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#Women In Finance Know Stuff: A Conversation With Linda Zhang, PhD

This is the first of a new series of interviews with inspiring women in finance, a new initiative we (Elisabetta Basilico and Tommi Johnsen) launched in January 2018 in collaboration with Alpha Architect.

But why create a Women in Finance Interview Series?

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Simple: there aren’t many women in finance and we want to inspire more women to participate in this exciting (and often rewarding) field.

Some quick statistics: Women represent less than 20% of investment professionals in the U.S. (Stumpp, 2013), less than 10% of mutual fund managers in the U.S. (Lutton and Davis, 2015), 16.4% of the CFA Institute membership in the U.S., and 18.4% of the global CFA membership as of June 2016 (Adams, Barber, and Odean, 2016).

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When you segment further and look at the number of women in quantitative finance…well, let’s say you can probably count the number of famous female quantitative finance PhDs on one hand…but, we can begin to close the gender gap.

Our first step is to showcase the profiles of some amazing women in finance in order to highlight their experience, what drives them, how they dealt with difficult times, and some advice for future female leaders.

Today, we start with Dr. Linda Zhang, Founder and CEO of Purview Investments.

Dr. Zhang, who many of you may already know if you are in the advisory/ETF business, is a trained financial economist, and an expert in asset allocation and ESG investing. After studying Finance at the University of Regina in Canada, she completed a PhD in Finance at the University of Massachusetts at Amherst. Purview Investments specializes in actively managed ETF solutions and ETF innovation research.

Linda Zhang, Ph.D., CEO of Purview Investments

What Contributed to Linda’s Success?

We asked Linda to tell us the things that contributed most to her success. She conveyed three basic themes that characterized her professional career:

From the very beginning, Linda displayed a passion and curiosity for the capital markets. In particular, she pursued the study and practice of using data and methodologies available to devise and exploit trends and patterns in the markets. In her first foray as an instructor in finance, Linda took this passion to heart. Teaching a senior level MBA class based on a well-known column published in the Financial Analyst Journal titled, “What Practitioners Need to Know,” she developed a reputation and following among the students during her short stint as a young finance professor.

While teaching, Linda continued her research efforts and began to develop a consulting business, and subsequently became a quantitative analyst at Barings Asset Management, a firm known for global investments. At Barings, she crunched data and models on a variety of topics: country allocation, sector rotation, factor investing, security selection in equity research, asset class and risk modeling in fixed income. After all, the demand and the expectations for quants are high. Linda referred to a time when she had to create a risk model for High Yield debt in two weeks! Linda embraced these challenges and felt lucky for these opportunities to prove her mettle. Following her successful work with Barings, she left to be the Head of the Quantitative Investment Group at State Street Research Management (SSRM) in 2003.

Her first task at SSRM was to revamp the asset allocation process, from a qualitative, “gut-instinct,” framework to a more systematic and quantitative approach. Linda’s initial experience transforming the SSRM investment programs into quantitative platforms helped her in her next phase: fifteen years of global multi-asset portfolio management at some of the largest asset management firms in the country, including Blackrock and MFS. She relied on her quant background for product innovation. At Blackrock, she pioneered the global macro overlay approach to the Global Tactical Asset Allocation Fund she managed, using derivatives, SWAPS and ETFs to express top-down investment themes and for portfolio risk mitigation.

In 2012 came another big opportunity and a turning point in her career. Linda moved to Windhaven, a firm known as a leading ETF strategist, focused on multi-asset investing with full ETF implementations. Here she became fully immersed with a newer investment vehicle that was starting to shape the entire asset management industry: Exchanged Traded Funds (ETFs). At Windhaven, she witnessed first-hand the exponential growth and disruption that an “innovative product” can bring.

In multi-asset investing, technology and innovation is key. Robo-advisory is an example. Linda sees a new opportunity: building multi-asset solutions that are less generic and more active than Robo products. This insight led her to found a registered independent investment company, Purview Investments (https://www.purviewinvestments.com/), which launched its first product ‘Purview Impact Solutions’, a multi-asset ESG focused strategy. The choice to focus on ESG comes from combining her beliefs for a cleaner environment and a more inclusive society with the realization that there is a limited supply of ESG ETF solutions in the marketplace. Impact Solutions is now live and open to the public offering separately managed accounts.

Linda’s next frontier: ESG investing

We share with Linda an interest for ESG investing, which was part of our research for our upcoming book on research-backed successful investing ideas. We asked Linda to describe the challenges currently facing the ESG industry. As with most new ideas and industries, there are many challenges, but three stood out from the rest:

(1) Lack of standardization

There are multiple leaders in ESG research, classification, and the ESG scoring business, including ESG groups in most large index companies and independent ESG firms. There can be substantial differences among them regarding the measures and the importance of the measures in evaluation each component of E, S and G. For example, some consider gender diversification as a part of Social elements, yet others classify it as Governance. Some assign higher importance of the number of women serving on boards as a measure of gender diversity, while others think women serving in management is a better metric. ESG scores may also differ on the method of exclusion. Some are more aggressive in excluding low score industries altogether, while others include ”the best in class” of the problem sectors. This could result in substantial variations in index sector exposure and subsequent performances. As a consequence, the same company can be rated differently depending on the provider and their particular philosophy. That may create confusion and discomfort for some investors.

(2) Limited data disclosure

Many firms simply do not disclose data, and when they do they are subject to the same lack of standardization issues. For example, the simple question of how many women are in the C Suite and middle management is hard to answer. Hopefully, the data limitation issue can be alleviated over time with the pressure for transparency via regulatory policies and companies own realization that transparency benefits them.

(3) Fitness in a portfolio.

The third challenge is on the user side. Many investors want to make a positive impact on the environment and society, but don’t know how ESG products fit into their portfolios. Hence, it is necessary to investigate the exposure and risk/return characteristics of each product. For example, SHE, a gender diversity ETF, is a US large cap product with very specific risk/return characteristics.
This might be easier said than done for most investors who are not equipped for such analysis. Linda recommends, and we agree with her, that investors seek professionally managed ESG themed ETF solutions. Purview Investments is one such firm. Most solutions out there are partial ESG ETF solutions, vs. the full-blown ESG version offered by Purview Impact Solutions and others.

Closing Thoughts from Linda

Back to some personal tips for our female audience who want to pursue a finance career.  Linda recommends developing a passion for the markets and the macro-economy first. Read global economic and capital market history. In terms of skills, she recommends taking classes in statistics, math, programming, and econometrics…and…equally important: don’t forget about acquiring writing and presentation skills! You need to be able to sell the quantitative story.

And when it comes to the issue of the under-representation of women in finance, she is emphatic that it is not a simple question of a smaller talent pool. In Linda’s opinion, there is a deep pool of female talent on Wall Street. However, women analysts are not promoted as often as their male peers (maybe because they don’t speak as loud or get discouraged when they do). How can an organization get around this problem? In the end, this is a leadership decision: the CEO must create an inclusive environment and demand that more women are promoted.

Thank you, Linda: it has been a great pleasure and we wish you continued success!

Elisabetta & Tommi


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