In this Q&A interview with Richard Romer-Lee, T Rowe Price's Bill Stromberg discusses being a CEO, passive investing and business culture...
Was it your ambition to become president and CEO?
No - I wanted to become an investor. I was sold on the passion of companies, business and markets. 99% of investors want to be investors, not business managers.
How do you balance the shorter term interests of shareholders and management with the longer term interests of clients?
Balance is everything, as my mom has always said - and still does. It requires judgement and emphasis. We regularly demonstrate a clients-first bias. For example, in 2016 we repaid investors a sizable amount for a mistake we made voting a Dell Corp proxy and in 1990 a security we held in a money market fund went bad and we made good. It was the right thing to do…
What is the role of a modern day asset management business?
To help people achieve their financial goals. Doing so on a global scale is both challenging and exciting. Growing our capabilities and business while delivering for clients globally is a big challenge. We will aim to do so in typical T. Rowe Price manner, organically diversifying, steadily. The world's changing - we have to be more agile, accept change and improve for clients whilst holding true to our values.
What's the most extraordinary thing you have seen?
Two things come to mind. I started in this industry in August 1987, and two months later markets crashed. I saw investors lose 21% of their assets in one day. It was astonishing and has made me think of risk every step of the way. The second was how far things fell during the global financial crisis. Markets were unstable and on one Sunday afternoon in late 2008, we were not even sure if markets would open the following day.
What makes a good fund manager?
Three things are of paramount importance. Firstly, have a process and stick to it. Value investors excel picking through typically messy companies; growth investing requires very different skills. Secondly, portfolio managers tend to be naturally curious people, always looking for and wanting to know another insight to help determine whether they are right or wrong. Knowing more helps them make better decisions. Thirdly, a willingness to admit when they are wrong. When the facts change, successful PMs know to reassess.
How important is the culture in your business?
Over the long-term, culture is the single most important aspect to get right, to pass from one generation to the next to ensure the company survives and thrives. Everyone owns the culture in how they treat each other every day. Central to it is investment excellence - it's part of our DNA - and we hurt when we are not performing well. Being client orientated is crucial. Every business will say this - and some live up to the pledge. We do. Trust and mutual respect create a good climate. Collegiality and collaboration - sharing ideas, showing others how - makes us all better. Having a long-term time horizon gives a competitive advantage in a world that has become increasingly short term.
What's your view on the rise of passive investing?
It is already a multi-decade phenomenon. It accelerated after the financial crisis when many of the big names and index constituents performed well. Passive investing has a big role to play and is right for many investors. But there is also a place for active investing. As in any craft or profession, people want to do better than average. That's what active managers are here to do. We have demonstrated the ability to do so in the past. We are investing heavily in the things that drive alpha - teams, process and tools - to continue that success.
Richard Romer-Lee is managing director of Square Mile. You can read more Talking Withs here
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