We asked Christian Stracke, a managing director and PIMCO’s global head of credit research, to share how PIMCO fosters diverse thinking in our investment process.
Q: PIMCO has long believed that diverse thinking produces stronger outcomes for clients. How does the investment team make sure that diverse ideas make their way into portfolios?
A: As an active investment manager, PIMCO by definition has to think and perform differently than others in the market in order to seek to generate returns for our clients. That means challenging the consensus view – the market-implied outcomes of every potential investment we analyze. So it’s critical that we encourage differing points of view across our investment team. PIMCO recognized this long ago, which is why we designed our investment process to foster broad participation of all PIMCO investment professionals.
Ultimately, we want to ensure we put our best ideas to work for clients, and we have to embrace the fact that good ideas can come from anywhere. For example, on our credit research team, we’ve hardwired our process to facilitate the seamless sharing of information between our analysts and portfolio managers around the globe. Beyond the natural daily interaction, we have weekly and monthly meetings where we share our ideas and collectively determine what we want to buy and sell across global credit markets. We’ve also built a culture where we are willing – and in fact expected – to question each other, and we believe that has been a key ingredient in our long-term success.
Q: Academic research has shown that investment managers can be prone to biases that are barriers to diverse thinking. How does PIMCO mitigate that risk?
A: This is something we’re increasingly focused on. At PIMCO we work deliberately to avoid biases that impair or color our analyses of investment opportunities. For example, “groupthink” – when group members conform to consensus at the expense of open and rational decision-making – is probably one of the most important biases that investment managers have to consider. Mitigating risk of groupthink is especially critical to PIMCO because groups play a central role in our investment decision-making process. And as I said previously, active managers can only outperform by diverging from market consensus.
One way we’ve addressed this is by requiring members of the investment team to back an investment thesis with quantitative analysis, where it is relevant. We need to know in detail what assumptions they make, how they derive these inputs, and how they specify their model. This transparency helps illuminate different perspectives and address groupthink.
Having this formal process is critical. Everyone wants to encourage diversity of ideas, but it’s the process that ensures differences are brought out.
Q: Another important way to foster diverse thinking is to make sure you bring together people with different backgrounds. What are some of the ways PIMCO is working toward this?
A: We are very focused across the organization on making sure our teams include people with diverse backgrounds, perspectives, and cognitive biases. Part of that, of course, is gender diversity. We’ve made big strides in recent years toward this objective – through new recruitment practices, enhanced work-life balance programs, more mentorship opportunities, and other initiatives. This has helped us attract some incredibly talented women to the firm in portfolio management and other roles, and we are continuing to build these ranks. It’s also about creating a culture and environment that feels inclusive. That puts the conditions in place for the idea sharing and collaboration that we believe will lead to better outcomes for our clients and PIMCO.
Read more about PIMCO’s global Inclusion, & Diversity initiative.
Christian Stracke is global head of credit research at PIMCO.