Raising the bar

Sheila Patel began wearing the pants way before she became the chief executive of the international segment of Goldman Sachs Asset Management (GSAM).

It began in the early 1990s, when she was a junior investment banking analyst preparing for the initial public offering (IPO) of women's apparel chain, Ann Taylor.

The chain was a Wall Street darling, having become a household name by selling clothes to career women.

Sally Frame Kasaks, the retail veteran, then in charge of the firm, had insisted that all the bankers who went on roadshows wear Ann Taylor clothes.

"That meant wearing pants. Because pant suits for women were one of the items that Ann Taylor sold," she said.

At that time, Wall Street was a traditional place where women wore dresses or skirts.

But if women started wearing pants at roadshows, they might wear them in the office after that.

Senior management at Merrill Lynch, the investment bank where Ms Patel worked, had to agree on the new dress code.

And so it happened.

"It was quite a phenomenon to have the whole investment banking area of women all wandering around in pants. It was very nice, very professional, very serious-looking apparel," she said.

Ms Patel would eventually work with Ms Kasaks, the woman who wore the pants at Ann Taylor, for two years.

The lesson for her from the pants episode was that sometimes people have a barrier in their minds, but never question it.

Ms Kasaks did, she said.

Today, she advises people to manage their careers actively.

"I try to raise my hand a lot, and raise my hand for things that people wouldn't necessarily think a woman would raise her hand for," she said.

This included moving overseas, spending time in places like the Middle East, or living on the road, she said. But being "an adventurer" with her career has served her well.

"One of the challenges sometimes is people don't test the waters with women as much . . . but at the end of the day if you're a woman in business, and you're willing to test the waters, I've found that, certainly at Goldman Sachs, people have been pretty willing to engage and give me those opportunities."

She asked, for example, to go abroad.

A trader with a good head for mathematics, Ms Patel had spent a significant part of her career trading derivatives.

What distinguished banks from each other was the ability to analyse derivatives, notice anomalies in pricing, and come up with good trade ideas, she said.

In 2008, she took up an opportunity to move to Singapore from the US, handling equities distribution in Asia.

Then a gap appeared in the asset management business, so she moved to London in 2009, before returning in 2012 as the head of GSAM's international business.

"I saw some opportunities, saw colleagues get those opportunities, and thought, hmm, that's interesting, I wonder if anybody has thought of me for those jobs," she said.

"So I asked, and said if there's a really good opportunity to grow my career, and extend myself within the firm, I'm flexible, I will move, my husband will move, my family is portable."

She now tells the several hundred staff who work for her that she is not psychic, and they need to tell her what they want.

Singapore is GSAM's back office for the region, with operations, technology, compliance and legal departments based here together with trading desks for the region and some portfolio managers.

"Our careers are a two-way street. They're both ours to manage, and to engage with managers and mentors and sponsors," she said.

Women especially might be afraid to ask sometimes.

"And we have to remove that fear."

The future of stock research

Based in Singapore but travelling often, Ms Patel focuses on the GSAM franchise in Asia-Pacific ex-Japan and Europe, the Middle East, and Africa.

She meets clients often to figure out what they want, and oversees strategic issues at the firm.

After a turbulent 2016, the asset management industry is on an efficiency drive.

Regulatory costs are rising.

A persistent low yield environment has forced fees down for passive and active asset managers alike.

Clients getting a few percentage points of yield on their bonds could hardly be expected to pay a couple of percentage points in fees.

Active managers are also competing against cheaper and passively- managed products like exchange-traded funds (ETFs).

One casualty in the efficiency drive is what she calls "bog-standard" third-party research merely analysing publicly-available information and financial statements.

But the future of stock research lies in the use of big data and analytics, she said.

A focus on the Asian giants of China and India also helps.

For example, data on Chinese shopping trends, compiled from a survey of 10,000 stores, could be of interest.

"It's really inefficient for every asset manager to try to do a survey of 10,000 stores across the breadth of China. But it's incredibly interesting and important for us to understand those trends," she said.

Asian tourism is also intriguing. Ms Patel highlights an in-house study at end-2015 on how many people in China will have passports in 10 years' time (12 per cent) compared to today (4 per cent).

"Where are they spending their money, what are they spending it on?" she said.

The study highlighted how Japan is expected to benefit the most from the influx of Chinese tourists over the next 10 years, but it lacks hotels.

The best research tries to place individual stocks and country-level analysis in a broader context, often relying on big data to make its points.

It can also highlight how a company is similar to companies which arose in other places.

Or "aside from analysing China in its own right, looking at China as an example of what may or may not happen in India, is critical".

She recounted how the head of a large institution in the Middle East once told her: "If you get China and India right in the next 10 years, you will get it all right".

Both countries might have different rules of law and government styles, but macro trends that are happening in China are also happening in India, she said.

"People are getting mobile phones at a massive rate. People are about to have a much different perspective on their savings, whether it's having your money . . . transmitted via a mobile phone, or having a bank account . . . buying things on the Internet."

Chinese Internet companies could have billions of transactions, Indian Internet companies have millions of transactions, and the latter will probably follow the same path, she said.

"Those kind of comparatives are very interesting for us and for third-party research enterprises to dig into more deeply."

Becoming leaner

In its latest results, Goldman Sachs said its net revenues in its investment management division were US$5.79 billion in 2016, 7 per cent lower than 2015.

This was due to significantly lower incentive fees after a strong 2015, the investment bank said. Management and other fees were also slightly lower.

This reflected "shifts in the mix of client assets and strategies, partially offset by the impact of higher average assets under supervision."

Assets under management increased US$127 billion in 2016 to US$1.38 trillion.

As a sizeable asset manager, GSAM isn't as bothered about its budget compared to smaller asset managers focusing on just one or two niches, Ms Patel said.

"We're ready to adapt to lower fees if they come," she said.

"But most importantly we're focused on lower costs overall, not just the fee component, but also being efficient users of resources for clients."

Major cost efficiencies are achieved through technological improvements in trading and compliance, Ms Patel said.

"So much of trading today is electronically based. It is very important that you have the best technology, in order to make sure you can trade with speed, that you have the most transparency and visibility into the markets at hand, and that you have very experienced traders."

The tech focus is clear in Goldman's head count, she said.

It was reported in 2015 that out of the 33,000 people then employed in the wider Goldman group, some 9,000 are engineers and programmers.

Efficiencies also come from improving operations around compliance.

A few years ago, humans touched a lot more of the millions of transactions that can go through an asset manager, she said.

But since then, technology has gone towards building regulatory frameworks to meet client guidelines.

"Five years ago, a trader would have needed to call three people to see if the trade was allowed within a certain client's portfolio. Now he can look into the system, and the system can tell him if it does or doesn't meet every one of the criteria and guidelines we have for the client.

"That's a big difference of time, of efficiency, and hopefully it's a difference of value to the client. It means we can come up with good ideas and transact, as opposed to being delayed by trying to evaluate a lot of other criteria," she said.

On the portfolio management side, the trend is to make the team bigger, not smaller.

"We want more analysts, we want more people thinking about the best investments for clients . . . If you can't drive good ideas and performance for your clients, as an asset manager, then what is your mission?" she said.

Value of asset management

Meanwhile, a big part of her work involves meeting clients and finding out what they want.

That keeps her going, she said.

"I love going to see our clients, and see the diverse places they live, and the challenges they have," she said.

"I'm in a different country every week. At some point, maybe that exhausts some people. To me, it's what renews my interests."

Being able to connect people from disparate parts of the world gives her joy.

While in South Korea, she heard some problems from clients.

"And I know the exact person to introduce them to, and that person is in the Middle East," she said.

"They'll never meet each other, they'll never know they have somebody facing the exact same problem or somebody they can partner with on something. Whatever or not it matters for GSAM it matters for the global connectivity that people need.

"And I think that's really fun."

Running an asset manager is not just about offering clients funds that can perform well, or ensuring assets are managed as efficiently as possible, she said.

GSAM gets hired to manage risks, as well as to ensure regulatory issues are dealt with.

It handles a large amount of money for insurance firms, which tend to have constraints on what they can invest in, and tend to invest in fixed income.

The chances of having different performance from another asset manager are very low, she said.

Over an average mandate of six to seven years, there might be periods of underperformance or outperformance.

"But if over those six to seven years, there are hiccups not related to performance, where somebody traded out of guidelines, or somebody caused a regulatory problem for an insurance company, or somebody was not focused on the guidelines a sovereign wealth fund has on environmental, social and governance issues . . . then we've caused a problem that will go well beyond a quarter of underperformance," she said.

Ultimately, an asset manager needs to get its process right.

This means asking questions about whether there is a smarter and better way of using its team and research capabilities, she said.

"At the end of the day, what clients want to see from any investment programme or product is that you have a process," she said.

"And if you have a process, you follow that process, and your views were wrong, that's a different question."

SHEILA HARILAL PATEL

CEO, Goldman Sachs Asset Management International

• May 1969 Born in New York City to an Indian father and Irish mother
• 1991 AB in Politics and Near Eastern Studies, Princeton University
• 1992 Joins Merrill Lynch as investment banking analyst, covering energy and retail, including retail chain Ann Taylor Stores Corporation
• 1994 Joins Ann Taylor as finance associate, becomes manager of merchandise administration
• 1996 Joins Morgan Stanley as derivatives sales trader, rises to head of trading strategy
• 1997 MBA (highest honours), Columbia University
• 2003 Joins Goldman Sachs as a managing director on the derivatives desk in the Equities Division, later becoming head of US derivatives sales and US synthetics sales
• 2006 Named partner at Goldman Sachs
• 2008 Relocates to Singapore as co-head of Equities Distribution in Asia
• 2009 Becomes co-head of EMEA (Europe, Middle East and Africa) at GSAM and moves to London
• 2012 Moves back to Singapore as head of International GSAM "If you can't drive good ideas and performance for your clients, as an asset manager, then what is your mission?"

haoxiang@sph.com.sg

This article was first published on January 28, 2017.
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