It’s no secret that the financial services industry lacks diversity, whether you’re looking at gender, race or any other measure. In this regard, BOK Financial’s Carrie Clasen Porter (right), Liu Liu (left) and Melissa Lord (center) are a real breath of fresh air.
They’re not only the cornerstone of manager selection and allocation at the Tulsa, Oklahoma-based bank, but they’re also role models for aspiring women in the male-dominated world of wealth management. Porter heads up the manager research and due diligence team, while Liu oversees managed strategies and Lord leads retirement consulting.
As the heads of teams that contribute directly to the bank’s discretionary, consulting and advisory services, Porter, Liu and Lord have seen firsthand how diversity can add value to a firm, as well as the extent to which leadership and collaboration between like-minded women can help the industry to attract talented people of all genders and backgrounds.
But that doesn’t mean things have always been straightforward.
‘When I was hired out of the internship program as a portfolio manager, I was the first female portfolio manager within our group,’ Lord recalls. ‘It wasn’t intentional. I think it was just the way the industry was at that time. Most times, I was the only woman in meetings.’
Although being a woman has never been an issue for Lord during her 17-year tenure at the firm, she has had to overcome unforeseen challenges as a working mother.
‘There were very few working mothers that could serve as a mentor or a role model for me, someone who understood how to juggle traveling and working long hours when you have little ones at home. I had to figure that out on my own,’ she says. ‘But now I enjoy being someone that other young working moms can look up to and talk to as they’re facing the challenges of trying to do it all and juggle all of those responsibilities.’
Things are easier today. Lord says that she is fortunate to have had plenty of supportive co-workers and bosses over the years, including Porter and Liu, who are also working mothers.
‘I’m pleased that the organization has provided the flexibility for me to be both a working professional and a working mom, and the opportunity to do the best of both. We have to continue to encourage more women to come into the industry and be there to support each other as well,’ Porter says.
She adds that while women do bring a different set of skills to the table, diversity goes well beyond gender, including different backgrounds, experiences, interests and passions.
‘That’s what allows the three of us to work together and add value to our team – not just as women, but as three different women with unique interests, backgrounds and perspectives,’ Porter says.
Narrowing down the options
Together, Porter, Liu and Lord oversee a $22 billion discretionary platform made up of 365 approved managers. That includes 125 active and 100 passive mutual funds, 100 ETFs and 40 SMAs. In addition to financial advisors, the platform is used both by Liu’s team to manage the firm’s own collective investment trusts and by Lord’s retirement consulting team to provide 3(21) co-investment fiduciary and 3(38) full-investment fiduciary services to defined contribution retirement plans.
The team’s research is also used in the wealth management division’s private and institutional units, as well as BOK Financial Securities, the bank’s brokerage division.
As such, the trio focuses on meeting these different needs, considering from the outset how and where manager picks might end up being utilized within portfolios and accounts.
‘After outlining the mandate, we then get input from Melissa. If it’s regarding wealth portfolios, we consult with Liu too,’ Porter explains. ‘We then proceed with our initial quantitative screening, which is consistent across roughly 80% of our searches. The screen includes a track record of at least three years, a manager tenure of at least three years and at least $300 million invested in the strategy.’
The team then runs additional quantitative screens to evaluate performance relative to a strategy’s benchmark and its peers over rolling three- and five-year periods. It also evaluates performance in each calendar year and goes on to examine performance over specific periods within a cycle.
On the qualitative side, the team evaluates the repeatability of the process and the likelihood that a manager will deliver similar results in the future.
‘We interview the managers, and we focus on understanding the investment decisions and who makes them, the firm’s culture, its investment philosophy and the process that drives that strategy. We also consider the resulting portfolio characteristics, the performance dynamics and the sort of risk profile we should expect,’ Porter says.
‘We try not to rule something out based on performance, because you really need to understand the strategy, the investment philosophy and the approach before you can understand and discern what performance dynamics you would expect over time.’
Finding the right match
Within this qualitative research, the team looks for a number of different traits.
For Porter, consistency of performance is key. ‘To use a baseball analogy, we prefer managers who hit singles and doubles, rather than those who hit homeruns but who strike out often too,’ she says.
Lord agrees, but adds that she needs to be certain about a strategy’s performance capabilities before it makes it onto the platform.
‘How do you know whether or not they’re going to be able to achieve whatever they’ve achieved over the past 15 years again over the next 15 years? It goes back to the question of how you discern the good from the bad,’ she says. ‘How do you distinguish between the lucky ones and the ones that are actually solid investment managers with a sound, repeatable process?’
Liu adds that the team’s ability to understand a given strategy can also make or break a hire. ‘We all know that active managers – like anything really – go in cycles. They come in and out of favor, and the only way you can stay with them when they underperform is to be able to understand the strategy,’ she explains. ‘If you don’t have the patience to stay with an active manager, it’s really best not to use them at all.’
While consistency and clarity are paramount for the team, Porter adds that the level of passion demonstrated by the manager can also play a significant role in the selection process.
‘If you are talking to a manager and they don’t show passion, you have to wonder what makes them go to work every day and do their best on behalf of our clients and all of their investors. If you don’t see that level of passion, it makes it that much more challenging to have a strong conviction in what they do,’ she says.
Porter recalls one unexpected success story, in which an emerging markets manager with both consistency and passion ended up achieving top-decile performance. The manager has added about 200 basis points of excess return since being hired about eight years ago.
‘At the time, the manager had a track record of only a few years. He had a very young team, and we definitely felt that he was an up-and-coming manager who was still building out his team,’ Porter says. ‘We liked what he was doing, and while he did not have a lot of performance history, he had done very well and was passionate about his research. I’m drawn to those characteristics – a focus on the fundamentals, a passion for what they’re doing and a level of intellectual curiosity.’
Room for improvement
While the team is patient with managers who exhibit short periods of underperformance, certain traits will never be tolerated, even if the manager has a great track record.
‘I find it difficult if managers won’t admit to mistakes they have made and instead find excuses. Those are typically more challenging for me to accept, because I think you should learn from your mistakes. That’s how you improve your process,’ Liu says.
Porter agrees. ‘I dislike managers who are defensive about their underperformance. It’s a turn-off and it tends to weigh on my conviction in the long run,’ she explains.
This trait reminds Porter of one disappointing meeting years ago, when she had the opportunity to meet with a manager she had been watching since the start of her career.
‘I prepared for the meeting and had a list of questions to discuss, but the manager had his own agenda and did not answer most of those questions. That was probably one of the worst meetings I’ve ever had, mostly because I had high expectations going into it,’ she recalls.
‘I think the meetings that are most challenging are when managers are not transparent or haven’t really done their own analysis to understand what’s not working across the portfolio.’
It’s clear, then, that this trio has set – and met – some pretty high standards. Manager picks need to do the same too, else they won’t be making it past these three impressive women.