Six lessons from a former global CIO – Lesson number two: Pressure creates diamonds… or it creates coal

I was part-way through a second tour of duty as Russell Investment’s Global Chief Investment Officer when the pandemic began.

When I first arrived at our Seattle headquarters in September 2018, I sat down with the board chair of our retail fund business.

“I know last time I was Global CIO we had a bit of a rough patch  with the global financial crisis, but I can’t imagine anything like that happening again,” I half-joked.

The COVID-19 pandemic triggered extreme volatility in markets—but the challenge it presented to fund managers was altogether different to previous financial crises.

Human lives were at stake and the upheaval in daily lives was significant as lockdowns spread across the globe.

The critical challenge for asset managers was to negotiate both the market upheaval and contingency planning required to keep their operations running smoothly.

Russell Investments not only achieved both goals—it also improved trade accuracy by half in an environment in which its team, like everyone else, was working from home in difficult conditions.

To put that in context, Russell Investments runs US$300 billion in funds under management but also has separate trading activities. That trading is conducted for its own funds, for transition management clients and for derivative overlays, for example.

The improvement occurred even as our trading volumes spiked to US$3 trillion early in COVID-19, an increase of US$400 million from a year earlier.

This outcome was testament to the focus of the team as they responded to a complicating factor – the fact that derivatives counterparties outsourced their back office to countries like India, where the challenges of working from home are far greater.

Another achievement at that time was simplifying our processes to streamline the moving parts required for a asset manager to run its operations.

Both outcomes are proof the most extreme pressure can bring out the best in people – and in organisations too. In fact, the proven ability to respond to a crisis should be something every investor looks for in an asset manager.

It’s real proof that pressures creates diamonds… or it creates coal.

Next time: Lesson three: Smart people hire people that are smarter than them.

Previously: Lesson one: Never waste a crisis 

What you need to know

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