Author: Maha Khan Phillips
The asset management industry needs to become more solutions-driven, says Marino Valensise, CFA
Marino Valensise, CFA, is used to navigating through a crisis. He began his career in the autumn of 1987, right after the October stock market crash. While working at Baring Asset Management – including seven years as chief investment officer (CIO) - he had ring side seats to both the dot-com bubble of 2000 to 2002, and the 2008 Global Financial Crisis. And now, of course, there is Covid. Right before the pandemic broke out, Valensise had accepted a new role, to become group CIO of Cardano, the risk and investment specialist firm.
“I started remotely, without having spent a single day in the office. It could have been challenging, but I must say that it went very smoothly,” he says. At Cardano, Valensise has oversight for the investment team and its three areas of focus: liability-driven investing, multi-asset investing, and external manager selection.
He believes that the pandemic has brought forward a host of new operational tests for asset managers. While there will be a ‘new normal’ of balancing working from home and being in the office safely, there are also operational challenges, such as how to ensure remote working is safe and effective. “Cyber security is obviously of paramount importance. How do asset managers keep data safe when outsourcing or relying on the cloud? Anecdotal evidence also suggests that many clients who had never been on a video call now expect a high-quality technological delivery.
Whatever the challenges, Valensise also believes that asset management has been privileged to be able to navigate the Covid crisis better than many other sectors, though he points out that the pandemic has had an impact on people, particularly women and those who are still early on in their careers. Rather than on profitability, the hit on asset management firms has been mainly on their staff. “During the last twelve months, I have experienced situations where people were forced to hold video-calls from kitchens, bedrooms and even closets, due to challenging family logistics.”
However, some of the implications of the pandemic will be positive over the long term. Covid is making the world reflect on the vulnerabilities of humans against nature, and creating an acceleration towards more sustainable goals and approaches, he suggests. Three areas are particularly important to Cardano - climate, the conditions of developing countries, and inequality within society. Climate change cannot be ignored any longer, Valensise says, while also highlighting the fact that major cities in developing countries are overpopulated, with poor conditions, where social distancing has been impossible. “Inequality has been ignored in the past but now we see certain sections of our society hit disproportionally hard during the pandemic. This is strengthening community spirit, and driving the industry to make a more decisive approach to a fairer society, diversity and inclusion,” he says.
Valensise highlights two initiatives within the firm. NOW: Pensions, the auto enrolment provider acquired by Cardano last year, sponsored the Underpensioned Report 2020, which highlighted the pension savings gap for the most financially at-risk groups in society. Cardano also ‘enthusiastically’ participated in the 100 Black Interns programme, which offers internships to black students. Valensise also highlights Cardano Development, an independent foundation established by Cardano’s shareholders, which has been helping to provide financial infrastructure and financial product innovation to frontier countries for over a decade.
He believes the asset management industry, the larger firms in particular, aspire to move from being sellers of products to becoming solutions providers. For decades, under the era of the specialist manager, very few investment firms have had a completely holistic view of their clients’ circumstances, whether it is understanding their funding ratios, tolerance for risk, or unique challenges. “Asset owners used to have a very fragmented portfolio of external managers, and this comes with a lot of complications,” he says.
He points out that, during the last twenty years, new governance solutions emerged such as the creation of diversified growth funds, and subsequently, fiduciary management. “For some years now, large traditional asset managers have been trying to establish teams which would try to build a more comprehensive relationship with clients, and better understand their needs. In a few cases, they have taken this seriously and succeeded. But in many other cases, under the label of ‘solutions’, there has only been an attempt to push more products down the clients’ throat.”
He believes this is a cultural issue for the industry, which still has to cope with strong fund manager personalities ‘owning’ certain investment teams, jealous of their team’s investment capacity, and only interested in their team profit and loss. “A true ‘solutions’ offering becomes difficult to build in these cases,” Valensise says, suggesting that many firms will have to ‘change their DNA’ to become more solution-orientated.
He argues that Cardano is very different. “Cardano was born as a solution provider. We do not have products, but we have strategies which are utilised for the benefit of clients, so they can reach their overall objectives. Our mission is to help the investment strategy of pension providers and implement journeys towards their long-term funding objectives, with the emphasis on stability in an uncertain world.”
Valensise is married (many years ago his wife helped him study for the CFA exams) with four children. Like most people, he has been directly impacted by Covid. He talks about his mother, who lives alone in Milan. “The incredible thing is that she’s on FaceTime and WhatsApp. It’s refreshing to see an 82-year-old on social media, and thank god for all this technology.” One of his daughters is a medical student, and is currently administering Covid vaccines, while his son will soon start his financial career in Manhattan , most likely remotely. His youngest daughters are still in school. One bakes cakes for the family on a daily basis. The other is a strong advocate for climate change responsibility. “She is my extinction rebellion daughter. Every time we say ‘let us drive you’ somewhere, she turns us down systematically, saying that there is no need for that, when she can walk or use public transport,” he says smiling.
Marino Valensise, CFA, Group Chief Investment Officer, Cardano