A Conversation with Fatima Dickey
Studies often suggest women portfolio managers take a more disciplined approach to risk. In your experience, is that difference real or does it come from the incentives and scrutiny women face in a still male-dominated industry?
In my experience in the world of money management women do face more scrutiny. It is hard to put the finger on it sometimes but I can think of few examples where women made out of consensus calls in public about various things, were wrong, and those calls really kind of tarnished their reputation. On the other hand, our world of investing is littered with people making calls that don’t pan out and I think men tend to get more of a pass on not being right about them and the wrong calls do not ‘stick’ to their reputation to the same extent.
In terms of approach to risk I can address my own approach to risk which I do feel is risk aware and disciplined. However I am not at all afraid to be different and take roads less traveled. I create portfolios that look way out of consensus, if you define consensus as running closely to S & P 500. I invest for the long term and for me what matters is doing that in diversified way with the best people and best business models I can find around the world.
My own risk guardrails are defined by my strategy which I call “Owners And Dominators". And I see biggest risks therefore as absence of those things. To me risks are not about being different but they are about investing with unreliable people, investing with bad organizations and investing with businesses that face too much competition. I feel safer in situations where for me a position in the portfolio can harm it only to the extent of its limited exposure to the whole ( 3-5%). But I know that for the CEO it is their baby ( because he perhaps started the company, it is all or most of his wealth, he is an owner & operator).
If this is the case, they will care, nurture, watch out for it like they would for a baby. They will work to prevent risks that can be prevented, they will design the organization so that it can achieve ambitious goals, they will nurture the right culture and spend a lot of time on risks. This is why I feel my investment risks are lower, not because I am quicker than the crowd to sell when things get tough or avoid bad investments but because I trust the incentives of my selected owner operators. When risks do materialize they tend to act decisively to protect their baby. I know I can count own them to be committed to solving whatever issues arise. I am not sure if my strategy has a lot to do with the fact that I am a woman manager but I do know that my approach and its application depends on valuing things that are not always easily quantified that cannot easily be put into a number and perhaps that does have something to do with the fact that I am a woman manager. I put a lot of value on who the owner operators are: I try to find them, get to know them and then embark on a long term investment journey with them. I feel that I value things that are hard to quantify and yet very valuable.
The numbers suggest women-led funds often outperform, so why does the capital allocation gap persist? Is it a pipeline issue, a network issue, or something structural in how institutional allocators make decisions?
I have been a portfolio manager now for 20 years and still don’t know! Looking at my own experience, when I was being evaluated by institutional investors, it was usually young men who do the questioning. It is a lot of superficial evaluations that feel more often not that satisfactory from my point of view. Being judged by young men who I often feel resonate better with other men, feels like a barrier. They are the gate keepers in many of theses situations and I found it harder to connect with them as I am sure they find it harder to connect with me, than with another male money managers.
What’s the best investment call you made when consensus was clearly pointing the other way — and what signal convinced you the crowd was wrong?
Out of consensus calls are very satisfying because besides getting it right there is a pleasure of seeing the strategy work as it is supposed to. For me, those instances have to do with for example assessing correctly that the Owners I teamed up with, do in fact act decisively and smartly during the times of stress or crisis. I have seen it so many times, the market not appreciating the Owner aspect and their added value precisely during such times, even if a particular Owner had a well recognized track record in the past. For some reason, while everyone understands the value of great management, in times of stress even best Owners can be doubted and undervalued.
For example, Brad Jacobs is well known as company builder with great track record. When we owned his company XPO Logistics few years ago, at some point it lost a big customer and the stock crashed 50%. Brad did what we so often see with owners —he acted decisively. He bought 20% of shares outstanding, probably biggest amount at any time public company decided to buy at once. And of course, stock recovered and in time company also gained plenty of other customers who filled the gap ( which he assured it would without any problems) and the company continued on its journey. During stressful times or a crisis market or crowds “forget” that company has an amazing owner and instead they tend to focus entirely on the nature of the crisis —while we focus on the owner and what he does, what he says. After all, we feel we hired the Owner to be the expert in whatever area, not us!
While the market is reading signals emanating from the issues that arise we are reading the signals coming from the Owners. This is why I like my strategy because the signal is the Owner himself and it is strongest during times of crisis or stress and by focusing on that signal while the crowd focuses on the particulars of the various business complications that arose, allows us to make better decisions. And in that case, as with many others, we were right and the crowd later too realized that Brad Jacobs deserved his reputation and track record and that yet again he solved another crisis!
This is why I am focusing on finding the right owner operators and time after time I realize that their value in the markets tends to be under appreciated — perhaps because it cannot really be quantified. But as in real life most valuable things cannot be quantified. I think that being a woman, perhaps I understand that little better? It is not all about numbers!
