Future proofing culture and investment capability to thrive in a fast changing world
Global Investment Insights
with Lisa Gray, Chief Executive Officer, Victorian Funds Management Corporation (VFMC)
Lisa joined VFMC as Chief Executive Officer in February 2016. Her career spans over 30 years, predominantly in financial services, having held various executive roles at NAB, MLC and Axa.
Lisa’s signature strength is strategic execution, achieved by blending the power of communication with a unifying purpose, to create self-sustaining organisations. She brings a unique combination of applying data insights, analytics and strategic intuition to make courageous, transformational decisions that deliver strong commercial results.
VFMC’s new strategic agenda, Evolve24, is underpinned by its enduring purpose of and commitment to ‘improving the future prosperity of Victoria’. Lisa explained that VFMC’s strategic priorities over the next four years are mainly focused on three key areas.
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We need to future ready our culture and capability to thrive in a distributed, digitally driven world.
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“Over the next four years, we aim to ensure we have an adaptable and scalable investment ‘platform’ that evolves with our clients and the State. Our first area of focus is optimising investment decision-making by blending our people’s talent with data-powered tools. This is critical as we navigate the complexities of COVID-19 influenced global capital markets that require the best of human insight and intuition, supplemented by the speed of data and analytics capabilities.
Our second area of focus is to ensure we can grow and adapt efficiently by simplifying our underlying structures and processes to respond to emerging client needs.
Over the last 10-15 years, our underlying structures have been ‘built by necessity’, but to enable us to rapidly respond to an unpredictable environment they need to be refreshed and ‘built by design’. This involves rethinking underlying investment structures so they are more adaptable and refreshing products.
Finally, we need to future ready our culture and capability to thrive in a distributed, digitally driven world. We were delighted with how well our people responded and delivered during 2020 and into 2021; how we perform in a digital and distributed world is our future”, Lisa concluded.
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Disruption brought about by COVID-19 highlighted the fact that many organisations were not operating at the speed of markets.
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A core challenge of the investment industry is to enable comprehensive and efficient information management that informs decision-making.
“The disruption brought about by COVID-19 highlighted the fact that many organisations were not operating at the speed of the markets and as unconventional policies were being implemented around the world, the traditional measures of economic activity were also being challenged. With so many moving parts, the importance of sound governance practices are even more critical to ensure better decision-making”, Lisa opined.
Lisa continued, “as investment specialists, we are stewards of capital, which today also means we are stewards of sustainability. Over the years, ESG factors have been progressing from the fringe towards the core of the investment process. Today, ESG considerations are increasingly in demand by investors and society at large. Propelled by COVID-19, ESG is likely to gain momentum as data and analytics are tuned to quantify the opportunities and risks associated with ESG. The effective management of ESG risks and opportunities is an important component in our investment management approach and we aim to continue to evolve as a responsible and innovative industry participant, whilst maximising financial outcomes for our clients.”
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Propelled by COVID-19, ESG is likely to gain momentum as data and analytics are tuned to quantify the opportunities and risks associated with ESG.
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We asked Lisa what emerging trends and thematics make the future of investing exciting for her, and she highlighted three key areas, namely:
1. Data and innovation: the depth and breadth of data available to investors has grown exponentially. Insights gleaned from data can significantly enrich the investment decision making process. Key to realising this benefit is the ability to efficiently capture, structure and process data in a timely and practical manner. In addition, the modelling tools available to apply data to portfolio management allows increasingly deeper understanding of portfolio characteristics and return patterns. “We are undergoing a significant transformation in our Data and Analytics capability which is being deployed across the different asset classes as we seek to leverage these tools to make better decisions, faster”, Lisa highlighted.
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Modelling tools available to apply data to portfolio management allows increasingly deeper understanding of portfolio characteristics and return patterns, enabling better, faster decision making.
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2. Diversity, inclusion and flexibility: organisations that are embracing and actively increasing diversity and inclusion across their teams will benefit from higher quality investment ideas and decisions. Purposefully shaping organisations so that they enable people to work flexibly and to deliver what has been agreed. This creates self-sustaining companies that adapt and perform while celebrating the individual and their valuable difference.
3. Expanding opportunity set: the investment opportunities available to institutional investors is continually expanding across multiple geographies, capital markets, industry sectors and security structures. This enables investors to be innovative in terms of generating excess return and controlling portfolio risk.
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Organisations that are embracing and actively increasing diversity and inclusion across their teams will benefit from higher quality investment ideas and decisions.
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VFMC recently started the review of its strategic asset allocation across its largest clients’ portfolios.
This review incorporates clients’ revised investment needs and objectives and VFMC’s response to an increasingly challenging market and economic environment. “This includes building resilient portfolios that respond to the unprecedented central bank and government intervention, the heightened and ongoing geopolitical tensions, and the acceleration of structural changes across economies and sectors”, Lisa remarked.
She continued, “at this point we are reconsidering the role that traditional defensive assets should play in the portfolio, as well as how best to meet clients’ long-term objectives in a reinforced lower for longer macroeconomic outlook. We still believe that a long-term investment horizon provides material advantages in generating better investment outcomes, but we recognise that historical relationships may change in particular environments and we need to adapt. Our Cycle-Aware and Dynamic Asset Allocation programs are part of our tool kit to provide portfolio flexibility under different scenarios.”
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We are reconsidering the role that traditional defensive assets should play in the portfolio, in a reinforced lower for longer macroeconomic outlook.
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Lisa left us with some reflections from her career which may serve as applicable advice to others in their working lives, as they navigate their way through their career.
“At the height of the GFC, I was leading the personal banking businesses for one of the major banks. We were reviewing the performance of the credit card business and when I asked the leader of that business why revenue was down, he rolled his eyes and said ‘people are paying off their credit card balances faster’. I asked what was wrong with that and he responded ‘we make less money’. For me it was a ‘blinding flash of the obvious’ (BFO) that something was fundamentally wrong with an industry that, in the middle of a financial crisis, bemoaned when people were being prudent in managing their money but turned a blind eye when they weren’t, as more money was made.
It sparked a strategic agenda of ‘fair value’ and putting purpose, customers, and people at the heart of commercial decision making. It was also a reminder that I am the best leader I can be when my personal and professional values are aligned”, Lisa shared.
Disclaimer
The views expressed in this publication are solely those of the individual and do not reflect those of their employer organisation.
All information contained within this publication is general advice only, as the knowledge levels and needs of all individual and corporate investors vary greatly this publication should not be used solely as a decision-making tool, further opinions and information should be sought before making an investment decision. It is the recommendation of Global Investment Institute (GII) that you seek the opinions of a fee-for-service, independent investment adviser before making any investment decision.
The authors, directors or guest writers may have a financial interest as investors, trustees or directors in investments discussed or recommended in this document. It has been assessed by the editors that these financial interests have not had an impact on the material contained here within.
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