‘Lessons from the last 40 years for the next 20 years’ was Alan Brown’s presentation focus at the MFin City Speaker Series where he shared key ideas from a successful 40 year career in asset management.
Alan has experience leading two of the most highly respected investment businesses in both the UK and the US, with his most recent position being main board director and Chief Investment Officer of Schroders and having held previous high profile roles at State Street Global Advisors and State Street Corporation. He has also been awarded Chief Investment Officer of the year on three occasions, having worked extensively on investment strategy and business development throughout his career.
Alan’s talk to our class covered a number of topics including the imperfect use of financial models in explaining the market, portfolios not reflecting known knowns, the similar treatment of upside and downside risks, the overutilization of time-weighted returns, behavioural biases in investment research, recommendations and actions, and the unintended consequences of regulation.
His talk challenged conventional wisdom and highlighted the imperfections in the textbook knowledge that we’ve learned thus far, showcasing the extra dimension that finance practioners bring to the programme. Specifically, we had been cautioned by several industry practitioners on the limitations of the Capital Asset Pricing Model (CAPM), which is based on rational investor behaviour, normal return distributions and the use of empirical evidence to explain the future. Alan argued that the CAPM model was developed many years ago under different circumstances, and thus may not be as relevant or applicable now which was an interesting and enlightening point of view.
We also liked that he highlighted the limitations in the conventional methods of measuring risks and returns: the former using volatility and the latter using time-weighted returns. Alan proposed the use of money-weighted returns, which are more difficult to compute but give a better indication of performance. We found him to be an interesting and engaging speaker and appreciated that he was open to sharing his knowledge and experience with our class.
After the presentation, a select group of us proceeded to Trinity College for a three-course networking dinner with Alan, accompanied by our MFin Director Simon Taylor. During the private dinner, we had the opportunity to introduce ourselves, share our thoughts about his presentation, continue the discussion and ask questions — all against the backdrop of a beautiful, candle-lit dining room at one of Cambridge’s most famous colleges. Definitely a night to remember.