Deloitte CIO Alex LeeDeloitteCIOAlexLee

Being the CIO at a large audit firm can be taxing. 

Every chief investment officer faces a bevy of challenges, of course, but the responsibility of navigating SEC and ERISA obligations while maintaining independence from audit clients brings some extra considerations to the table. It’s a challenge that Alex Lee, the CIO at Deloitte, relishes.         

Lee oversees more than $25 billion in defined contribution and defined benefit assets at the professional services giant, assuming his role after the retirement of long-time CIO Mary Ellen Stocks in 2020. We spoke with him about some of those challenges, how he got started in investment management, the importance of taking a long-term view of the markets, and a handful of other topics. 

Let’s begin with how you got started in the industry. 

My father was a mid-cap portfolio manager and my mother was an actuary, so the combination of the two skills really aligns well not just with investing, but pension investing specifically. I started my ROTH IRA when I was in middle school with my lawn-mowing income and my portfolio positioning was heavily influenced by my father’s preference for mid-cap growth stocks (of course). When I went to Boston College, I had an economics and math focus, with a finance concentration, knowing my preference was to work in the investment management industry, and ideally in the retirement investing space. I originally joined Deloitte as a consultant and advised investment manager and pension clients for my first eight years before transitioning internally in 2016 to serve the oversight committees for our own investment portfolios.  I served as Deloitte’s Deputy CIO for three years and have now been the CIO for a little more than two years, so I’ve been in a similar role for about six years now.

What do you see as the biggest challenge in your current role?

The biggest challenge may be sort of unique to me versus other CIOs you’ve talked to, given the nuance of Deloitte as a public accounting firm. We are always managing the firm’s commitment to independence from our audit clients. Beyond standard pension and DC lineup management, we also have that extra layer of complexity tied to independence that requires us to make sure we are in full compliance, but it’s a fun challenge and forces us to be innovative with our investment partners. 

Talk about the importance of long-term investing and how you view that through a DC and DB lens. 

It’s a foundational mindset to focus on the long term for retirement investing. So much is happening in the world and markets every day, especially in the past three years, and you can’t simply ignore the short term - our committee members are very much in tune with what’s happening on a day-to-day basis. An important part of my role is to address what’s going on in the world and how it influences or impacts our strategy, but we always bring it all back to why it would matter from a long- term perspective and how it will or will not make its way into our portfolios. It’s easy to get caught up in short-term noise so we’re often reminding ourselves that the primary focus is on the long term and maintaining discipline.

How do you view investing from an active versus passive perspective?

I know based off of my now-15-years in the industry that there are incredibly smart and talented organizations and people that, if you have the right infrastructure in place, should outperform benchmarks even after fees. That’s especially true in less efficient asset classes like fixed income and certain equity markets. I’m certainly a proponent of active management to capitalize on those inefficiencies, and also believe there is a place for passive if you want to have a higher-octane risk budget in certain areas. I really believe that if you have a robust process to identify the top-quartile managers you will outperform over the long term, even if there is some drag from fees. It’s essential not just to identify and access the best-in-class investors with an edge, but to find complementary managers within a sub-asset class, and you need to be able to look through the inevitable short-term storms that come along.

How do you view the role of diversity, equity & inclusion in the industry?

For Deloitte as an organization, DE&I is one of our core priorities. Our firm has a commitment to transparency and one of the priorities is helping our clients improve their transparency, reporting, and measuring towards their stated goals. So it’s embedded deeply in Deloitte, and for me I benefit from access to insights from our internal resources and specialists. Largely due to an improvement in transparency and relevant data, there is a growing number of studies on the importance of diversity from a portfolio manager perspective, and it’s great to be able to see outcomes rooted in empirical evidence, which gives it that much more credibility. We can always acknowledge the anecdotes and perspectives, but when there is academic research to support the case, it’s more powerful as an input to the investment decision-making process.