Chairman’s Message: Society Update

Let me begin with a thank you to CFA Chicago’s Governance & Nominating Committee for entrusting me with the role of Chairman.  It’s a distinct honor to lead the oldest Investment Analyst Society in the world.  Positioning our 89-year-old brand for the future, delivering relevant and cutting-edge programming, and enhancing member value are our top priorities.

As our board and officer volunteers change annually, I have worked extensively with our Vice Chair Kerry Jordan, CFA, to create a long-term vision for our enterprise.  Kerry and I are just back from a CFA Institute Society Leaders Conference in London where best practices and future opportunities for our profession were exchanged.  The key takeaways from London for me are:  the U.S. asset management business is very dynamic and mature, and globalization remains apace at an increasing rate.

With respect to international financial services and investing, the five newest Societies in the CFA Institute family are Qatar, Norway, Peru, Lichtenstein, and East Africa.  And while the U.S. base of Charterholders remains the core membership, the candidate population and growth rates in international markets are much higher, and more diverse, than in the United States.

As I write this, the Chinese e-commerce firm Alibaba’s IPO is set to price this evening.  On a market cap basis, four of the top 10 internet companies will be based in Asia, up from two in 2004.  One of my London partners said this is evidence of “China’s capitalistic system writ large.” We are an international profession and we must continue to think globally.

Our Society is positioned quite well with 4,300 members, talented volunteers, dedicated staff, and because of thoughtful stewardship, strong financial resources. Resting on our laurels, however, is not what Kerry and I and the board can or will do.  As the 6th largest and original Society, we must be strategic about our industryand what role Chicago’s financial services community and professionals will play as we move toward our 90th year and beyond.  Thankfully, our leadership team and board are embracing the challenges we face in this dynamic environment.

Lastly, let me express great appreciation for an outstanding membership.  Your time, energy, ideas, and ethical practices are the most valuable asset we have.  Please get involved, stay committed, and then recruit a fellow professional to take your place in the future.  I hope to see you at our annual dinner in October.

Distinguished Speaker Series: Mario Gabelli, CFA , Chairman and CEO, GAMCO Investors

Nicknamed “Super Mario” by financial media pundits, Mario Gabelli, CFA , Chairman and Chief Executive Officer of GAMCO Investors, Inc., presented his ideas on shareholder activism to a sold out crowd at the University Club on Aug. 12, 2014.

The idea that activists are catalysts was center to this Charterholder’s presentation. Teeing up that idea, he gave us insight into the philosophy and investment thesis that GAMCO follows with several quotes: “If you drink it, we follow it, and if you watch it anywhere, we follow the content”.  What and who have influenced him?  He noted Graham and Dodd and Security Analysis as being the definition of value investing and Roger Murray, his professor at Columbia Business School as having a large influence on his decision to go into investment management.  Gabelli’s unique sense of humor bubbled through as he compared Mount Rushmore to the four professors who created value investing.

Given these influences, his investment process is very similar to what Graham and Dodd taught in the 1930s.  So, what twist does Gabelli put on value investing?   He looks at private market value – intrinsic value plus a control premium with a catalyst.  Catalysts bring underlying value to the surface and include regulatory changes, industry consolidations, death of a founder, share repurchases, division sales, management succession and finally, shareholder activism.

Activist hedge funds net asset inflows were 5.3 billion in 2013 with 59% of activist objectives achieved in 2013.  Gabelli walked us through various models of shareholder activism touching on big names and big results such as Carl Ichahn, Jeff Ubben, George Hall and David Einhorn.  He pointed out that Carl Ichahn’s model works because there is demand for it.  When discussing shareholder rights and the “poison pill”, Gabelli advocated that GAMCO votes against it per their Magna Carta of shareholder rights. After all, it is all about the shareholders who own the company.

The presentation wrapped up with a discussion of companies in our own Chicagoland backyard who have either split and created value or have the potential to create value with a split.  As a final nugget of wisdom before the Q&A, Gabelli recommended The Graduate as an important movie because as you watch a young Dustin Hoffman receiving advice on what he should do with his career, you realize this is defined the attitude of people in the ‘60s or ‘70s.  What movie will define the times we are living now?