Having worked in a broad range of roles throughout his career, Tom has a well-rounded perspective to share with treasury teams and understands the unique challenges of public sector investing.
Here, Tom shares some of his experience in treasury, why he’s excited about Clearwater, and the new direction of fixed-income investing.
Describe your background and experience in the industry:
I’ve been in the fixed-income capital markets for more than 20 years in a number of different roles, including credit underwriting, publishing research, structured product investment banking, and portfolio management. My early career was spent mostly as a publishing analyst on specific credit and structured product sectors but for over the past decade I have had the opportunity to directly invest total return benchmarked portfolios; oversee external managed portfolios; and, underwrite private market opportunities.
So, I’ve done a little bit of everything, which has been a blessing because it’s given me a broad overview of the market.
For the state of Oregon, I was part of a team that managed the pension plan, the local government pool, and state agency and insurance funds. We managed money both internally and through external managers. Additionally, we often collaborated with the alternatives team providing underwriting and external manager oversight for credit and debt market LP mandates (distressed, private credit, mortgage).
What brought you to Clearwater?
First off, I was strongly attracted to the culture at Clearwater. I have always wanted to be part of teams that emphasize client service above all else. I feel like with that attitude and focus you’re going to generate a superior product. And so far, having witnessed Clearwater’s seemingly continuous rollout of new tools and improvements coupled with internal messaging on client focus, I feel validated.
From a fixed-income management standpoint, I’ve sat here over two decades and watched the way institutional money management has changed. I’ve witnessed the influence of data and computing tremendously change the way money is managed. More recently I’ve seen the way quantitative portfolio management methodologies and big data have improved opportunities for consistency in portfolio returns.
What is changing in fixed income, and where do you see Clearwater fitting in?
When I think about the future of fixed income investing, and I believe it’s going to continue to be taken over by quantitative methods, machine learning, and efficient utilization of data. In the complicated, multi-faceted arena of fixed income investing, we always sought people who were experts in their fields. If we wanted to invest in high yield, we looked for a high yield manager. If we wanted to invest in emerging markets, we looked for an emerging markets manager. Furthermore, public market money managers have different skill sets and processes than private market managers.
The same themes apply to systems, analytics and data. We sought investment data and analytics systems and service providers that were best in class within their area of expertise. But, similar to the different fixed income market sectors such as corporate debt or structured debt, each specialized system and service provider employs unique nomenclature, processes, and analytics. While these systems were great within their specialty, the differences between them created persistent (and frustrating) inefficiencies every day in our operations. One tends to become accustomed to the individual workarounds and adjustments to meld the output of the various systems but they add up to significant effort and time.
As portfolio managers, we were always searching for every little opportunity to improve performance. We constantly searched for mis-priced securities to add incremental performance. However, when we analyzed our historical performance, we found that it was our controls and processes that were the most persistent contributors to performance. Analytics and processes that allowed us the agility and efficiency to maintain the proper allocations and efficient risk exposures was the primary contributor. This was eye-opening – we were human and couldn’t efficiently predict the future but we could greatly improve our performance consistency through changing market environments with better processes. It was confirmation that as fiduciaries, we needed to maintain a strong focus on improving our processes and systems.
During your time working in government finance, what were some notable challenges that you and your peers faced in your accounting and reporting processes?
As a government asset manager you are a public-facing institution. You typically don’t create headlines by outperforming, you create headlines when you make mistakes. And, because you are owned by the citizenry, you have a high hurdle for disclosure and decision justification which creates additional layers of oversight. There are both strong positives and negatives to these realities but they often slow the process of change.
Government asset managers often operate with relatively limited staffing and oversee a wide array of investment structures and mandates. It is relatively difficult to restructure across government agencies or even within agencies. The resulting process inefficiencies and strains generated workarounds and patches that have become ingrained or normalized. At the systems and operations level, it is not uncommon for there to be limited interaction between asset management, accounting and participant administration. It is a great feeling when Clearwater can step in to help all three groups at once.
What should governments know about Clearwater?
Governments have been steadily employing new technologies to adapt to the fast changing and more complicated investing landscape. Employing new sophisticated systems has created its own set of inefficiencies. Now there’s an opportunity to look at where data can be more consistent, accurate and flexible. Clearwater adds value by bridging gaps for better reporting, analytics and greater efficiency.