Brian Singer & Greg Fedorinchik 
Investment Leadership and Portfolio Management 
The Path to Successful Stewardship for Investment Firms

An industry leader candidly examines the role of investment
leadership in portfolio management

Investment Leadership & Portfolio Management provides
a top down analysis of successful strategies, structures, and
actions that create an environment that leads to strong macro
investment performance and rewarding investor outcomes. By
examining how to manage and lead an investment firm through
successful investment decision-making processes and actions, this
book reveals what it will take to succeed in a radically changed
investment landscape. From firm governance and firm structure-for
single capability, multi-capability, and investment and product
firms-to culture, strategy, vision, and execution, authors Brian
Singer, Barry Mandinach, and Greg Fedorinchik touch upon key topics
including the differences between leading and managing; investment
philosophy, process, and portfolio construction; communication and
transparency; and ethics and integrity.

* Leadership issues in investment firms are a serious concern,
and this book addresses those concerns

* Details the strong correlation between excellence in investment
leadership and excellence in portfolio management

* Written by a group of experienced professionals in the field,
including the Chairman of the CFA Institute Board of Governors

Understanding how to operate in today’s dynamic investment
environment is critical. Investment Leadership & Portfolio
Management contains the insights and information needed to make
significant strides in this dynamic arena.

Table of Content

Preface xi

Acknowledgments xvii

Chapter 1 Characteristics of Successful Asset Management Firms 1

You Can Take the Boy Out of the Culture, but You Can’t Take the Culture Out of the Boy 3

Size Matters, but Not in the Way Most People Believe 7

Governance: The Guardian of an Investment-Driven Firm 12

Fostering Collaborative Freedom: Everybody is a Peer 19

Integrity: An Unquestionable Characteristic of Success 23

Conclusion 25

Chapter 2 Building a Cathedral: A Framework for Turning the Mission into Collective Action 27

A Framework for Effective Leadership and Management 28

Establishing and Living Organizational Values 29

Creating Mission and/or Investment Philosophy Statements 31

Strategic Goals and Key Performance Indicators 33

Conclusion 37

Chapter 3 Building a Meritocracy: Understanding, Evaluating, and Rewarding Employee Contributions 39

Performance: A Deeper Dive 39

Horizon: The Fallacy of the Three-Year Track Record 40

Performance Analysis: Practically Speaking 45

Top-down and Bottom-up Approach to Determining Performance 48

Designing Your Rating System to Help Make the Difficult Decisions 51

What Does the Performance Score Really Mean? 53

Criticality: A Deeper Dive 53

Merit Zones: Putting It All Together 57

Communication of Performance and Criticality 59

Values and Compensation 64

Conclusion 67

Chapter 4 Investment Philosophy and Process: A Lofty Cathedral Needs a Deep Foundation 69

The Importance of Investment Philosophy and Process in Investment Organizations 69

Investment Philosophy: Core Beliefs 70

Investment Process: Control and Anarchy 73

Avoiding the Pitfalls of Behavioral Biases 78

Conclusion 83

Chapter 5 Investment Process in an Evolving World 85

Implementation Overview: The ‘How’ of the Investment Process 86

Fundamental Valuation 88

Market Behavior and How It Challenges the Fundamental Investor 90

Team Behavior: Lessons for the CIO from Jelly Beans and Freud 118

Portfolio Design 127

Conclusion 129

Chapter 6 Communication for Superior Client Outcomes 131

The Problem: Human Nature 133

A Classic Tale 134

Case 1: Individual Investors, the Impact of Performance Chasing 137

Case 2: Are Institutional Investors the ‘Smart Money?’ 137

The Reality of Investing in Equities 139

The Mathematics of Recovery 142

Dilemma: Investment Firm or Distribution Shop? 143

The Importance of Culture 145

Sales and Marketing in an Investment Firm 146

Conclusion 149

Appendix: Client Communication in Extreme Market Conditions 149

Chapter 7 Where are the Clients’ Yachts?: Reasonable Fee Structures 159

The ‘Gamma Trade’ 161

Anatomy of a Blowup 167

Catch 22 168

Faults of Existing Fee Structures 170

Our Recommendation: High Integrity Fee Structures 178

Conclusion 186

Chapter 8 Final Thoughts 187

Characteristics of Great Asset Management Firms 188

It Starts with a Shared Mission and Values 188

True Meritocracy 189

Avoiding the Pitfalls 190

For Successful Client Outcomes: Communicate, Communicate, Communicate 192

It’s All about Incentives 193

Integrity 193

Notes 195

Bibliography 201

About the Authors 205

Index 207

About the author

BRIAN SINGER is Chief Investment Officer of Singer Partners and Chairman of the CFA Institute Board of Governors. Previously, he was head of global investment solutions at UBS Global Asset Management (formerly Brinson Partners, Inc.), responsible for asset allocation and currency strategies. Singer is also Emeritus Board Member of the Research Foundation of CFA Institute and an advisory board member of the Journal of Performance Measurement. He is a recipient of the 1991 Graham and Dodd Award and a 2001 recipient of the Dietz Award. Singer holds an MBA from the University of Chicago.

GREG FEDORINCHIK is head of investor solutions at Mesirow Advanced Strategies, Inc., an institutional fund of hedge funds firm based in Chicago. Prior to joining Mesirow, he was a senior strategist with the global investment solutions team at UBS Global Asset Management (formerly Brinson Partners, Inc.) and a member of the asset allocation and currency committee. Fedorinchik holds an MBA from the Kellogg School of Management, Northwestern University.