When asset management employees spill the beans
Are more grievances being aired in public?
A month ago, a young woman named Brittany Pietsch became a global sensation when she posted a video of herself getting fired.
In the video, she is protesting the injustices of the process that led to the decision to fire her, and the way it is being carried out. All this had nothing to do with investment management.
Until this week that is, when tiny versions of it played out all over the place.
When outsiders look at a company, all they see is the shiny façade. Behind it, always, are just groups of people, who want things and don’t always agree. You have tensions, quibbles, sometimes fights. But the barrier between inside and outside usually remains solid. Then, sometimes, it becomes more porous, and things leak out.
This week, let’s dig in to some of what’s been leaking – and why we are seeing all these leaks now.
The headline that first grabbed my attention was the Financial Times's Jupiter’s compliance team blocked crypto ETP investment. Investment Week ran a similar angle with Jupiter forced to divest crypto ETP holding on compliance team demands.
The short of it was that Ireland's regulator prohibits Ucits from buying crypto stuff. A Jupiter fund that happens to be domiciled in Ireland bought crypto stuff, and compliance spotted the issue. But there were other ways to tell this story, right?
The baddie could have been the regulator (‘Poo! They won’t let us buy crypto!), or the portfolio managers (‘Manager neglects to memorize Ireland's crypto regulation’).
Yet somehow the juiciest take was that this was a fight between Jupiter and… its own compliance team? Who seem to have done their job? It only makes sense if one believes it was compliance stopping the managers from diligently serving clients by buying crypto stuff. Judging by those headlines, someone must believe this.
Hardly qualifies as dirty laundry, though, does it?
Generally, people in asset management prefer not to air their grievances in public. The last thing you’d want to do is tag yourself as a troublemaker, because asset management used to be rock solid; once on the inside, employees could expect a reasonably cushy career, moving from one house to another.
Recall Odey Asset Management, which closed last year after thirty two years. Thirteen female employees blew the whistle – the news diligently noted they were junior. Then, seven more women had stepped forth to share their stories, by which point the reputational damage was just too big. For thirty two years the calculation was simple: it’s better to shut up.
It’s not a coincidence, I don’t think, that Pietsch filmed herself just as the tech industry was deflating, or that the allegations against Odey came out after their AUM had shrunk substantially, or that this crypto kerfuffle is coming out just as Jupiter is suffering massive outflows.
Consider another case this week, when it leaked that Citigroup will now begin tracking how often its private bankers call clients. Private bankers must now turn in call records, including details of each conversation and what was discussed. Other private banks encourage call logging but apparently have not made it a strict rule. Then again, Citi's private bank saw its revenue fall by 17% in 2023.
Does it ultimately do any good that workers are more willing to air their resentments? Brittany Pietsch says she doesn’t regret standing up for herself, but she will also need to navigate her choice for a while. In all the above stories, the employees are clearly better off having remained anonymous.
But sometimes, leaks end up doing something. This week, the FCA ordered more than 1,000 banks, insurers and brokerages to report how many sexual harassment, discrimination and other non-financial misconduct cases they have recorded since 2021, and how they have dealt with them.
“Lawmakers have said they were appalled by the scale of the problem in finance after 40 women from 30 financial firms told them anonymously about how victims typically are forced to move teams, leave or are silenced with NDAs.”
Parts of the investment industry are going through some tough times right now, this much is obvious. Far less obvious, though, is the upside:
More employees will likely open up abut fraught internal practices. And maybe, just maybe, the industry will be better for it.
Treasure Corner:
Continuing with the theme of leaky internal operations, Norway's sovereign wealth fund decided it's going to stay ahead of the curve by leaking the dirty stuff itself.
As reported by IPE, Norges Bank Investment Management (NBIM) agreed to have an academic anthropologist study its culture and publish the findings.
The paper is titled Anthropological gaze, stories, and reflections on NBIM culture, (by Tone Danielsen, of Kristiania University College). It was completed in December for internal use at NBIM, and released publicly last week.
Nicolai Tangen, NBIM’s chief executive officer – and no stranger to the power of social media – posted the full research on LinkedIn, and said:
“One year ago we invited an anthropologist into the fund to have an inside look. The thinking was: if it’s good, then it is good. If it’s bad, then it is good, because then we know what to improve!”
For her part, the anthropologist didn't mince her words. Among the issues raised were a lack of long-term strategy, poor communication culture and abrupt changes. An employee named only as Kristin is quoted saying:
“I worked (in) many places, but never a place where the changes are so abrupt as here. We reorganise all the time.”
Also Happening
“Rising political tensions” are usually bad. But not for Norway! Almost as a side comment, the above study mentions the increased workload on NBIM staff due to the war in Ukraine and high oil and gas prices. Apparently, NBIM took in almost the same amount of money per month in 2022/23, as per year previously, according to the report. Oil plus a stable government is clearly a profitable combo.
If you haven't got oil, maybe try selling shares in nature? The New York Stock Exchange considered listing "natural asset companies," which sell licenses to ecosystem services. "Natural capital accounting" aims to give landowners a way to extract money from their land if they enhance natural benefits.
For now, the proposal's been canned, following fierce resistance from the political right. But conservationists are hardly convinced in secondary markets being the solution here.
Active ETFs are not just on the rise, they are on the rise for different reasons. In Canada, they make up 30.7% of the ETF market, in South Korea 29.4%, and in Australia 11.8%. But why?
In Canada, it followed 2016 regulation requiring advisers to disclose fees to clients. Whereas in Australia, it's because platforms charge mutual funds fees to be listed – but not ETFs.
Then there was that added kicker: a fresh start. As put by a strategist at Global X:“If you are a mutual fund with a long track record and you have underperformed, if you launch an ETF you get a fresh slate. That provides a way to wash away underperformance.”