Archives for August 2015

From CIO to CEO

This was originally published in Investment Week

The elevation of Richard Buxton to CEO at Old Mutual Global Investors brings to the fore the issue of how investors should feel about great investors taking on the role and responsibilities of CEO of their company.

As with all such discussions there are positive and negative factors to consider, and although the precise extent of responsibilities will vary, in general there are more factors that cause concern than there are those that cheer.

On the positive side, having a successful investment manager appointed to be CEO of the fund company is tremendous for morale within the investment management team. The team know that at the head of their firm is someone who understands their needs and frustrations, understands the vagaries of investment performance, values the (often rather invisible) work they do and is not likely to take the firm in directions that take the focus away from delivering investment performance. This supports both the retention of incumbent fund managers and the recruitment of new ones. Happy fund managers can devote their energies solely to generating good performance.

Set against this are the concerns.

The first of these is sufficient time in the day. Where an investor seeks to combine the roles of CEO and CIO then there is a clear risk of overstretch and of not doing either job well. After all, both are normally considered to be demanding, full-time roles in their own right. The major risk is that, since, ultimately, most things end up in the CEO’s inbox, the time available for (longer term) investment responsibilities gets eroded by the (shorter term) demands of the business, and this ends up being reflected in poorer investment performance.

In addition, being a good CIO is very different from being a good CEO -there are significant differences in the two skillsets.

  1. A CEO needs to be a strategic thinker about the firm across many departments, whilst an investor is focussed on a relatively narrow set of investment opportunities and assessing their relative attractiveness within the context of ever-changing market prices.
  2. A CEO needs to be able to effect and deliver change, whilst an investor merely needs to take advantage of it by identifying when it will be implemented successfully.
  3. A CEO needs to inspire his management team and his workforce across a range of disciplines. A CIO merely needs to inspire other investors, who are likely to be people like him.

This is not to say that a CIO cannot be a good CEO, merely that the skills that made him/her a good CIO are probably not those required to make him/her a good CEO.

In recent years the most high-profile move from investor to CEO has been Edward Bonham-Carter at Jupiter. He proved to be an excellent CEO but he was not able to combine that with continuing to deliver good investment performance and ultimately pulled back from managing money.

The early sense about Richard Buxton’s elevation is that his role will remain extremely investment-focussed but that Old Mutual Global Investors were keen not to have a position with the title of CIO. His role is, however, intended to be that of investment leader. The bulk of what would normally be considered the CEO’s responsibilities at Old Mutual will be covered by Warren Tonkinson, who has been given the title of Managing Director. If this is borne out in the months ahead then it may well be that this CEO can continue to deliver for his investors.