The Role of Active Management with Jean Hynes, Chief Executive Officer, Managing Partner & Portfolio Manager, Wellington Management.
Moderated by Jennifer Prosek, Managing Partner, Prosek Partners.
MODERATOR
SPEAKER
Jean Hynes
Chief Executive Officer, Managing Partner & Portfolio Manager
Wellington Management
Jennifer Prosek
Founder & Managing Partner
Prosek Partners
TIMESTAMPS
EPISODE TRANSCRIPT
Jennifer Prosek: (00:07)
Hello, everyone thrilled to be here with Jean Hynes. The CEO of Wellington, Jean is not just the CEO of Wellington, she's a great investor. One of the greatest healthcare investors in the world. She's also a mom of four daughters. We were chatting outside and I was saying, you know when you're really successful, when your children become great citizens,.she has great four great citizens that are in the working world and in college. So we'll talk about all those things, but Jean, first, I'm going to ask you to tell us a little bit about your journey. We graduated in the same recession. Your path is a little untraditional. You entered Wellington out of college as an administrative assistant. Tell us about that.
Jean Hynes: (00:49)
Thank you, Jen. It's really great to be here today in person and live, feel so great. So I am a daughter of immigrants. My parents immigrated from Ireland in the 1950s. My father was a bricklayer. My mother was a homemaker and I was lucky enough to go to Wellesley College Pretty much on a full scholarship. I didn't know anything about the stock market. Anything about stocks. In 1987, when the crash happened, that was my first introduction to what the stock market was. So I found my way to Wellington after graduation, which was not a great year as you know.
Jennifer Prosek: (01:28)
I do know.
Jean Hynes: (01:28)
To find a job, because I wanted to do research and I could verbalize that, but the asset management industry was really small in 1991.
Jean Hynes: (01:37)
It wasn't really a prominent industry. I started as an administrative assistant and there was just a terrific recruiter. I wish I could go back and find her and thank her, because she said, "This is a special company. You're going to have tons of opportunities. Don't worry about the title." And so I took the job. I was probably doing administrative work for a couple of years half the time, in research half the time. One of my mentors and bosses said, I open mail faster than anyone else. And that really was because I was very interested in the research part.
Jennifer Prosek: (02:11)
Excellent. Wellington is a $1.4 trillion firm with a storied culture admired around the world for that culture private partnership. Tell us what's special about Wellington. What kept you there? And we were chatting in the hallway about a new recruit who actually contacted you after an interview you did. Tell us what she said about Wellington after her initial experience.
Jean Hynes: (02:35)
Wellington's a private partnership. The private partnership is 41 years old. The company goes back longer almost a hundred years now. But as a private partnership, I think being a private partnership in the asset management industry is a gift to be able to really think long term and not worry about the P and L statement in any one year. So I really do think it really aligns us with our clients. The interesting thing about our partnership structure is now we know it has scaled to $1.4 trillion in assets. It's scaled as we've globalized in terms of having partners outside the US. I don't think that was evident. It's a merit based partnership. So there's a lot of trust put in place by our partners and the three managing partners to treat everyone very fairly. We just have a tremendous structure to be able then to operate in the asset management industry.
Jean Hynes: (03:34)
And I think that's helped us with a couple of things, Jen. I think that's helped us be really long term oriented and long term focus with talent. Be very aligned with our clients. Take long term timelines. Allow us to invest counter cyclically at times. I'll give you an example. In 2008, after the global financial crisis, many firms were moving out. We had just started our expansion, in 07 in London, in 08 in Singapore and Hong Kong. And we actually leaned in instead of taking the resources out after the global financial crisis. So it's just allows us to be very countercyclical and invest for the long term and that partnership structure.
Jennifer Prosek: (04:15)
This is an alternatives conference. So I would remiss if I didn't ask you about your alternatives portfolio and how important is that to Wellington these days?
Jean Hynes: (04:24)
So we've been in the alternatives business, if I go way up in the balcony since 1995, and that was really driven by talent, talent that wanted to run long short. So, for the first 20 years, that's been about long short, liquid long short. In the last, since 2015, we've also been in the privates business. So we have a $32 billion alternatives business, both liquid alts, as well as privates. And that's an area of strategic investment for us. One that we're expanding.
Jennifer Prosek: (04:55)
Okay. And you are an investor, like I said, you run one of the largest healthcare portfolios in the world. Curious if you'd give us a sense of where you think the healthcare world is going. There's been so many innovations. And also along with that, what makes a great healthcare investor or investor in general?
Jean Hynes: (05:16)
I think this is the most exciting time to be a healthcare investor.
Jennifer Prosek: (05:23)
Certainly.
Jean Hynes: (05:23)
And the reason I say that, I think there's innovation. The healthcare industry has always been about innovation. It's been one of the rising of the middle class, the demographics has been one driver and then innovation has been the other driver. And in some sense, both of those are accelerating with the aging of the population, as well as middle class and many of the emerging markets really accelerating volume growths around the world. And then with innovation accelerating in both the biopharmaceutical industry, and I'll get back to that, as well as in the healthcare delivery. I think in the next 10 to 20 years, how do you deliver healthcare to an aging population in a way that really drives outcomes?
Jean Hynes: (06:08)
And I think that will be enabled by digital. Data will come to healthcare in a way that is not yet obvious and will help deliver healthcare. And there'll be lots of winners and losers from that. I think that will be a fascinating time to be a healthcare investor. In the the biotech biopharm, I like to call it biopharm, because I do think it's one whole continuum of research. It is the most exciting time in my 25 plus years of covering this industry. And the reason is all based on the ability to understand biology at a level that was not even possible.
Jean Hynes: (06:48)
So just to give you a date, 20 years ago, we had the first genome was sequenced and the genome just allows you to understand biology at a deep level. It was only really in 2010 where you had a machine that allowed the companies to be able to sequence biology. And it's really only been in the last three or four years where you can do that at mass scale. And so I think we're just in the very early stages of 20 or 30 years of dramatic changes in health.
Jennifer Prosek: (07:20)
Is there anything that you're particularly excited about in our lifetime or the lifetime of the audience members? What do you think is going to be a really big bang for us all before?
Jean Hynes: (07:33)
It has the potential to happen across all health. But if you look at where the industry is investing, it's particularly right now, because cancer is a mutation based disease. I think in the next 10 or 20 years it'll be a large benefit in how we treat cancers and it will no longer be a breast cancer or a lung cancer. It'll be a mutation driven cancer. Cause we'll understand those mutations.
Jennifer Prosek: (08:00)
And going back to you as a young investor, young female investor in healthcare, was there a moment or a bet you made that you were like, "All right, I'm good at this." Can you remember a moment?
Jean Hynes: (08:13)
I would say, when I think about my career in the 1990s, that was the time to really learn how to be a great researcher. And Jen was asking me earlier, "Was there a moment you knew?" And I would say in the late 1990s, one of the big bets we had was this company called Immunex. It's now… was purchased by Amgen. And they discovered the first drug for rheumatoid arthritis, like the first disease modifying drug that was safe for rheumatoid arthritis. and I just remember the research that led up to the insight that this was going to change the standard of care. And so when I look back now, that's a 30 to $40 billion category of drugs. So good bet. That was a good bet.
Jennifer Prosek: (09:04)
Excellent. And again, I would be remissed to ask, everybody's going to ask you this, you are a female, you are a young female, probably in a world of many males. Did that ever down on you in a big way? And what do you tell your four daughters about getting ahead in the world?
Jean Hynes: (09:24)
When I joined Wellington in the 1990s, we actually had some very strong female partners on the business side. So I had some really great internal role models, but on the investment side, there were not many females. There were very, very few. I had just some tremendous male mentors. So Ed Owens, who I worked with for over 20 years, they call him the Dean of healthcare. He really started the healthcare portfolio investing as it is known today. He started running the Vanguard Healthcare Fund. I had tremendous, I had gender blind mentors, I will say. And I do think investing is so quantitative versus qualitative, that it is like such a terrific field for women.
Jennifer Prosek: (10:15)
Yeah. Tell us more about that. Because the narrative out there is that we're losing female investors. It's really hard to find, it's really hard to keep them, but you always say this is a great profession for women. Why?
Jean Hynes: (10:27)
I'm not sure we're losing female investors. I think we're not attracting them. I think we have to do a much, much better job of attracting young women into the field of an actual investing. And I think role models are so important. And like I've said for the past five to 10 years in my firm, I can't be the only one and we need 20. And that's what we've deliberately been doing, increasing our numbers out of college, as well as attracting terrific female talents across both equity and fixed income and long short. I did it without having the role models because I think I was just incredibly lucky to have tremendous mentors, but I do think, seeing someone do it allows you to, and I hope that there are many, many young women out there that say I can be CEO now. Like that's the next thing.
Jennifer Prosek: (11:27)
Absolutely. Well, you told me you were contacted after a Bloomberg experience by a woman. Who was an investor and also inspired by you and now you're hiring her. Which is really a great-
Jean Hynes: (11:43)
Sometimes it makes me, I told Dan, it makes me a little uncomfortable. I'm not uncomfortable being up on stage, but it's not about me really. It's about how do you inspire the next generation? And so I'm willing to put myself out there to say, you can do this too.
Jennifer Prosek: (12:00)
That's great.
Jean Hynes: (12:01)
So that's one of my goals and-
Jennifer Prosek: (12:02)
So you have been CEO for how many months?
Jean Hynes: (12:04)
I've been CEO for not quite three.
Jennifer Prosek: (12:06)
Okay. Well, this is an unfair question, but I'll ask it anyway. What's been the most difficult thing running the company versus running your wonderful portfolio?
Jean Hynes: (12:17)
So one of the interesting things about, and Jen knows is I loved, I had no aspirations about being CEO. I did have aspirations about becoming a managing partner at Wellington, because that's a very talent driven, people driven position. And that was a part of me that I thought that was missing. So I became a managing partner at Wellington in 2014. And I thought I had the best of all worlds. I was investing in biopharma. I had ran three long short strategies, ran the Vanguard Healthcare Fund. And then I was a managing partner. And I thought, that's how I would finish my career.
Jean Hynes: (12:55)
And as I worked really closely with our CEO, Brendan Swords at the time, it just became a parent to me that the skillset was similar. So the skillset of connecting dots, connecting dots on talent and connecting dots on strategy, making decisions with a lot of ambiguity, not black and white, the ability to take risk, that those were all things that I saw him doing. And in areas that I'm like, well, I can do that too. And I would say the thought of becoming CEO gradually, gradually snuck up on me over a number of years. And I would say I've been preparing for this. To get to your answer, I've been preparing for longer than the two and a half months that I've been CEO and we've had a transition that's been almost a year.
Jean Hynes: (13:55)
And I've just been studying Wellington as if I would study a company. And I would say, I know Wellington better. Maybe that's been an insight to me, like after spending the last year really studying Wellington, I know it better, even though I've been there for 30 years. And I've been a managing partner for seven years. So, that would be one observation. I would say a lot of people told me once you become CEO, it feels lonely. I don't think while being a CEO at Wellington is lonely because we have the managing partner structure. We have the partnership structure. There's a lot of support, but there's already been times where everyone's looking for you to make a decision.
Jennifer Prosek: (14:36)
For sure.
Jean Hynes: (14:37)
That's probably been in the last couple of months. There's been a few where on the screen, they're looking what do you... You have to say, let's go move forward. Let's do this.
Jennifer Prosek: (14:47)
Sure. And I'm sure you feel a certain amount of pressure on the legacy. I mean, this is a really private partnership, storied culture. You have to drive the ship now. Three months and totally unfair, but if there's a legacy you want to leave on Wellington and, thought of what that would be?
Jean Hynes: (15:05)
So if I look out towards the end of my career and I've been at Wellington for 30 years, I just had my 30th anniversary.
Jennifer Prosek: (15:12)
Congratulations.
Jean Hynes: (15:12)
And any time, let's put a 10 year time mark that, probably going to be plus or minus that. But I would like to see us a couple of things, be more diverse. I think we should be, our culture, we have such a strong collaborative culture. We should be a great place for diverse talent of all, females, Latinx, black heritage talent. We should be a talent magnet for diverse talent. So that would be an area that, it's not going to be in 21 or 22, it's going to be over the next decade. We have gone from being all Boston based, 15 years ago we were a Boston based firm.
Jean Hynes: (15:58)
And now we have, almost 30% of our employees are in EMEA and APAC. That's going to continue. So, will we be 40% global by the time I retire, as we continue to find talent in all corners of the globe and serve our clients in all corners of the globe? Those are probably two. And then just really importantly, we're only going to exist if we have the talent and we deliver investment performance. And that's going to be one of my key initiatives. As the markets are changing so much, how do we continue to evolve and help our investors? Whether they're a long only investor or an global industry analyst like I was, or a private investor, how do we continue to help them with skill sets, technology skill sets that help them evolve and deliver for our clients? That's going to be an area, that I think I'm being an active investor, that's an area that I think is very well suited particularly to my skill sets.
Jennifer Prosek: (17:00)
Great transition to active management, because I think this whole subject was supposed to be about active management. We have a few minutes left, we've got a lot of hedge fund and private markets investors out there. Talk about your belief in and active management and any advice you have for folks in the alternatives world or insights you have in the next few years.
Jean Hynes: (17:22)
If you take this step back and say, what do our clients want? And with our clients, I mean all the asset owners around the world from individuals to governments. They want their assets to grow. And I think since the global financial crisis, in a way that is more risk adjusted. I think active management has a vital role to play in that. When you think about interest rates, where they are in 2021 and expected returns from fixed income, where the stock market is now, I'm not going to predict where the stock market is. I really do believe that active management, if we can deliver alpha hundreds of basis points on equities and 50 to 100 on fixed income and the ability to find value and parts of the economic growth that may be private, those are all going to help our end clients.
Jean Hynes: (18:19)
I think active management has a really vital role. And maybe one last thing we haven't touched on, I do think, ESG and sustainability is going to dramatically change the structure of the financial markets. It's an area that we are investing in. I think it's an area of a lot of complexity. And I think that will be very well suited for active, for active management as well.
Jennifer Prosek: (18:45)
Okay. And alternatives, any last thoughts?
Jean Hynes: (18:48)
On alternatives, for us, we are building, so we've had a long short equity. We're building privates. I think there's just a lot of value creation in the privates. It's very aligned with our very long term investing structure at Wellington. And that's an area where if we can find talent, we're going to continue to build platforms in the private side. And I think on the liquid alts side, finding talent to come to our platform, and I'll tell you about the story. We have a new joiner who just emailed me this morning, I'm catching up with her in Asia tonight. And her observations about being in here for a few weeks is, the open collaborative research platform is astounding. How do we take that? How do we take that platform and really attract talent and put it together in a way that helps our clients?
Jennifer Prosek: (19:44)
Well, we'll be watching you. Thank you all. Thank you to SALT for having Jean and I on stage. We're thrilled to kick off this unbelievable conference. Thank you all for coming.