The title of chief investment officer probably means different things in each of the businesses where it is deployed, but Chris Darbyshire, chief investment officer at Walker Crips Investment Management, says the role is changing and the likelihood is the next generation of holders of the title will have much more similar backgrounds.
He says: “CIOs are required now to be more mathematical, it is much more about statistics. Firms are trying to gain an edge through strategic asset allocation, and that requires use of stats and the understanding and measuring of risk.”
Darbyshire’s background is in the maths-driven world of derivatives investing, specifically structured products, and he worked for large institutions on those products before becoming chief investment officer at 7IM and then at Walker Crips, where he oversees around £3bn of assets under management, including in the companies model portfolio range.
He actually began his working life as a journalist, at Euromoney, but decided to leave after a year. Darbyshire says: “When I told them I was going to leave, I was called into the boss's office, and when it became apparent that they couldn't persuade me to stay, the chap said to me ‘derivatives’, and that is what I ended up doing.”
After spells working in corporate finance, he worked on the structured products and derivatives desks at BNP Paribas and Goldman Sachs.
He says now, “since the global financial crisis, the structured product market has changed a lot and has become a lot less interesting, with far more plain vanilla products coming to the market”.
Many structured products struggled to perform during the global financial crisis as liquidity dried up, and also because Lehman Brothers – one of the largest financial institutions to act as counterparty in the structured product market – went bankrupt.
Darbyshire joined Walker Crips following a six-year spell as chief investment officer at 7IM.
He says the main difference between the first is that 7IM “was more institutional in its mindset, and I arrived there having always worked on the institutional side. Whereas at Walker Crips, the investment management side is with advisers and private clients, so there is more of a retail focus, as there should be. That is probably the number one thing I am learning at Walker Crips; how to be more retail-oriented”.
The model portfolio service is a relatively small part of the AUM of the business, with investment managers creating bespoke portfolios for individual clients being the bulk of the business.
Darbyshire’s role is to provide research and thought leadership to those individual investment managers, as well as running the model portfolios.
He says that while much is changing in the world of investment management, one of the things that remains broadly the same is the significance of the role of government bonds in portfolios.
Such assets are typically held in portfolios as a way to mitigate the risks of a sell-off in equity markets.
In the decade since the global financial crisis, the policy of quantitative easing pursued by central banks has caused the price of government bonds to rise to record levels, and consequently for yields to fall.