Training Grounds: Wellington Management – Jean Hynes (EP.423)

Today's show is our third in the Training Grounds mini-series, following Carnegie Corporation and Bain Capital to better understand how certain organizations have developed industry leaders. Wellington Management is one of the world's largest, privately held asset managers, managing over $1.3 trillion in assets with 875 investment professionals across 19 offices and a nearly 100 year history with an unusually low level of turnover along the way. Wellington has developed, recruited, and retained leading global investment talent across public equities, fixed income, and recently private markets as well. My guest to discuss this training ground is Jean Hynes, CEO of Wellington, who has spent more than thirty years at the firm starting as an administrative assistant. Our conversation covers Wellington's cultural values and boutique investment team model, including apprenticeship for junior talent, recruiting at the mid-level, and promotion all the way to partner. We then discuss Wellington's evolution from a U. S. equity value shop to a global, multi-asset, multi-strategy powerhouse, and Jean's evolution from a portfolio manager to CEO. Take Capital Allocators Audience Engagement Survey https://www.capitalallocators.com/annual-survey/ Learn More Follow Ted on Twitter at @tseides https://twitter.com/tseides?lang=en or LinkedIn https://www.linkedin.com/in/tedseides/ Subscribe to the mailing list https://capitalallocators.com/ Access Transcript with Premium Membership https://capitalallocators.com/signup

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Ted Seides?

  Capital Allocators is brought to you by AlphaSense. Every allocator sits at their desk for hours preparing the work around investment decisions, getting up to speed on a new theme, prepping for the next investment committee meeting, and tracking what changes across an entire portfolio. AlphaSense just launched something built to help. It's called SuperAnalyst, an always-on agent that works like a power user on your behalf. It draws on over 500 million premium sources, including broker research, expert transcripts, company filings, and earnings calls, and keeps working long after you've gone home for the day. Point SuperAnalyst at a theme, company, or market, and it learns the coverage universe

• 0:46Ted Seides?

  so you can easily turn new insights into the briefs, models, and memos you'd otherwise build by hand. It was designed to work like an extension of your team, so it remembers your projects, follows your templates and processes, and links every output to its source so you can see where each conclusion came from. The best way to judge its quality is to give it a whirl. Pick the research task on your desk before your next committee meeting and hand it to SuperAnalyst. Start a free trial at alphasense.com/capital and see what it has ready for you.

• 1:24Ted Seides?

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• 2:06Ted Seides?

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• 2:47Ted Seides?

  the operations partner trusted by the leading private market GPs. One theme that keeps coming up on the show is GPs that build the strongest and most durable relationships with LPs are the ones that have both strong returns and strong operations. AI raises the stakes on operations and having Juniper Square as your operations partner helps ensure your data is organized, accurate, and accessible, so you can unlock operational alpha. That's why thousands of GPs trust Juniper Square. Learn more at junipersquare.com/capitalallocators.

• 3:32Ted Seides?

  Hello, I'm Ted Seides and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access premium content at capitalallocators.com.

• 3:59Speaker 01

  All opinions expressed by Ted and podcast guests are solely their own opinions and do not reflect the opinion of Capital Allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Capital Allocators or podcast guests may maintain positions in securities discussed on this podcast.

• 4:18Ted Seides?

  Today's show is our third in the Training Grounds mini-series, calling Carnegie Corporation and Bain Capital to better understand how certain organizations have developed industry leaders. Wellington Management is one of the world's largest privately-held asset managers, managing over $1.3 trillion in assets with 875 investment professionals across 19 offices and nearly 100-year history with an unusually low level of turnover along the way. Wellington has developed, recruited, and retained leading global investment talent across public equities, fixed income, and recently, private markets as well.

• 5:00Ted Seides?

  My guest to discuss this training round is Gene Hynes, the CEO of Wellington, who spent more than 30 years at the firm, starting as an administrative assistant. Our conversation covers Wellington's cultural values and boutique investment team model, including apprenticeship for junior talent, recruiting at the mid-level, and promotion all the way to partner. We then discuss Wellington's evolution from a US equity value shop to a global, multi-asset, multi-strategy powerhouse, and Gene's evolution from a portfolio manager to CEO. Before we get going, I was walking down the street and saw my friend Brian Furtado,

• 5:42Ted Seides?

  the head of the family office practice at Apollo, on the other side of the street with a handful of shopping bags. Brian is a very affable, can-do type of guy, so as I crossed the street to say hello, I was surprised when he appeared frazzled and mumbling to himself. He looked up at me and repeated a phrase twice: "Just keep buying, just keep buying." Since that December 23rd three years ago, "Just keep buying" has become a mantra in our house during moments of holiday-induced stress. It's not really about retail therapy, although my wife Vanessa might mean it literally from time to time. It's about remembering that the sprint to the holidays can bring some stress, but the

• 6:26Ted Seides?

  actions we take spread joy and cheer when the big day comes. So whether you're celebrating Christmas, the first day of Hanukkah, or anything else on December 25th, when you feel the inevitable pressure of the holidays, take a small action with the gift of giving in mind: just keep buying. Thanks for spreading the holiday cheer with Capital Allocators. Please enjoy my conversation with Jean Hynes.

• 6:55Ted Seides?

  Jean, great to see you.

• 6:56Speaker 02

  Great to see you too, Ted.

• 6:57Ted Seides?

  Well, I'd love to dive into this training ground story of Wellington, going through your story as a classic homegrown talent. So why don't you take me back to those early steps in your recruiting and training as you worked your way up here?

• 7:16Speaker 02

  The recruiting is probably not as interesting as the training. So I found my way to Wellington, which was a very small company back in 1991, when I joined, under 300 employees. I started as an administrative assistant. Very unusual, I only had two interviews, not the typical 30 that we have now. But the early couple of years was really about working in the research department. And then 18 months in, getting to work with Ed Owens. In Wellington, particularly on the investment platform, we talk about having an apprenticeship model. And I think I am the classic apprentice, particularly that first decade, but I would even say my second decade of learning to become an investor.

• 8:01Speaker 02

  So if I take a step back and think about that first decade and working with Ed Owens, it was really, one, getting to know companies. And working with him was pharmaceutical and biotechnology companies, getting the skills to do that. So that meant for me, coming from an undergrad degree at Wellesley, going back to Harvard Extension School and getting accounting background, taking my CFA and then taking biology courses, which was really necessary to understand what was happening in the subject matter that I was studying and the industry I was studying. What Ed taught me in those first few years, and it was really about observing him and being in every meeting with him, was really about,

• 8:46Speaker 02

  how do you evaluate companies and take all that information in and then gain some insights?

• 8:53Ted Seides?

  So is that one-on-one apprenticeship model common across Wellington?

• 8:58Speaker 02

  Yes, and I think it still is in existence today. So in our $1.3 trillion, it really is approximately 60 teams across equities, across research sector teams, across fixed income, long-short strategies, and now private strategies. Most are small teams of anywhere from two or three to up to 10 people that spend most of their time together. And so for me, learning those first few years, a typical week would be which companies are coming into our office? Are we going to see Eli Lilly this week? Are we going to see this biotech company? And then you have a daily, a weekly, a quarterly cadence to how you do the work.

• 9:42Ted Seides?

  If you look today across those 60 teams, how would you characterize some of the similarities in that training and apprenticeship model?

• 9:52Speaker 02

  If you look across the 60 teams today, there is a combination of people across their career spectrum. So we continue to have a really robust early-career group at Wellington. So people who start out either right from college, a few years out of college, or from MBAs that are starting their career in the investment management industry. We have people that we hire that maybe have spent 10 or 15 years, or 20 years even, in the industry. And then we have a series of people that are very experienced in their seats, either as researchers or experienced portfolio managers. So I think that's what's similar about it in the sense that you have the generations of experience

• 10:36Speaker 02

  on most teams, and that helps us with succession because we think succession is so important for the continuity of the business. And we have this concept of how do you build a bench in a team? And then there can be a lot of movement amongst teams as well over time.

• 10:51Ted Seides?

  So let's break down that unit of the team. You talked about your experience early on, some of that initial training. That mid-layer, lateral hires, how do you go about that interviewing process?

• 11:04Speaker 02

  We have a very in-depth interview process. So by the time someone joins Wellington, and they will joke about it, like they will typically have gone anywhere from 25 to 35 interviews. I remember a few years ago, a new employee who had just been through the process said, "By the time I was on my 25th, 26th, 27th interview, I felt like I was a Wellington employee already. I wanted to come." And by the time the Wellington employees have interviewed the person and get the feedback, we want them to come. Sometimes we're looking for very specific skills that we don't have at Wellington or that we want to replace, if it's a succession or if we're in a new area of the market, something we want to add.

• 11:47Speaker 02

  But really importantly, it's about culture and it's about values. And that would be being a client fiduciary, having high integrity, being really collaborative. And you can interview for collaboration. If someone wants to be a lone wolf and doesn't want to collaborate, they shouldn't be at Wellington. It's not the place for them. There are many very successful investors who probably, successful in their own right, but we wouldn't benefit from them and they wouldn't benefit from the Wellington platform. And so it's shared values and it's collaboration are what we really get out of those interviews. And then we're also interviewing for the skills.

• 12:26Ted Seides?

  How often does someone get near the end and then doesn't ultimately get an offer?

• 12:32Speaker 02

  After that number of interviews, people will usually go to offer. I think our hit rate on offers is very, very high. By the time someone's invested so much of their energy into the process, they want to come to Wellington as well. We don't make many mistakes in hiring and who we bring in the door.

• 12:53Ted Seides?

  So when that person comes in laterally on that team, how do you think about the onboarding of that person onto the team?

• 13:00Speaker 02

  The onboarding happens deliberately and then very organically as well. So if someone's coming on a team, there's a few people they're going to work with every day. And so they're the main people, they're going to make sure that that person has a good onboarding. But then we are also very deliberate over time of creating an onboarding plan. Because like every company, Wellington has its ways of working and it can be a little overwhelming to get to understand Wellington. Let's say you're coming in as a global industry analyst. You come in September 1st. How are you going to meet the portfolio managers and the other global industry analysts over the next number of months, very, very deliberately so that you get to know people?

• 13:44Speaker 02

  By the time you launch in coverage, which might be between three and six months, you get to know a lot of people. So we're very deliberate about setting up an onboarding schedule. People at Wellington love to meet the people and they tend to already be in the meetings with them or in our investment meetings. So they see them. And so we try to do that pretty deliberately.

• 14:04Ted Seides?

  What are some of those norms that you said are a lot when somebody comes in?

• 14:09Speaker 02

  Let's say you're a business developer. We have more products than the average asset manager. We have about 250 products and 60 teams. There's a real beauty to that diversity, but it can be overwhelming, particularly to some who are used to having a more narrow product set or particularly if they're coming from a small firm, they may have one or two products and all of a sudden they have potentially 250 products to get to know and 60 major investment teams versus a few. And so that's probably the one we hear the most. One of the things about our investment platform that we've really worked very hard on breaking down silos. And so there's a lot of collaboration, not only amongst a team, but then the equity

• 14:54Speaker 02

  teams and then amongst the fixed income teams and all the way down the line. And so when you come to Wellington, you may be a private investor and getting to know all our global industry analysts might be important for your role. How do you meet 500 people over time? That could be overwhelming because someone might have something that's helpful to you. Now, that's impossible to do all at once. People often ask me, what's the secret? What advice do you give me about being successful at Wellington? And one of my answers is, we're not a political organization, but we're a relationship organization. Getting to know people is important.

• 15:35Speaker 02

  And that's how you create networks and collaborative networks. People really want to collaborate. And so how does someone who comes into Wellington really form those networks is important over time.

• 15:49Ted Seides?

  And then over time, on an investment team, how do you go about your regular evaluation of talent, its reviews, and then changes, whether promotions from the junior level to that mid-level and mid-level to senior?

• 16:02Speaker 02

  Every year, we have a feedback mechanism where you will have anywhere from 10 or 20 people that you work with most closely provide feedback on you, both qualitative feedback and quantitative feedback on your skill, in your recommendations over the past year, but also the level of skill over time. So that's one part of the evaluation process. So if you take our Director of Research, Mary Priszek, who's responsible for all of the analysts, she will get feedback on the 60-plus global equity analysts. It'll be very rich and robust feedback. The other part of the feedback is quantitative.

• 16:45Speaker 02

  What is the one-year, three-year, five-year, 10-year? Down to how good were they at recommending? How good were they at impacting portfolio management? How much have they impacted actual portfolios? What is their results in their research portfolios? Then there's self-reviews. So I often tell people, spend a lot of time on your self-review. One, it's important for yourself that you are reflective about how well you've done and where you can improve. The manager then takes all of that information and provides a review of an individual. That happens at the individual level. And then at department level, it's like, who's done really well? Who has not done as well this year?

• 17:28Speaker 02

  And we have both short-term ratings and long-term ratings because we know in this business, there are always years where you don't do well. But we want people to be reflective of that because that's the short-term client experience. But the most important rating is really how someone's doing over the long term.

• 17:45Ted Seides?

  On that quantitative piece, how do you think about process versus outcome?

• 17:50Speaker 02

  So we have the processes that determine yearly compensation. And then we have the processes that determine what is someone's philosophy and process? We have an oversight group at the firm that looks across all of the investment platform and says, how is the whole investment platform? Are there any outliers? Are there outliers that are doing too well? Are there outliers that are doing not too well? And then that allows us then to go down a little bit further and delve into a team, perhaps, that maybe is doing well or over-earning alpha. And then we have a group in each department, really, that focuses on what's the philosophy and process of that investor? Are they actually doing what they're saying they're doing for clients? What's the alpha targets?

• 18:35Speaker 02

  What should they be delivering based on their philosophy and process? That's both on early career. What is your philosophy and process? How it might be different from your senior investor? Then we do it continuously over time because it shouldn't change drastically, but it should evolve over time. We do then offshoots of that. So how do you incorporate factors into your philosophy and process? How do you incorporate ESG factors? How do you incorporate portfolio construction? That's the process part of it that becomes the output.

• 19:09Ted Seides?

  When you gather all that information together, you get to compensation discussions and promotion discussions.

• 19:17Ted Seides?

  How do you decide with all that information when someone's ready to take the next step?

• 19:23Speaker 02

  Our director levels have the decisions to promote someone to an analyst and they have their frameworks and what they expect to reach that bar. You want to be open and transparent to everyone about what it takes to reach that bar. So if you're a research associate, what will it take to become a global industry analyst? If you're a team analyst, what will it take to become a portfolio manager on that team? So we have frameworks in place that are transparent throughout the organization. We also have frameworks about what does it take to become vice president, a managing director and a partner? And those criteria are actually similar, but obviously the level of impact rises with each one.

• 20:07Speaker 02

  And so it's very transparent about character and behavior, skill, impact, essentiality of the role. Those all go into our promotion processes. And over time, we have tried to define what success looks like. So one of the other things we like to do is storytell. And so we recently named approximately 50 new managing directors. We have what we call a managing director advisory committee that helps the managing partners with a lot of the evaluation. They helped us narrow down all the input we've gotten across the firm on potential managing director candidates. And then we put out not only who was named a managing director, but we told a story about why.

• 20:51Speaker 02

  And so that's part of role modeling what it takes to reach the next level.

• 20:56Ted Seides?

  When it comes to that prized partnership, what are those criteria that go into determining who will be the next partner from managing director?

• 21:05Speaker 02

  With all of our compensation and promotion processes, we gather a lot of input. For partners, it starts with partners. It's a nine-month process, a very intense, robust process to get feedback from the partnership, to get feedback from our line managements on who they would nominate for partners. And then the re-managing partners are responsible for nominating partners that will be elected by the partnership.

• 21:33Ted Seides?

  Over many, many years, there have been more and more Partners, you add a new partner, they have a slice of the pie. Where does that slice come from?

• 21:41Speaker 02

  So there is a pie. When we determine merit over time, we can only split 100% of the merit. It can't be more than 100%. But over time, we hope that by adding great skills to the partnership, that we will grow the pie. As we've grown over time, what will determine the size of our partnership will be, one, the impact partners have. It will also be where we are in successions. It will be what capabilities we have. We would probably be a smaller partnership if we had not 60 teams, but 20 teams. We'd probably be a smaller partnership if we just stayed US and didn't globalize. The size of our partnership will

• 22:22Speaker 02

  be determined by the amount of people that are having that kind of impact that allows us to grow, add capabilities, serve our clients in all parts of the world. We don't have a determined size. It's really based on impact and are they adding something unique to the partnership?

• 22:41Ted Seides?

  What's the framework that you use for succession?

• 22:45Speaker 02

  I'm 33 years at Wellington, and I'm not an unusual partner at Wellington to have spent, one, my entire career or a long career at Wellington. But I think it's a very personal thing when people want to leave the partnership and retire. Sometimes people stay well into their 60s and sometimes people say, I've had a wonderful 25, 30-year career and they're in their 50s or early 50s and they say, I want to do something else in the next chapter of my life. So I think it's a combination of what are the personal desires of our partnership and what they want to do after spending a lot of time. And part of it is when successors

• 23:27Speaker 02

  are ready. It could be a combination of that. Sometimes, hopefully not often, it's because of performance. That's our job is managing partners to make sure that everyone in the partnership is performing. The investment business, it is a really hard business. In order to be a great investor or a great business person in this business, it's an intense amount of work. And so I think people, over time, want to keep that intensity and they're doing so well for their clients.

• 23:58Ted Seides?

  I'd love to pull on that thread of those instances where the performance isn't what it needs to be. Not necessarily the partner who's decided to retire, but along the way, what's that historical turnover been in the organization?

• 24:13Speaker 02

  The turnover in the organization overall is under 10% and turnover of investors is lower than that. So, one of the things that is a benefit of being a private partnership is that we can take the long-term view on talent, but we also have to have a high bar. I've seen many successful investors who've had a downturn and then they've recovered and have gone on to do great things. And then there might be times that the market structure evolves and the investor doesn't evolve alongside. This is a job where you have to have a lot of resilience in overtime, maybe something in someone's personal life or the toll of investing over time, that that resilience isn't there. So, those are the things we look for.

• 24:58Speaker 02

  And we'll go through an evaluation at the management level, the management line managers who manage investors. We often will get a lot of feedback from their peers. We often have peer SWAT teams to help. So, the combination of, first of all, we want to try to help. And then it's a series of conversations to say, maybe it's time to leave.

• 25:19Ted Seides?

  So, when the turnover is that low, and some of it has come from some underperformance that doesn't work its way out, it sounds like there's not a lot of voluntary departures. And I'm curious, what is it about the culture of the investment team in an industry where there often are people who want to go somewhere and hang their own shingle that's kept so many people here?

• 25:45Speaker 02

  I think there are two things. One, it's the culture, that we have a very strong culture of great people that people like to spend their days with because that's very, very important. Number two, we have this Culture of collaboration. A lot of people in organizations will say they're collaborative. We are insanely collaborative. And that makes people better. So, back to what we interview for. Do people want to learn from others? And do they want to share their knowledge? You have a group of people who are better at their jobs because they're part of the broader Wellington ecosystem. I think that keeps them there. And that's what attracts people.

• 26:29Speaker 02

  We've had people come in and they do better at Wellington than they've done in their previous firms because of the collaboration. And then finally, it has to be a very positive economic. Our private partnership, the ability to become a partner and be an owner in the firm. And the economics have to work out that they're equal to better than setting up your shingles someplace else.

• 26:54Ted Seides?

  I'd love to walk through some of the history of how you've evolved as a business and some of the interesting dynamics and challenges that have come along the way. From really that early start, what were the most important early strategic decisions in changing from that original boutique?

• 27:13Speaker 02

  So, when I joined in 1991, it was the very beginning of what I'll call our research portfolio franchise. And I think we had just started the year before. That was a US portfolio. And then after that, we had strategies that focused on international and global and various versions of the research analyst managing money. That was very unusual in the 1990s. So, I think what resulted in that is that becoming a global industry analyst became a destination instead of a stop on the way to having to become a portfolio manager to be recognized and being able to run money.

• 27:56Speaker 02

  And so, that became just a very important part of the model. If you take Wellington at its core, we're a research shop. Research insights is what we do really well. Having the ability of researchers to be able to express those insights in portfolios themselves and not necessarily just through the portfolio managers became a really important part of, one, retaining talent, which many of our peers, if you go back to the 1990s, the great researchers at the firms left. And so I would say also in the mid 1990s, we started a hedge fund business and that was based on talent.

• 28:38Speaker 02

  So we have a 30-year-old longshore business and that also allowed many of our really strong investors to have another outlet within the Wellington structure. And I think that just kept a lot of people at Wellington. That mindset of both innovating for our clients and also innovating for our investors, I think, has continued over 30 years. One more I will highlight would be going to the privates business. That was driven by a growth investor who recognized that many growth companies were staying private for longer. Now, that's very obvious to say that now, Ted, but it wasn't necessarily obvious in

• 29:21Speaker 02

  2012 and 2013 when he was pushing the firm. That was a very talent-driven entry into that business. There's also strategic reasons to increase our capabilities. I would say in the decade of the 2000s, there was two big strategic endeavors. One would be, we had a fixed income business, but it was very small relative to our equity business. And there was just a real recognition of making sure we had all the capabilities. And that included technology, it included trading, it included hiring investors. And that led to a lot of growth over the next 15, 20 years that has now resulted in

• 30:03Speaker 02

  the fact that we're very balanced between equity and fixed income as a business. In the mid 2000s also was going from our Boston-based footprint to going to a global footprint. And you look back over 20 years, 30% of our employees and 30% of our clients are in our EMEA and APAC offices. We used to tell everyone that our edge was being together. In person. And in 2006, when our head of research said, we're going to have investors be in our London office, our London office was a smallish business office. And literally,

• 30:45Speaker 02

  we almost fell off our chairs. He asked for volunteers to spend some time in London because I think he knew that in order for us to globalize our investment platform, we needed senior people and culture to make it happen. There was a bunch of us and we all decided we were going. We're going to London. And there we had a foundation, our foundation had a gala that night. And we told all our partners and spouses, we're moving to London that very day. In the end, it was only me who went. That's how it started. If we had not done that, and we had only looked at the Boston talent, we would not be where we are today.

• 31:26Ted Seides?

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• 32:04Speaker 03

  This is not an offer to sell or investment advice. Investing involves risk, including the loss of capital.

• 32:09Ted Seides?

  And now, back to the show.

• 32:13Ted Seides?

  In that evolution, when you've delivered a message to your clients at that point for decades, that our strength is we're together in Boston, how do you change the story so that people are comfortable with this dramatic change in what you had historically told them to be your competitive advantage?

• 32:34Speaker 02

  We had told the story, but we had to shift what the advantage was. And so when we moved to have investors in London, we did it in our way. We wanted to make sure that investment culture was transported into our London office. And as we hired London investors, how do we make sure it didn't become siloed? So I think what we very successfully did was that it didn't become a London office. Investors in London are part of the Wellington investment platform and ecosystem and it didn't become a siloed office. We were just very deliberate about that. Again, we had that message that our edge is being together. And so when we weren't together, we did a lot to make sure our edge was still together.

• 33:18Speaker 02

  I remember technology coming, our very famous morning meeting. Until 2008, it was always on audio. And all of a sudden, you had video screens. The technologies helped us make sure that it didn't become siloed, too.

• 33:36Ted Seides?

  As you built out, particularly in some of the alternatives, say, starting even in hedge funds in the 90s, the compensation scheme is notably different in hedge funds than traditional active management. How did you deal with some of the potential frictions of people managing products that were more profitable than others?

• 33:57Speaker 02

  So we have a compensation philosophy that you want to treat everyone fairly based on their contributions. So fair is not always equal, but it's fair. And so we have our incentive compensation committee that looks at how all investors are incented. And there are different formulas depending on the type of investor you are and the business you're in. And I think being a private partnership and having the managing partners govern that, I think, is also part of the secret sauce of making sure it's fair.

• 34:30Ted Seides?

  So when you first started moving in that direction, it's not hard to envision, certainly back then, all of a sudden, everyone's going to want to go run a hedge fund. What happened at that time?

• 34:40Speaker 02

  Well, I think we had interest in running hedge funds and long short portfolios because we had just great investors who really understood their sectors. They were looking for avenues to express the whole sector. I don't think it was really because of the compensation. I mean, the compensation was important, but I think it was really about a way to really express all the insights they had. We have portfolios now that are Or 14040, those allow you to express all your insights. We've had movement from being an analyst to being a portfolio manager and being a portfolio management team to an analyst team. I think people select what they like to do best.

• 35:23Speaker 02

  We have people that really love to be deep researchers and we have people that like to be broad and we have people that like to do long short investing, which is hard. I think you just have people who select to what their interest is. For many, many years, we had my colleague on the healthcare biotech team. He didn't even want to do pharmaceuticals. He wanted to just do biotech. And so we have that ability. What is the overlap between people's passions and what they're really good at and what are the opportunities here?

• 35:56Ted Seides?

  So strategically, you've started to move into the private markets and that whole world exploded in the last 10 or 15 years. How have you thought about how to engage beyond the extension of companies that are staying private for longer?

• 36:13Speaker 02

  Growth companies right before they go public was just a perfect, natural extension for us and that's how the business started. Over time, it became what else makes sense for Wellington to win? And I think we take the lens on what are our clients interested in? Where do we in particular have places that we could do really well? You have biotech and climate technology and investment grade private credit. We recently have something in the venture growth lending strategy. And it's like, where does it make sense that investors will come in and they will benefit

• 36:53Speaker 02

  from being part of Wellington and Wellington will benefit from having them on our ecosystem? I think there is plenty of white space and there are parts of the private market, it doesn't really make sense for us to win in. But if you think about our capabilities in sector-based research, if you think about our capabilities in credit, we're a very large public credit investor across all the asset classes of fixed income. There are many, many places where we can continue to grow. That's the strategy.

• 37:23Ted Seides?

  How do you think about getting there organically compared to, say, an acquisition as we're seeing a lot across the industry?

• 37:31Speaker 02

  We are more open to hiring teams. Five years ago, we might say we were only going to hire a person and then build a team around them. We're more open to hiring teams. We've had plenty of luck hiring great private investors that I think we will continue down that path.

• 37:49Ted Seides?

  Have you thought about strategic partnerships?

• 37:52Speaker 02

  I would say one of the things I think Wellington is really good at, and it might not be as obvious, is that we are a great strategic partner. We've had a great strategic partnership with Vanguard for 50 years. We're the largest sub-advisor in the world. And so I would say if you think about what are strategic partnerships, those are strategic partnerships on manufacturing and distribution. I suspect there's going to be more strategic partnerships across many aspects of our business going forward. And we're not going to do everything. Those kinds of things, I think, are much more likely in the future. I'm not sure we would have contemplated them, but I think the world is changing that more of those type of partnerships will become.

• 38:35Ted Seides?

  What have been some of the challenges to the scale that the business now has?

• 38:41Speaker 02

  The interesting thing is that we are a scaled business, over $1.2 trillion in assets under management. But the 60 teams make it very small. So think about each team being quite manageable. And the beauty of it is that you have scale and distribution across the globe, and we'll continue to invest on the margin there. Do we have scale in technology? Yes. That's probably one of the biggest changes, how much you need to invest in technology to do the investment management business versus 10 or 15 years ago, then when you got a paper printed out to do portfolio management. And so I think those part of it are scaled businesses. But

• 39:25Speaker 02

  Everything else we do is really about the small boutique teams. And I think that's true on the private side, too. The only reason clients invest in private is because you give differentiated returns. They take the illiquidity premium. So that's our approach. Where can we have a team that either does great research or has great insights and generates an outcome or an alpha stream that's really important to our clients? That's how you manage the scale. Importantly, for the future, we have a few platforms that will take those small teams and put them together and package them. And that's on our long-short strategies.

• 40:09Speaker 02

  That's on our 140-40 strategies. We've had a 30 years of our research portfolios, putting researchers together. I think we'll do it in the private space. You take all those small boutiques where people really spend their time and can optimize, but then we can scale them through platforms and vehicles.

• 40:31Ted Seides?

  With so much of the capital you manage being in the public markets, equity and fixed income, and active management has, generally speaking, been under pressure for a long time. How do you think about the future of active management?

• 40:46Speaker 02

  We're a proud active manager. Let me take it at first principles. I think that our business benefits from the world growing, the world innovating, the world being productive. And then there are other things that impact the value of companies, such as geopolitics, elections, interest rates, monetary policy. I don't think those are static. And we're probably entering a period where they're less static than they have been over periods of time. So I think that active management will be just a very, very important part of the future of managing money. If I reflect back, very two important trends in the last decade have been the rise of passive.

• 41:29Speaker 02

  And I wouldn't say here that passive has peaked or will slow down. And the other big trend is privates, which I would consider active. But if we focus also on the public markets, you had a decade of QE, which led to less dispersion and that's not as good for active management. And then over the last couple of years, you've had this immense concentration on a few companies, very rightly so, based on the earnings and the margins of those companies and what they've accomplished. Just as QE ended, you had the rise of this concentration. I think what will benefit active management is that concentration broadens.

• 42:12Speaker 02

  I'm a big believer that those seven companies will be successful only if the benefits broaden to the economy around the world. And so I would suspect that you're in an environment in the next period of time where you don't have the QE of the past decade. I'm not saying those companies won't do well because they've done amazingly well, but you'll have a broadening of the market and that's a really good environment for active management.

• 42:37Ted Seides?

  Did we circle back to your path from the administrative assistant to the analyst, to the mid-level, to the portfolio manager, to partner, and now CEO? What has been different for you in your role as CEO?

• 42:50Speaker 02

  So I became a managing partner in 2014 and that role is actually more similar to being an investor than maybe many people would suspect. You spend your days absorbing information. So that could be because you're reading, it could be because you're looking at a model, it could be because you're discussing something with a young person on your team, it could be because you've met five companies over the last few days, or you've been on a research trip to Europe. You're absorbing information and the managing partner is very similar. When I think about being an investor in the managing partner role, the energy was very similar.

• 43:31Speaker 02

  And I would say probably the biggest surprise for me being CEO, the days are different. They're more dynamic. How do you balance the schedule of the short term with making sure that you're thinking really long-term? Because I think one of the benefits of me and my skillset is I've been an observer of companies and who's done well and what great leadership looks like for my whole career. And so it's that balance of making sure you're executing in the short term and really thinking about the long-term.

• 44:07Speaker 02

  The day to day of being CEO is just very different than the day to day of being an investor. I have only a few more weeks of managing money and the luxury of sitting down and reading a research report and just absorbing things or coming to a close. For me, I try to bring that in more. How do I make sure my days don't get too booked? And how do I make sure I'm spending my days right where I have that balance? My management team, they're the ones who are responsible for the 3,000 employees. And I'm responsible for the overall firm and accountable for the overall firm. So I have to be there and have my energy high to interact with the management team,

• 44:51Speaker 02

  to make sure that I'm iterating with them, problem solving with them, and helping them run their businesses in whatever capacity I can help them. And also then making sure I'm thinking about the strategy of the firm long term. And making sure I have that balance, right of energy is very different than being an investor.

• 45:12Ted Seides?

  You described as an apprenticeship business. Where do you get your training as a CEO?

• 45:17Speaker 02

  When it was announced that I was taking this role, I can't even tell you the number of CEOs, both in the financial industry as well as in the healthcare industry, that said, I want to help you. How can I help you? And so I did a series of about 30 interviews with CEOs of healthcare companies that I had known for a long time and financial companies and some of our clients. And as I started those, I got to ask the same question. What do you regret? And what did you think you did really well? Hearing answers to that, that was so helpful. Then I have a series of dinners I have with some Boston-based CEOs where we talk about being a CEO.

• 45:59Speaker 02

  I belong to some organizations that also other CEOs and we talk about issues about being a CEO. There is a number of continuing education ways that I learn.

• 46:12Speaker 02

  Everyone has different businesses, but the issues that you deal with can be quite similar. You just learn from others.

• 46:19Ted Seides?

  When you went on that listening tour of other CEOs and heard about things they regretted and things they did well, what were some of the common patterns you saw?

• 46:28Speaker 02

  Two things across the board were unanimous was people felt lonely. So back to your previous question, how do you create a community and a network where you can share some of the things that get those off your mind? So I still work with my personal coach, my executive coach. So I've worked with her for 10 years. I find that incredibly helpful. And then peers who are also that I can talk to. But that was number one. And then the other thing is I took too long on talent. And I think I heard it from every single CEO. Every seat has to have the right leader because that's what slows up organizations. If you don't have the right leaders in those management seats, and then it has to happen

• 47:12Speaker 02

  at every layer. The people who are managing all your employees are the ones that they interact with. And they're the ones giving the messages and they're the ones setting strategy of those groups. And if you have someone who's not the right person, it can really slow an organization. That was unanimous across all of those interviews.

• 47:32Ted Seides?

  How did you act on that in an organization that's so methodical about the hiring process?

• 47:39Speaker 02

  Take the same philosophy, making sure that every one of my direct reports that you're constantly have the right person in the seat. Even in an organization as nice and kind as Wellington, that's really important.

• 47:53Ted Seides?

  And then on the other side, what did you hear from the CEOs about the things that they did well, that they had to keep doing well?

• 48:00Speaker 02

  I remember one large pharmaceutical company who had been very successful. One of the things he said to me, he's like, I've made four decisions that mattered. Four decisions that mattered over those 10 years. And I went through the decisions. And so that always sticks in the back of my mind. You're going to make a bunch of decisions, but in the end, it's back to the story of Wellington. It's like getting into research portfolios and getting into hedge funds and investing in fixed income and globalizing and going into privates. We've zigged and zawed, but those are the ones that have made Wellington what it is today. And that resonated with me.

• 48:42Speaker 02

  It's like you're going to make a few really important decisions. And so how do you get the energy and the time and the mindset to make sure when those decisions come, you're ready to make them?

• 48:53Ted Seides?

  As you look out over the next five or 10 years, what do you think Wellington becomes?

• 48:59Speaker 02

  I think Wellington becomes a firm. I would suspect that we're going to continue to be an excellent manager of long assets. We have an amazing base of research across sectors and the economy and governments that we will excel at that and being an excellent long manager. And you know, if you deliver 100 basis points, 200 basis points, that compounding effect is so important. Really, really focused on delivering alpha. I think we have every right to be a much bigger player in long, short investing.

• 49:44Speaker 02

  We have been in it for 30 years. We've spent quite a bit of time in the last five of investing in that business. And so I suspect that will become a bigger part of our business going forward. And we should be a great place. They fit into our culture quite well. And as long as we have people who want to collaborate and don't have big egos and want to learn from others. I hope and know that if I look at our roadmap for privates, that we will have more capabilities on private investing. And I'm a big believer that We might be going through a cyclical part of the privates market, but secularly, I do think privates are a greater part of the economy,

• 50:29Speaker 02

  both on the credit side as well as on the equity side. And so making sure that where we can really add value on that, that we continue to grow those capabilities.

• 50:41Ted Seides?

  So Jean, as you step back and think about the takeaways of what's made Wellington such a great training ground over the years, what are the most important factors that you summarize as this is what's made this place great?

• 50:55Speaker 02

  It goes back to the fact that we've earned the trust of our clients because we've delivered very competitive returns over long periods of time. We're a stable organization and that has allowed our clients around the world to trust us, that we will be there for them in the good times and the hard times. What has allowed that to happen, I think, is our private partnership model. I think it's our ability then to attract talent, people who want to be owners of the business. So it's sort of a flywheel of the private partnership model. The culture has allowed us to hire great people over time and those great people work well together.

• 51:39Speaker 02

  They continue to earn the trust of clients and together they figure out what's the Wellington of the next five or 10 years. And so I think that's the flywheel that we have to keep continuing, making sure we're bringing in great talent, both a very early career and more experienced talent and that we can have a thriving business over time.

• 52:01Ted Seides?

  Jean, thanks so much again for coming on and sharing your incredible journey in that of Wellington.

• 52:07Speaker 02

  Thank you, Ted.

• 52:09Ted Seides?

  Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com, where you can join our mailing list, access past shows, learn about our gatherings and sign up for premium content, including podcast transcripts, my investment portfolio and a lot more. Have a good one and see you next time.