5th August, 2016
DB News, IC Insights
Inside an IC meeting: A fly on the wall
Beginning my internship with DB Wood at the start of July was an exciting time to start my journey into the world of the financial services; Britain had just voted to leave the EU, a result very few had expected, America was running through their quadrennial presidential election campaign with a choice of “presidential firsts” (the first female president or the first president to build a brick wall around Mexico) and central banks across the globe were struggling to implement any form of effective monetary policy (If British economist John Maynard Keynes was still around he would be telling us all “I told you so”). A time of mass uncertainty, what a time to see if the theoretical knowledge from an economics degree would hold up in the real world.
Within the first week I found myself in-the deep end of an Investment Committee Asset Allocation meeting. Situated in the DB Wood boardroom, I was already trawling through the vast amount of research that had been compiled in the build-up and I was assigned to write the minutes (it was hard enough choosing what suit to wear let alone having the pressure to summarise the whole meeting!). Excited at the opportunity to challenge the knowledge I had attained from my degree I couldn’t wait for it to begin. Debate took place around the committee’s main macroeconomic themes (their current view of the state of the world) post-Brexit. Themes ranged from the debt bubble in China to the current positive correlation of bonds and equities (which perfectly contradicts basic theory) and the new addition of economic uncertainty resulting from Brexit.
Post-debate the committee used a Positivity Tool, a table which aligns the IC’s view on how certain economic variables are currently affecting each asset class. Each variable was given one of three labels; a positive, negative or neutral effect. This positivity tool was very intuitive and structured way to collate several opinions into one concise decision, I certainly wish I had the use of it in my portfolio management meetings during my degree.
The meeting concluded with the proposed allocations of each asset class across the 6 different portfolios which DB Wood manage. Using the results from the positivity tool to decide which asset classes would increase, decrease or stay the same relative to their weighting from the previous quarter, was a simplistic but incredibly effective process in restructuring them to express the IC’s current view of the world while remaining bound by the portfolio’s individual risk profiles.
For me the most fascinating debate was the one regarding the IC’s decision to once again introduce some gold exposure, a typically warranted ‘safe haven’ in times of economic uncertainty. I had coincidently been reading up on the investment case just a few weekends before, but even reading the FT didn’t cover the type of dynamic debate that was had in that meeting. One of the strengths I identified within the team was their ability to challenge each other, as well as their own thinking. There is a great sense of ownership with respect to every idea, and certainly no sense of hierarchical thinking like I had previously experienced during work experience a hedge fund.
Post-meeting, while writing up the minutes, I had time to reflect upon what I had learnt and where the gaps in my knowledge were (it took me a while to cover all of them). Don’t get me wrong, a degree in economics has given me a good base to work off going into this internship but my knowledge is far from the expertise of the Investment Committee. This has sparked my enthusiasm to learn even more about the subject going forward, regular reading sessions of the FT and debates with fellow intern Reece and investment analyst Alex has generated some fruitful and insightful conversations.
The opportunity to sit in the DB Wood boardroom and listen to the brains behind the Investment Committee debate for several hours about the current state of the world economy and the logical reasoning behind these views was certainly an eye-opening one. I have no doubt this meeting will be one of my top highlights during my time at DB Wood, and I hope it is not my last.