A CEO for All Seasons
Rachel Elwell is the CEO of Border to Coast, which was established to manage the assets of 11 local government pension funds (their ‘Partner Funds’). These are defined benefit pension schemes and collectively have assets of around £50 billion. The funds collectively represent 2,500 employees and over a million members and are supported by millions of local taxpayers. Established in July 2018, Border to Coast currently manages around £25 billion of assets covering public equities, fixed income, and alternatives.
While much of the asset management sector is in London or Edinburgh, Border to Coast is based in Leeds. Over the next few years Border to Coast will continue its growth, expanding the investment opportunities and capabilities provided to its Partner Funds, with the aim of having around £35 billion of assets under management by 2025, and projected growth to £40 billion as legacy alternative assets mature.
Rachel gives us a glimpse into her story at Border to Coast for Allocator Intel's 1st Annual Top 50 Women in Investment Management.
Can you give us a sense of the overall asset allocation?
Strategic Asset allocation remains the responsibility of our Partner Funds. But of the money we currently manage, around £5 billion is in fixed income, £15 billion is in public equities, and we have received over £5 billion of commitments to Alternatives. Overall, the LGPS is a relatively immature scheme with only around a third of its members being pensioners, which means that it has a growth-orientated investment strategy with, on average, around 60% in public equities, 10% in real estate, 10% in alternatives, and 20% in fixed income (with a mix across the credit spectrum).
We manage assets both internally and externally, the choice about which route used is based on a cost-risk analysis and how we can drive most value for our Partner Funds. We also work with a range of private markets managers (currently around 35, managing around £3 billion AUM) – this will continue to develop as we deploy more capital on behalf of our Partner Funds as our portfolio is expected to grow to over £5 billion AUM by March 2022.
How would you categorize yourself as an investor?
Our internal team is strongly focused on security selection with a bias toward quality stocks that demonstrate a clear competitive advantage, as we believe that stock selection provides the most consistent source of alpha over the long-term. Portfolio Managers are supported in this philosophy by an in-house research team. The ESG aspects of this process sit within the Research Team under the leadership of our Head of Responsible Investment, as we firmly believe that a deep understanding of each company allows for better insight into the financial risks and opportunities that ESG factors pose.
What was the impact of the pandemic, and what has been the response?
Our Partner Funds are long-term investors and are experienced enough to understand the natural fluctuations and cycles markets go through. However, we have seen general trends to reducing public equities (increasing allocations to private markets, real estate and higher yielding credit) and reducing exposure to the UK market (increasing allocation to global markets).
What has it been like being a women in the investment world?
Having studied at university at a time where around 80% of the students on my course were male, and then going into a profession where around 75% of members were male, I am perhaps used to the sense of being in a minority. It generally hasn’t made a difference, but I do think that having a diverse array of role models makes it easier to see how you can play to your own strengths. I’ve been really fortunate to have had a number of mentors – both men and women – over the years who took time to explain what they’d learned, and to help me think through what I needed to learn.
What are the biggest barriers you have faced in your career? Has being a women impacted your experience in your career?
My parents gave me an amazing start. Right from an early age my gender never had anything to do with the choices I made, whether that was insisting that I should be allowed on the school cricket trip (I had to name the Yorkshire XI team to prove that I knew something about cricket before I was allowed to go) or in the decisions I made about which subjects to study.
It took me a long time to understand that there are differences between how men and women work – and that there were strengths that I could exhibit at work which perhaps I hadn’t felt I could share, like how much I care about our purpose and about my colleagues, the importance of collaboration and consensus, and the importance of listening to each other. It took some difficult conversations and experiences to appreciate how I could play to those strengths.
What can be done, what should be done, to alter the role of women?
There are still many assumptions made about what it takes to be a leader and about the career and personal decisions that both men and women make. My wonderful husband experienced this often, being the primary carer for our kids. The assumption made by his work colleagues that his wife would be leaving work early because one of the kids was ill, and lack of understanding when he had to explain otherwise, ultimately made the role untenable in a way that I know I wouldn’t have experienced if our roles had been switched. On the other hand, I experienced the assumption that I wouldn’t travel for work because I had a young family. I strongly believe that each family should be able to make its own decisions and that, to support this, there should be equal rights to maternity/paternity leave.
There are other aspects of government policy which would really help to create greater equality, including access to childcare support, incentives and training to encourage female entrepreneurs, and longer-term planning to ensure a balanced economy.
What effects do you think the Coronavirus crisis will have on the gender balancing efforts?
In the short-term we’ve seen a huge, negative impact of Covid-19 on inequality – socio-economic class, ethnicity, inter-generational, and gender. A McKinsey study showed globally women’s jobs were 1.8 times more vulnerable than men’s, in part because it has been part-time jobs in service industries that have been most impacted, and in part because in the majority of families, the burden of looking after children when schools have been disrupted, has fallen to women. However, there does seem to be a growing recognition that women lead well in crises: Witness the strong examples in Germany, New Zealand, and Taiwan, to name a few.
Is diversity important in the investment management space?
Diversity isn’t important – it’s essential. Even ignoring the moral argument for it, diversity is good business. It delivers improves cognitive thinking, which means better problem solving and ensures better decision making.
What about the backlash?
I would question why people are against making better decisions and delivering better outcomes. I’ve heard people try to defend a lack of diversity by claiming they are only interested in selecting the best individual. However, businesses are teams, and it’s essential you build the best collective team.
What are you looking forward to in the future?
I look forward to a time when we don’t discuss the importance of diversity because it’s taken for granted. I suspect I may have to wait some time for this though.
Where were you born and raise? Where did you go to school?
I’m from Yorkshire (born in Sheffield and raised near Leeds) and studied Mathematics at Cambridge.
How and why did you get interested in finance and investing?
Whilst studying for my A-levels, I knew I wanted to continue with maths at university, but had no idea what I’d do longer term – whether to stay on in academia or to go into the world of work. Having made the halfway leap of studying to be an actuary, at PwC I worked across a range of sectors, advising pension scheme trustees and corporate sponsors from retail to food production to manufacturers to private equity houses, insurers and banks.
What drew me to Royal London as the next stage of my career was in part the fact it is a mutual organisation focused on its customers and members, and in part because of the challenge I was given to establish a number of functions at a time when they were growing rapidly via acquisition, from around £30 billion assets under management to over £100 billion.
What lessons have you learned?
I worked for PwC for 15 years, where I qualified as an actuary, and then joined Royal London, the mutual insurance company, for eight years before leaving to help set up Border to Coast at the end of 2017. One particular piece of advice that has always stayed with me is that building your career isn’t necessarily a straight line: Sometimes a sideways move or taking the opportunity to learn something completely new can stand you in great stead, giving you the breadth of experience that you’ll need later on.
Another is that good leaders try many different approaches and learn from many different people in working out their own style. I have certainly learned more from my failures than my successes, remembering two things that I tell my kids: 1) FAIL stands for First Attempt Is Learning; and 2) If you’re not failing, you’re not trying hard enough.
Are you a follower or an adherent or a disciple of anybody or any school of thought in particular?
I love learning and gaining insights from a variety of people – TED talks are great! But I must confess that I do frequently return to Simon Sinek. If nothing else, he teaches the importance of purpose – and the importance of the right mindset in anything you do.
What is your personal mantra?
Make a difference, always do the best you can – and have fun whilst you keep on learning.
Any books you're recommending?
Having just talked about Simon Sinek I’d better suggest his latest book, “The Infinite Game.” I’m also just reading “The Nine Types of Leader” by James Ashton, and Barack Obama’s “A Promised Land.” More generally, I’d recommend anything by Guy Gavriel Kay – “Tigana” is my particular favourite.
This has been edited for length and clarity.