Boeing CIO Liz Tulach
As the Chief Investment Officer (CIO) at Boeing, Liz Tulach is partly responsible for the retirements of tens of thousands of past and present employees.
Overseeing more than $90 billion in global defined benefit and defined contribution assets is no small task in the best of times. As we know all too well, last year was far from the best of times. But with 2020 now in the rearview mirror, Ford CIO Erin Rohde shares her views on some of the key opportunities that await investors and plan participants in 2021, along with the importance of diversity in the asset management industry and the biggest current challenge in her role.
How did you get involved in the industry?
I was hired by Ford Treasury in 2000, after finishing my MBA. I’ve had several roles throughout Treasury here, including assignments within the pensions group and capital markets. Over the past five years or so (Rohde was named CIO in 2016), the pensions area has been my home again and I enjoy it immensely.
It’s been a remarkable year, to say the least. Can you offer your views on the resiliency of financial markets and what we might expect heading into 2021? As we continue to make our way through the pandemic, what is your biggest concern from an investment perspective?
In some ways I’m surprised that markets held up so well, but there are a few things that I see sustaining market performance. One of those is all of the central bank support we’ve experienced. Central banks have been laser-focused on aiding the markets for several years now and their efforts have been successful. Market participants appear to have faith that central banks will continue to do that. The ongoing reach for yield driven by low interest rates is another factor supporting markets, and in particular risk assets. At some point, there is potential for economic correction, but I believe these factors will continue to provide support to the markets into 2021. My biggest concern is the central banks’ ability to continue navigating around the pandemic and related economic issues over the longer term.
The Department of Labor recently offered up its opinion on the inclusion of private equity in target date funds, giving plan fiduciaries the opportunity to take a more innovative approach. Have you begun to incorporate illiquid assets into your investment process?
The participant base in our DC plan is pretty diverse and we use a passive, “off-the-shelf” target date product which does not lend itself to customization. That may make us a bit slower to adopt illiquid assets within our target date offering. But it’s definitely an interesting and healthy development within the market. Broader retail access to private equity and other alternative assets is a great tool for people to have within the construct of target date funds. It allows better potential diversification and returns, while mitigating some of the constraints like liquidity issues and short-term investment bias.
While some parts of the world are much further along than others, ESG is increasingly becoming a driver of investment decisions around the globe. How does Ford view ESG investing?
ESG has been an important topic within Ford corporate-wide and we have been looking at ESG investing for some time across our global plans. Even before the topic of ESG was en vogue, we’ve always had the view that ESG considerations should be a factor in our investment managers’ processes. There is the potential for all of those factors to impact price - sometimes in a significant way - and it should be something our asset managers are considering. More recently, there have been regional regulatory developments that have put ESG even more in the spotlight. Our plans in the UK and continental Europe must take a more active stance on ESG impact of securities in the portfolios, reporting of those securities and trustee board knowledge of those investments. In the US, the regulatory environment has not been as friendly to ESG, especially on the DC side. But eventually it will become a bigger factor in the US too – we are seeing more interest among the plan participant base.
What are your thoughts on the debate about active vs. passive?
Passive investing has exploded over the last decade and there have been many benefits – particularly the accessibility and affordability it has driven for smaller investors. I think there will always be a role for active investment, though, and there will always be active managers that can generate alpha over the passive benchmark. The drivers of active alpha may evolve as markets and technology evolve, and I think you’ve already started to see that on the equity side. In addition to fundamental factors driving price, there can be big swings related to systematic trading. The active managers that win over the long-term will be able to understand and incorporate these emerging trends into their process.
Diversity within the ranks of asset management is an important consideration at PGIM, and throughout the industry overall. Can you offer your views on the role diversity plays in your business?
I think more often than not there isn’t as much diversity within asset management as we’d like to see. When we do see it, we recognize the potential benefits. A diverse population around the table encourages different perspectives, better discussions and healthier debates. Ultimately that leads to better outcomes with respect to investment performance, client service, product innovations, etc. for our plans and plan participants. Academic research has supported this view in some recent studies I have seen, tying diversity to better investment performance. It’s nice to see that validation, and hopefully it will continue to drive better outcomes in terms of diversity at asset management firms more broadly.
What’s the biggest challenge in your role?
It varies over time, but right now I think it’s the remote working. We have been out since the middle of March and won’t be back until at least June 2021. It’s all gone fine and I have a great team that will continue to rise to the challenge successfully. There has been a lot of evaluation as to what’s working and what’s not so that we can continue to refine and improve. So much of what I think about is related to interpersonal connection. From a team-centric perspective: do we have enough touch points, is everyone getting the right training and help, etc.? We also manage dozens of external relationships at Ford, which adds considerable complexity. The issues are not insurmountable, but they will continue to be a focal point until things return to normal. There’s no substitute for sitting with colleagues and it’s hard to recreate all of the benefits related to that when we are all working from home.
What do you like to do to unwind outside of the office?
That’s an interesting question in times of COVID, and my answer might have been a bit different a year ago. I try to make sure I’m getting enough exercise and activity, which is more challenging now. But the biggest thing for me is family time. I spend a lot of time with my kids and coach some of their activities, which helps me put work aside and unwind.
PGIM’s Vantage Point Series is written for C-level executives and is intended to offer a glimpse into the issues that are important to these decision makers. The articles look at the challenges facing CIOs and the industry trends they see as most vital, along with a broader range of topics relevant to institutional investors. For more information about the series, or to be featured in an upcoming installment, please contact IRG.