You’re running a large, public institutional investor out on the frontier of finance. You want and need to hire the best and brightest minds to help achieve your objectives, but you simply can’t locate the finance talent you need. What to do?
In my view — which has been greatly influenced by a mentor of mine at a sovereign fund operating out on the frontier — you should hire highly accomplished and skilled project managers and train them in the language of finance. Why? The successful portfolio manager at a sovereign fund or public pension fund looks an awful lot like a successful project manager in non-financial industries.
Here’s an (overly) simplified description of your job as a portfolio manager at a public investor: you’ve got a specific transaction you’re interested in doing. Perhaps you had the idea or perhaps your boss did. Whatever the case, you have a series of hurdles and challenges that you will have to overcome to close this transaction. There’s due diligence to do, risks to manage, internal priorities to consider, and high-level approvals to secure (e.g., legal, CRO, COO, CIO, CEO). In order to achieve all of this, you have limited resources at your disposal, which means you have to be very efficient in your work and effective in your coordination and collaboration.
Who do you think is right for this role? Is it the young finance whipper snapper out of the Ivy League or Oxbridge who’s been a trader on Wall Street for two years? Or is it the project manager that has a demonstrated ability to get things done? For large institutional investors, the choice (for me) is obvious: I’d rather have a project manager with little knowledge of finance than an investment professional with little project management experience — especially since all of these funds will have senior investment professionals (e.g., the CIO) that will ultimately have to bless any investment decisions.
So, given you’ve got the investment knowledge up high in the organization, why not hire project managers at the lower levels that can steer a project from start to finish? And how, you might be thinking, do you expect these funds to find these sorts of folks and hire them? My Stanford colleague Ray Levitt has an interesting take on this:
“The interviews should be designed to assess a prospective new hire’s temperament and skills for teamwork in a very unstructured environment vs. [ability] to assess their capacity for individual accomplishment that might be indicated by grades or prior technical performance evaluations. Some companies include bringing potential hires into social activities such as Friday afternoon happy hours as part of the hiring process.”
In other words, the nerd with the 4.0 GPA who dominated his or her financial math masters program is probably the wrong person for this particular role. However, the captain of a basketball team or crew team with a 3.3 GPA may be the perfect hire.
Why? Project managers have to be team players (most of what they do is coordinate and delegate). They also have to be disciplined and rigorous about getting things done. (Have you ever met a competitive rower?) They have to be able to nagivate bureaucracies, while internalizing and integrating innovative practices. (Do quants have the patience for this?) They have to be self-starters with a high pain threshold. (Again, see rowing). And, finally, they have to have a high tolerance for ambiguity.
Anyway, if I were running a large sovereign fund, I’d recruit an army of project managers and put them underneath the tutelage of a handful of savvy investors. Because if you can manage the site below, I trust you to be a good steward of my pension money. Also, financial concepts are quite teachable, while project management skill is often only developed through life experience.