Emmanuel Roman, the CEO of Pacific Investment Management Co., said on Thursday he doesn't worry about competing with other money managers - It's technology and new entrants faciliating investments in the market that he is keeping an eye on. "The real question is what are other people doing? What is the ecosystem doing and how will we compete against new entrants? That’s what keeps me up at night,” he said.
In an interview with Eric Jacobson, a senior manager and research analyst for Morningstar, Roman said the firm was trying to make itself "bulletproof" from that competition by spending more money in recent years than it has previously on trading technology, middle and back office functions and cybersecurity.
Roman made it clear that he sees technology as a major factor to the firm's ability to find alpha in the fixed income markets. He foresees quantitative analysis and data models behind more decisions around investments and using automated trade execution to acheive an edge, though he said he was not interested in being a high-speed trading shop.
It's not just about dedicating time and money though. Success–and a competitive advantage– is also dependent on hiring the best people, which Roman admitted has been a challenge for PIMCO. Like other financial services companies, PIMCO is fighting for a small pool for top technology professionals who often choose to pursue careers in Silicon Valley over finance.
To help attract them, the firm is opening a new office in Austin, Texas that will have about 200 employees before the end of the year, including many technology professionals.
“I think you will literally see the landscape changing and we need to be prepared for this,” Roman said.
The executive said PIMCO is also trying to make its workforce more diverse. The way people think about and solve problems is conditional on their past history so it's important to have unique employees from different backgrounds and places, he said.
“I really believe that the argument for diversity is that it is a plus from a business standpoint," Roman said. “Listen, I’m a French guy...they were willing to embrace someone who thought differently.”
Whether investment decisions were made by people or machines, Roman said an active investment strategy is better for fixed income markets. "Passive index investing makes no sense" in the bond markets, he said. Indexes have high turnover, and active managers can use derivatives and other strategies to make outsized gains in the bond markets.
Roman also defended the accusation that PIMCO's fees are too high. They are largely decided by an independent board, he said, and are fair given the performance and value of PIMCO's funds, he said. Clients are also largely unaware of the investments the asset manager is making in itself, Roman said. “That has to be reflected in the pricing one way or another.”
