybe it, I’ll answer it as to what advice would I give to those 20 somethings out there now. And I would say understand the benefits of compounding. Make sure you invest early, make sure you’re diverse, and make sure you invest in your 4 0 1 k plan. Because as much as it feels though, as though you can’t afford that extra a hundred dollars or $10 or a thousand dollars, it’s just so important to, to start investing early.
00:52:09 [Speaker Changed] Yeah, no, to say the very least kind of that, that decade, twenties to thirties, it makes a huge difference that over 40 years
00:52:15 [Speaker Changed] It does for sure.
00:52:17 [Speaker Changed] Linda, thank you for being so generous with your time. We have been speaking with Linda Gibson, CEO of PGIM, quantitative Solutions. If you enjoy this conversation, well be sure and check out any of the previous 500 or so we’ve done over the past nine years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcasts. Sign up for my daily reading list@riol.com. Follow me on Twitter at ritholtz. Follow all of the Bloomberg family of podcasts at podcast. I would be remiss if I did not thank the correct team that helps put these conversations together each week. Sarah Livesey is my audio engineer. Atika Val Brown is my project manager. Anna Luke is my producer. Sean Russo is my researcher. I’m Barry Ritos. You’ve been listening to Masters of Business on Bloomberg Radio.
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