Investment Leadership and Portfolio Management
Understanding how to operate in today's dynamic investment environment is critical. Investment Leadership & Portfolio Management contains the insights and information needed to make significant strides in this dynamic arena. BRIAN SINGER is Chief Investment Officer of Singer Partners and Chairman of the CFA Institute Board of Governors. Previously, he was head of global investment solutions at UBS Global Asset Management (formerly Brinson Partners, Inc.), responsible for asset allocation and currency strategies. Singer is also Emeritus Board Member of the Research Foundation of CFA Institute and an advisory board member of the Journal of Performance Measurement. He is a recipient of the 1991 Graham and Dodd Award and a 2001 recipient of the Dietz Award. Singer holds an MBA from the University of Chicago. GREG FEDORINCHIK is head of investor solutions at Mesirow Advanced Strategies, Inc., an institutional fund of hedge funds firm based in Chicago. Prior to joining Mesirow, he was a senior strategist with the global investment solutions team at UBS Global Asset Management (formerly Brinson Partners, Inc.) and a member of the asset allocation and currency committee. Fedorinchik holds an MBA from the Kellogg School of Management, Northwestern University.
Investment Leadership and Portfolio Management
In Murfreesboro, TN, childhood home of one of the co-authors, a weathered farmer walks out to get the morning newspaper in her usual morning back pain. Mary had forgotten to take her nightly painkiller to treat arthritis in her back and the impact of her weekly immune system inhibitor injection was beginning to wane. Regardless, she hobbles back into the old wood farmhouse and settles in to an easy chair, molded to her body after years of this morning ritual. She reads the local newspaper, building up the energy to mount the tractor for another day's labor.
Mary spots an article in the newspaper about a terrorist attack in South-east Asia. She has never heard of the terrorist group, but she is certain that "some Muslim group" is behind the devastation. Mary hates Muslims and is sure that they hate her for her fundamentalist Christian beliefs. No bother, though, as they are on the other side of the world and Muslims are unlikely to have any influence on her narrow existence in this rural little corner of the world.
She couldn't be more wrong. What Mary doesn't realize is that both of the drugs she uses to control her daily pain would not have been possible without the generous financial support of those individuals whom she unjustly loathes. Conversely, the people who produce her pills may equally dislike Mary for her bigotry and hatred; yet they enable her to get up on most days to live a pain-free existence. Moreover, their investments created two successful drugs-interestingly developed by an Israeli company-that garnered generous returns supporting unprecedented infrastructure building around the world.
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages . . . He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it . . . He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
These parties don't know and perhaps can't stand each other, yet they depend on, benefit from, and support each other on a daily basis. How can this happen?
ARE WE SETTING A GOOD EXAMPLE FOR OUR CHILDREN?
To understand how this happens every second of every day, consider a common misperception that was so eloquently portrayed in Tom Wolfe's The Bonfire of the Vanities (Random House, 2001). Sherman McCoy, a self-styled "Master of the Universe" bond trader on Wall Street, is asked by his daughter, Campbell, what he does for a living. The question is prompted by the fact that seven-year-old Campbell's friend's dad produces tangible things at his printing business and Campbell wants to tell her friend what her daddy does.
After several failed attempts to explain what he does, Sherman's wife Judy explains that, "Daddy doesn't build roads or hospitals, and that he doesn't help build them." Rather, Judy explains, "Just imagine that a bond is a slice of cake, and you didn't bake the cake, but every time you hand somebody a slice of the cake a tiny little bit comes off, like a little crumb, and you keep that. . . . Imagine little crumbs, but lots of little crumbs. If you pass around enough slices of cake, pretty soon you have enough crumbs to make a gigantic cake." (p. 239) Having equated the gains from bond trading to gathering millions of "golden crumbs," Judy has implied, in quite memorable manner, that Sherman doesn't produce anything tangible. Sherman is portrayed as a parasite on the efforts of others.
While Tom Wolfe provided a wonderful story (a