How did you get interested in investing and manager research?
My interest in investing goes back to high school. I grew up in a small town in southern Illinois and worked in the town’s only book store. A regular customer, who was also a family friend, came in every day to buy the Wall Street Journal. He introduced me to investing and showed me my first stock price chart, which displayed an appealing northeastward trajectory. The idea of watching an investment grow over time resonated strongly with me. At the same time, I was also very interested in literature and writing (which explains the job in the book store). I couldn’t decide which interest to pursue in college, so I double majored in Finance and English. That combination proved beneficial later in my career.
I didn’t set out to pursue manager research as a career. My first job out of college was in corporate finance, so I pursued my interest in investing through my 401k. I quickly learned that Morningstar was the go-to resource for researching mutual funds. Fast forward a few years, I learned that Morningstar was hiring fund research analysts, so I applied for the job, thinking that they would value my background in both writing and finance. Thankfully, that proved true, and my career in manager research began in 2004 when I joined Morningstar. I began as a rank-and-file fund analyst and ended my time there as a senior consultant and fund-of-funds PM.
While at Morningstar, I admired Harbor Capital Advisors from afar. They were one of the few fund shops that I could imagine leaving Morningstar for. Their robust manager selection process and shareholder friendly ethic appealed to me. When I got the opportunity to join the firm in 2013, I didn’t hesitate.
What does Harbor look for when selecting partners to manage their investment products?
At Harbor, we begin by acknowledging that we have a tough job. Studies show that identifying outperforming managers ex ante is a very difficult task; persistence of outperformance is extremely rare. Nevertheless, we believe we can tilt the odds in our favor by partnering with investment firms that exhibit certain attributes that, based on our observations over the decades, are markers of best-in-class managers. We look for research-oriented, high conviction investment teams who think differently and are willing to take meaningful non-consensus views.
We believe a healthy culture is crucial to maintaining an investment edge. Culture influences many vital attributes of an investment firm, such as client alignment, decision-making dynamics, and the ability to attract, retain, and develop investment talent. The most important cultural characteristic we look for is a mindset of continuous improvement. Managers with this mindset are flexible, open-minded, and take joy in learning new things. They are also purposefully introspective; they think about how they could be wrong and seek out opposing views to test their own assumptions and convictions. They also have a process in place to learn from their mistakes by regularly reviewing portfolio decisions to better separate good decisions from lucky ones and bad decisions from unlucky ones.
What is one thing that you wish you would have known in your earlier days of manager selection?
I’ve learned so much over my career that it’s hard to isolate one thing. To name one, my thinking has evolved regarding the idea of process consistency. Like many in our field, I once thought managers should maintain a consistent investment process, and I was suspicious of change. In the past few years, however, I’ve come to appreciate the need for intelligent evolution. To be sure, I still think it is important for an investor to have a philosophical true north – investment beliefs that underpin the process regardless of market conditions. However, I also think it is vital to recognize that markets are dynamic and complex systems; therefore, managers must be flexible and adaptable to sustain long-term alpha. I am now skeptical of managers who say they’ve never adjusted their process. I prefer open-minded investors who recognize that they must finetune their investment process as markets, industries, and economies evolve.
What are you most excited about in 2022?
Harbor accomplished so much in 2021, and I expect us to do even more in 2022. We launched our first ETFs in 2021 and plan to significantly expand our ETF footprint in 2022. We also expect to add to our CIT lineup. Harbor has also established a multi-asset capability, and we plan to expand the offerings managed by that team.
Like many firms, ESG will also be a meaningful strategic initiative for Harbor. We feel that Harbor can play a distinctive role in ESG by not only by providing exceptional ESG-oriented investment products but also by providing clients with tools to drill down to better understand the ESG capabilities and characteristics of investment managers.
What do you like to do in your free time?
I’m a recovering English major, so for me, reading is about as optional as breathing. My tastes run more to literary fiction and history. I’ll guiltily admit that I’m not fond of investing and business books. That said, once in a while, I run across a business-related book that resonates with me, such as Annie Duke’s Thinking in Bets, which has applicable takeaways for investing and manager research.
Beyond reading, I enjoy spending time outdoors. I’m an avid golfer, though not a particularly skillful one. It is a very humbling yet addictive game. Thankfully, my wife also shares that addiction. We met on a golf course 15 years ago and still enjoy spending time together on the links.
We also love to hike. State and national parks are our favorite vacation destinations. Our last visit to a national park was pre-Covid in October 2019 when we spent a week exploring Acadia National Park in Maine. Hopefully, we can get back out there in 2022 to work our way through our national park bucket list!
For more information about Harbor or to contact Sonya, please click here.
