GE CIO Harshal Chaudhari
Harshal Chaudhari, the CIO at GE speak about his early days in the industry, his take on the current market environment and the Fed and his views on ESG.
Plenty of people have had a rough first day on the job. Then there’s Dennis Simmons.
Simmons, now the Executive Director of CIEBA, began his career on a rather memorable day: Black Monday. Given the carnage in the markets, he didn’t think there would be a second day, but 35 years later, Simmons is doing far more than surviving.
The organization he helps lead – the Committee on Investment of Employee Benefit Assets – describes itself as “the experienced, respected voice on plan investment fiduciary issues.” More specifically, CIEBA is home to more than 100 chief investment officers who collectively manage over $2 trillion in assets, funding both defined benefit and defined contribution plans. CIEBA’s mission is to enhance corporate CIO effectiveness and improve the overall soundness of the private retirement system.
PGIM recently spoke with Simmons about how he’s trying to accomplish that, and also got his thoughts on a host of issues impacting the retirement-savings space.
Let’s start by talking about how you got involved in the financial-services business.
I started in the investment industry the day of the crash in 1987. My first day at work for Vanguard was literally October 19, 1987. I just assumed the markets discounted the information that I was entering the workforce! But seriously, it turned out to be an interesting time to start, in a role that was essentially answering calls on the 1-800-line. I was with Vanguard for a long time, and they have been very consistent over the years with the ‘stay-the-course’ message. Of course, back then I didn’t know what I didn’t know, and I didn’t think I’d have a day two, because what I did know is that a 20% one-day drop in the Dow wasn’t really good. Anyway, I got my law degree at night while I was at Vanguard and from pretty early on I was working in the retirement-saving space. I had the good fortune to work within that business while wearing the legal and policy hat, and I learned from a practical standpoint how it all worked from the ground up. In 2017, I came over to CIEBA, where there were plenty of synergies because I knew a lot of the members and member organizations from my Vanguard days. And here I love the notion of working with folks who put the fiduciary hat on every day, which is what our members do.
We haven’t seen anything like Black Monday this year, but it certainly hasn’t been pretty. Do your members rely on CIEBA more when times are tough?
I don’t think it changes very much. Our members by and large are very long-term, stay-the-course in their approach, and in many ways they’re obligated to do that. At the same time, they are also very interested in hearing what their fellow members have to say about strategies being used in volatile markets – what’s worked in the past, what’s available now, and what some of the best practices are. And we’re fortunate here at CIEBA that we can play the middleman and make our members’ lives easier in sharing that information. Plus, we can always have the best experts from the industry come and offer their views, and our members get a safe environment to talk among their peers about what’s going on in the industry.
How does CIEBA envision supporting the next generation of CIOs?
A major part of our agenda is professional development and networking. In the fiduciary space there is safety in numbers in terms of what similarly situated fiduciaries are doing to bring best practices to the fore. In the past it was largely incumbent upon the CIO to take what he or she thought was helpful and filter it down to their teams. But we’ve been fortunate with virtual-meeting technology to expand our members-only meetings beyond the CIO to their teams. So from a development standpoint, a lot of folks who normally wouldn’t be are now participating first-hand. Frankly, some of that was a silver lining of moving to an all-virtual situation, but I can tell you there is a lot of purposefulness in our CIOs in terms of wanting to leave the woodpile higher than they found it.
How are members looking to bring DB investment best practices to the DC world?
Completely handing the investment keys over to the average employee was never going to be a recipe for success, and I think the industry recognized that early on. What we’re seeing now is more of a continued progression of letting the experts affirmatively provide tools to participants, such as custom target-date solutions and being able to do some things within DC portfolios with alternatives. It’s worth noting that our members use alts to the tune of 20% in their DB portfolios, and they’ve been using them significantly and effectively there for decades. So it’s natural that our members, while not pushing one particular approach, would give the comfort to their fellow plan committee members that they can focus on the merits of these programs, rather than just simply looking at fees. A lot of recent litigation in the DC space has put headwinds on folks who want to move in the direction of trying to find programs that really are effective, without being blinded by the idea that if they cross some sort of investment-fee line, they’ll be inviting litigation. Our members take the approach that it’s better to offer an effective program and have thoughtfully looked at various investments, as opposed to just saying, ‘Well, we didn’t put it in the program because it exceeded a certain expense ratio, and I didn’t want anyone questioning the fees.’ They’d rather defend the investment merits of their decisions if they happen to get sued.
Are CIEBA members supportive of providing more retirement income solutions for their DB participants?
Our members are actively involved in looking at custom distribution solutions for their DC participants. Gone are the days of simply sending a lump-sum check out to a participant when they retire, and that’s being driven by a lot of forces. One of those is the economics of DC plans – the larger account balances do support the smaller account balances. But more to the point, staying in the plan is invariably a better option from a cost and fiduciary-oversight perspective for retirees. Someone in the industry told me a long time ago that accumulation is much easier than decumulation, and there is no one-size-fits-all answer for DC distributions. Our members are focused on having the flexibility to provide customizable solutions, and that often involves marrying professional advice and guidance with flexible products and programs.
What is the take of CIEBA’s membership on some of the proposed new rules on climate-risk exposure reporting?
Our members have a bit of climate-change-regulation fatigue. They’ve seen a lot of different markets and administrations, and not all of the regulatory ping-ponging has been all that helpful in terms of how people actually go about investing. They look at it as another potentially important data point, but they’re always weighing the pros and cons, including whether climate change has an economic impact and what that means. Our members have the benefit of being experienced fiduciaries, and their guidepost is always acting in the exclusive economic best interests of plan participants.
How does CIEBA view the role of diversity & inclusion?
All of our members are committed to offering professional and investment management opportunities – to anyone of every background – who will manage money prudently and effectively. Looking at the broadest pool of effective money managers is an important aspect of satisfying a CIO’s fiduciary duties. Frankly, a fiduciary would be derelict if they didn’t consider all the diverse options at their disposal.
What do you like to do outside the office?
Hanging out with my wife and our two daughters, when we can see them. We also have a five-month-old grandson, which has been eye-opening. I also mess around on the drums a little bit with a cover band – I describe myself as much more enthusiastic than accomplished on the drums. But I’m fortunate to have some friends with all the equipment set up and I can just pop in. We don’t do it too often but when we get the opportunity it’s a lot of fun. Our gigs are mostly backyard picnics; you don’t need a backstage pass to get close to us!