Vishal Hindocha: Hello, and welcome to another episode of the All Angles Podcast. In this episode, I talk to Carol Geremia, the president of MFS and the global head of distribution, and it's an incredibly powerful and moving conversation about the power of vulnerability, about playing a bigger game and what it means to leave some of our agency and some of our issues at the door in order to solve the problem for the end saver.

Carol introduces the concept of long washing or long-term washing, and really gets to the heart of some of the issues as to why some of this is really challenging, not only for our industry, but all of the stakeholders that we have. Just as with any conversation with Carol, I walked away inspired and uplifted and full of curiosity on different ideas that she introduces, and I'm sure you will too. Thank you for listening.

Disclosure Voice: The views expressed are those of the speaker and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation to purchase any security or as an offer of securities or investment advice. No forecast can be guaranteed. Past performance is no guarantee of future results.

Vishal Hindocha: Welcome to another episode of the All Angles Podcast. My name is Vishal Hindocha. I'm the global head of sustainability strategy and client strategy at MFS, and is my great privilege and honor to welcome Carol Geremia onto the podcast. Carol, welcome.

Carol Geremia: Thanks, Vish. I'm so glad to be here.

Vishal Hindocha: Carol is the president of MFS, as well as the global head of distribution. So, for some listeners paying attention, that means that she's my boss. So, I have to tread very, very carefully on some of these questions.

This conversation I think is going to be a slightly more expanded and potentially more formal version of a conversation I think, Carol, you and I have almost every week around some of the challenges and some of the things that you foresee in the industry, and I can't wait to get into some of the detail. But before we do that, could you give some of our listeners a potted history of how you got to be president of MFS and in the position that you're in now?

Carol Geremia: Oh, it's kind of long. Well, it does date back to 1984, when I started at MFS in an entry level position that I was so fortunate to be guided to MFS, unbeknownst to me. I never imagined being in the financial services industry.

And landed at MFS, as I said, in an entry level position, but then had just so much opportunity over the past 38 years to keep getting pushed into new opportunities. First starting on the phones, all the way to being in the field, to running particular businesses like the retirement services company at one point, to the institutional business, and then eventually co-heading global distribution with the great Jim Jessee, and then heading up all of distribution and being president of the firm. So, it's been an incredible, incredible journey with lots of different . . .

Vishal Hindocha: . . . pivot points along the way.

Carol Geremia: Yeah, you bet.

Vishal Hindocha: Carol, at the beginning of that, you said that you had no real design or desire to get into the financial services industry right up front. Just out of pure curiosity, what was your idea of what you would do?

Carol Geremia: Yeah, I have to say it was not that planned out or thought through intentionally. I think in all honesty, I never thought I really could be in this industry. I hadn't gone to school, I was sort of more focused on English literature, and then I actually thought I'd be in the fashion industry and went to New York City and had some incredible jobs and an internship at the school I went to in Manhattan. And so, I got to see what working in the real world at a young age would look like.

And then again moved to Boston because I actually, I met my husband when I did a semester in England, and so he had another year finishing up in New Hampshire, so I followed in a way to him in Boston. And my mom dropped me off and said, "Find a job." And so, I thought I was going to ultimately go into the fashion industry somewhere. I had done quite a bit of work working for buyers of different organizations in New York. But then I met this woman who looked at my resume and she said, "This screams retail, we're going to need to do this over again." And I thought, where is she going to send me? And she sent me to a company called Massachusetts Financial Services in 1984.

Vishal Hindocha: And the rest is history. Incredible, incredible. Well, we might come back to some of the pivot points maybe as we go through because I think there is so much to learn there.

Carol Geremia: And could I just say one thing, which I do say a lot today, the fashion industry is a lot like the investment industry.

Vishal Hindocha: In what way?

Carol Geremia: You have to forecast the future. You have to constantly be looking ahead of where it's going before anybody else knows. And I learned that intensely in the internships and watching some pretty successful people in New York and fashion having to figure out where the puck was going.

Vishal Hindocha: Where do you think the puck is going in the investment industry, Carol?

Carol Geremia: There's so many places of opportunity and I guess forecasting. You and I have talked about this a lot, and I think what's happened, and we talk to investors about this all the time. For the past 30 years, people have had to take five, six, seven times the amount of risk to get the same amount of return. So, we've had so much risk allocation of capital move into both the public and the private markets.

And I think that generally has been obviously great for all of us. Obviously it's readjusting now that rates are starting to come back, but I do think the future is going to be a different way to allocate capital. And to me that's the most exciting part, is just to think about — instead of just growth at any cost or sort of obsessive growth — is this idea that it's going to be about transformation. It's going to be about rebuilding and an opportunity to build new.

Vishal Hindocha: This podcast series ostensibly was about the different angles of sustainability, and as we've had more conversations, it's become apparent that we're actually just talking about, as you're saying, the future of capital allocation. We're not talking about an exclusively sort of ESG type issue or a sustainability type issue.

And one of the things that I know you feel strongly about as a key ingredient that will be needed to catalyze this opportunity that you foresee is a much more long-term, future-focused mindset. Could you talk a little bit about your perspective at the moment on long-termism and short-termism in the industry, and the problems and opportunities that that's creating?

Carol Geremia: It's the one thing that is probably the hardest conversation to have, is either hitting the conversation head on about the war on short-termism or this idea of extending time horizons. I think, and there was a great paper written — I just like the term the time tragedy — is that it's so hard to measure over long periods of time. And so, as we've watched all this risk go into the market, and we as allocators of capital and the whole investment chain, we've all tried to really step in and do a good job by diversifying that risk at so many different levels, whether it's active versus passive, whether it's private versus public.

We’ve taken that on. But the layers within the investment chain, between the end investor and the public company, we're all trying to hold each other accountable — us trying to hold public companies accountable, and consultants and advisors trying to hold us accountable, and so on — that it's just bred a false sense of comfort to rely on shorter- and shorter-term measurements that actually is pushing us away from exactly what we're hired to do, which is to allocate capital responsibly. And nothing gets done quickly if it's responsible, actually.

And it's the same thing with trust. Trust doesn't happen overnight. And so that's the conundrum we're in today, is how do you hold us accountable, which we're not trying to run away from. In fact, as I say to clients, "Measure us every day." The issue is, though, that you do not want us to be certainly thinking about our investment decisions that way, that really to forecast the future with other people's money and to take a long view, it requires a lot of blood, sweat and tears to have discipline and think through it.

So, I worry that we've set ourselves into a system that has not figured out how to think about allocating capital responsibly in the future and how do we measure that stakeholder capital world versus a much more short-term shareholder world? And it's both the opportunity, but it's also the threat.

Vishal Hindocha: Yeah, there's a lot to unpack there. So just on the opportunity and threat — I know there are no easy answers in this space — and this is something that we and many people in the industry are trying to figure out, is how do you strike that right balance, as you said, between accountability and the reality of short-term accountability with the knowledge that I think — collectively — we have of the best way to create value is with a long-term oriented mindset?

How do you hold MFS accountable to that, in the role of president, or as the role and head of distribution, just focusing on what we can control within our four walls in our building? How do you think or could you eliminate for the listeners some of the ways in which we think about that, to make sure that we are genuinely taking that long-term perspective even though we show up every single day being very, very focused on delivering the best we can under our fiduciary duty?

Carol Geremia: The one thing I do say over and over again in the industry and to clients, if you're going to say you're long-term, prove it. It's the same thing I've said about sustainability and ESG. I'm not worried about greenwashing. I'm really worried about “long term washing.” We all say we're long term, and yet I don't think we're universally held accountable for proving that.

And so, I think that as we reflect inside MFS, we've got to walk the walk. So, it's just like I'm proving that you're doing the sustainability components as authentically as you possibly can. It's the same thing if you're long term. Prove it, ensure. And that's not just in terms of the portfolios we manage. As you know, I use the stat all the time, I say to investors, "Why not use the holding horizon as a key statistic, a key number in measuring a manager in terms of how long they commit the capital to holding security inside the portfolio?"

Well, just as much as it's important in running portfolios with a long view, if we say that's what we are, then we've also got to make sure that we're running our business that way, that we manage people that way, and that we are making all of our decisions with clients with the long-term view. So, it's almost got to cascade through the whole system. And I think one of the things that we've done is continue to reflect to make sure that we're showing up, reflecting that yes, we say we're long term, we can prove it in our portfolios, but we also have to prove it in terms of how do we run the business and how we interact with clients.

Vishal Hindocha: Amazing. And do you see — I know you interact with clients and different NGOs and different organizations — do you see the green shoots of hope that long washing is either at least being addressed or that people are, we can reorient or rewire the system to be more long-term oriented? What are the rays of hope, Carol, that you . . .

Carol Geremia: I think people are so desperate to want to get this right. There isn't a person in every major market that I travel into that doesn't shake their head and want help and want the ammunition to give us time to allocate other people's money the right way. And we know instinctively in our hearts and our minds that that is the best way to take somebody else's money and put it to work.

And so, when we do talk to clients or advisors or consultants, I think people want it. In fact, I believe today they want it desperately more so than they ever have. And I think the clarity of it is proving itself out. It's also why I think ESG and sustainability in its concept is so important, because I actually think it's an indirect way of extending time horizons. And so early on, when sustainability or socially responsible was sort of starting to build some momentum for us as active manager, it was so clear that we could crystallize what that meant in our active process because we think long term.

So, they're just intimately connected. They're not separate. For you to commit capital to a company over a long period of time, you know they have to be caring about the environment and the social issues of their workforce and society. So, I have so much hope. It's actually what excites me the most.

The thing that I know we will all run into is the idea of the measurement aspect, is how do you put it in a number? And so, I think that's what we have the opportunity to continue to innovate — talking to a lot of academics, talking to a lot of industry players, talking to a lot of asset owners — of what is the best way for us to tackle this so that we can help change the system we've built.

Vishal Hindocha: I love it. Thank you so much. What other challenges or opportunities do you see for the investment management industry right now? So, you talked about a couple already, but sort of the reallocation of risk and the future of capital allocation as we move out of this paradigm of increasing complexity, extremely low rates, easy money, into the sort of new regime. We've touched on some of the sustainability and long-term aspects. Is there anything else, Carol, that is the kind of what keeps you up at night question, both challenge and/or opportunity? What excites you?

Carol Geremia: Yeah, I mean, I just see so much opportunity, and I do think our job as investors is to be optimistic. Nothing can be achieved without optimism. Really, when you unpack that, and by the way, Helen Keller said that. The opportunity is to help understand for the future what all this disruption and change and uncertainty that we're all facing today gives us an opportunity to say, let's do it differently.

And as you know, we're talking a lot about it and describing it as playing a bigger game. It's the idea of not being afraid to leave your agenda at the door for a moment at least, and come to the table with the rawness of the opportunity to put it out there and say, how can we do this differently? If you truly want me to allocate your capital responsibly, and that's obviously what investors pay us to do and be good stewards of their capital, then how do we create the measurement structure that allows you to hold us accountable but also ensures that we are delivering on that long-term promise?

With that opportunity, and I said it earlier, it's also the biggest threat to us all doing this well. If it's just about beating a benchmark over a short period of time, there is no way we can do sustainability, we can meet net zero. And even if you don't care about that, there's no way you allocate capital responsibly that way. Beating benchmarks that are not fiduciaries and don't care what you own is not a good long-term model for getting this right.

So that's where I feel pretty table pounding about why I get at this. I would say we don't have all the answers at MFS. That's why opening the dialogue and playing the bigger game, I think in some of these conversations over the past couple of years, is — there's some pretty important investors stepping into this conversation. And even though it's not solved, I think at the end of the day you still have to be incredibly strong in holding your stance on being disciplined and having conviction that this is the right thing to do, no matter what the noise is or what the industry tries to pull you to do, is to fight like hell against it because people, two things, don't pay us to be late. And the second thing is they don't pay us to be procyclical in how we make investment decisions. They don't want us to follow the herd. They pay us to have a countercyclical view. And many times, that's going against the grain. It's not easy.

Vishal Hindocha: I'm glad you bring that last point up because you talk about playing a bigger game, and I can imagine that some listeners will think, well, that takes tremendous amounts of courage, to leave your agenda at the door, even if just for a moment. What do you think gives you the courage of that conviction and the organization, the courage of that conviction, to be able to hold out and swim against the tide or to have that countercyclical view? What is necessary in order for an organization or for you to not only have the vision but also the ability to then have the stomach for that fight?

Carol Geremia: The term gets used all the time in the industry now is purpose. I was brought up in a culture that is very, very clear about the purpose of why we exist. And again, we say that now, and Simon Sinek, I applaud him for bringing it out more clearly in so many of us, is to just always be answering the question of why do you exist? What is your purpose?

And I have learned that here, at the end of the day, we're managing money. This isn't our money. We're managing money that is not ours. And so, it's the most important thing that we can do, to figure out how to make sure we do that in the best interests of our clients. And although we use those terms all the time, nothing is black and white, everything is gray. So, it requires a lot of deep conversations, a lot of debate. And sometimes people think it takes longer and it's slower, but actually I always believe that a collective decision, bringing multiple diverse views into almost any major decision or even small decision, you will get to a better place.

So, I've grown up in that environment, and so it has always allowed me to say, people have said, "Why do you like MFS?" Because we like to get at the truth, and it could be really ugly, even if the truth for us needs to be changed and rethought, that we're not afraid to do that. So, through thick and thin, I've watched others before me do that at this company, and to not be afraid about it as long as we're willing to do it together.

Vishal Hindocha: Great. Thank you, Carol. One of my hopes for this podcast is for there to be some sort of pragmatic or practical wisdom in it, and a great mentor of mine and a good friend of yours, Roger Owen, he came up with this term of WISDOM, wisdom being an acronym for what I should do differently on Monday. So, the question to you is do you have a piece of wisdom for members of our audience? What practically, what would be their homework or what would you like their call to action to be for something different that as a practitioner and someone in this industry we could be doing differently on a Monday?

Carol Geremia: I think the idea of playing a bigger game is a really cool one for all of us to practice. At work, at home, I think we're in a time that requires us all to play a bigger game, to find allies that we'd never expected we would have for the future, to make investments we never assumed we would have to make, to get out of our comfort zones like we never have been forced to before.

And we've just come out of a global pandemic. Nobody has ever done that before that's alive. I've already forgotten it. That's not okay, because it explains a lot of the disruption. We've gone now to eight billion people in the world. When you see that when I was born there was about 70% less people on the planet. All of those things are telling us today that the future is going to look different. So why not play this bigger game, get out of our comfort zones, and also, I think, recognize that it's not supposed to be a straight line.

My least favorite word today, although I would never have been able to tell you this 10, 20 years ago, is perfection. And I can say that well, yeah, nobody likes the word perfection, but it is amazing how much we all strive to be. And it's not supposed to be like that at all. It's supposed to be twisty and broken and difficult and challenging, but if we are open to finding the truth, to working together, to put our vulnerabilities out there, and I think a lot of that is coming out today, the resilience that we all have shows up in much bigger ways than when it's all being clamped down and organized and sped through.

Vishal Hindocha: Sanitized.

Carol Geremia: And do it faster, more quickly. I think the last thing I would say is listen, we're not the technology industry and I don't think we should ever want to be. The technology industry is amazing for speed and efficiency. That's not what we are. We are fiduciaries and stewards of other people's capital, and I think we just have to continue to remind ourselves that the role we play, both in helping people create wealth and retire and save for college and all the things, but also we have a huge impact on the world and the direction of the world, and that's why we need to play a bigger game today.

Vishal Hindocha: Absolutely. I think two things on that. I'm glad you bring up the technology because there's so much to admire about how great technology companies and technology companies have been innovative and more agile. And often an accusation that gets lobbied at the financial services industry, maybe unlike the fashion industry, is it's not always the most forward thinking or the most nimble or the most agile. And there's a sort of tendency to lean into the move fast and break things kind of mentality.

But the sanctity or the sacredness of what we do, which is manage other people's money, I don't think we have the luxury of moving fast and breaking things and launching minimum viable products. I think we actually have a higher duty of care to, because what we're doing is looking after other people's savings, retirements, pension plans. And so, we don't unfortunately have the luxury all the time to move fast and break things.

But the flip side of that is a question about trust, and this has been the undercurrent of, Carol, a few of your responses. I think the industry, I think you would agree, has to do a better job of eliciting trust from the end saver. And if you look at the Edelman barometers of trust in the industry, unfortunately the investment management industry tends to rank much, much lower than the technology companies who tend to top out in that, which is often paradoxical for some of us, given some of the scandals.

So how do you square that? How do you think about how careful you know that the investment management industry has been at trying to protect that level of trust? And yet the perception is often that we are not the most trustworthy of industries. How can we recover from that to be in a better position of trust?

Carol Geremia: Yeah, I'm actually glad you brought that up because when you think about the opportunity, you asked me earlier about the biggest opportunity for the industry is to increase that trust tremendously. And I don't think we're actually far off. It gets back to the fact that we're living in a system of micro measurement around the wrong things that actually erode the trust. Short-termism erodes trust, and that's just the truth.

I think also what we try and do as more and more money moved to risk, that's why the measurements skyrocketed, and holding each other accountable was so important because you think that by micro measuring that's a false sense of comfort, measuring more and more risk. And the irony is it's the exact opposite, but that's hard to communicate. And I think we've been pushed into this idea, like technology almost, is that the holy grail is to figure out how to make money faster and faster. And the irony, again, of that is people's time horizons are not over short periods of time. They're long.

And so, the best we can do, and the CFA actually also does a trust survey, but one of the things I thought they did a fabulous job is building four blocks to investor trust. And it first starts with transparency and information. That's the beauty of technology. You don't need to take weeks and weeks to find out information anymore. Literally push a button. And so, nobody has a true information advantage like they used to.

But where it starts to evolve in time is it becomes much more than just information. In fact, so much information can give you tons of false signals. It really gets to the next level of building engagement and alignment through that process. And so much of it is through open dialogue and judgment and deeper research, and quite frankly, having an analysis advantage.

But then once people see that judgment of what you do with information the technology provides us, it I think opens the idea and the understanding that this is a lot more complicated than people even dream it to be, because again, you're forecasting the future. And as you build those blocks of trust, from information to engagement and knowledge and understanding, then actually I think you can step into people wanting to take your advice, wanting to turn over and delegate their portfolios to you because they really trust the process that you're going through to make the decisions that you have to make on their behalf.

So, I think there's a huge opportunity. It's just that if we're relying on technology, and it's all about speed and efficiency and we think that's the business we're in, we're nuts. I think that's what we have to fight against. And I think we have this opportunity to show up better so trust is built better.

Vishal Hindocha: It gets back to your wisdom piece of advice, which is if we play the bigger game, then we're likely to act in a way that elicits more trust for the investment industry and the work that we are actually doing.

Carol Geremia: And maybe I'll just add one last piece to it. I do think the industry with all the layers within the investment chain that have been built to hold each other accountable in the system, we put a lot of pressure on issuers and public companies to change and transform and keep up and compete and be more sustainable.

But I actually think we need to take a moment and really recognize that the system that we have inside the chain to hold ourselves accountable on public companies, if we start to play a bigger game around that, I think our influence to public companies and how we engage with them will be so much better in the future than they are today. It's about owning and caring what you own. It's not about, hey, I'm just exposed to this risk and all I'm trying to do is harvest a return, so I don't care about your company or your business. And I think the model today is saying, we can't do that anymore, or we have to do a lot less of it.

Vishal Hindocha: And the ownership mindset that you are talking about versus a sort of optimized, exposure-based mindset, I think is, as you said, emerging and coming good, and actually changing the dialogue that we are having even within ourselves, but also therefore as a ripple effect out into other stakeholders within the industry.

So, Carol, a feature of this podcast is that the previous guest gets to write a secret question for you. So, there's an envelope on the table, which if you wouldn't mind opening and reading the secret question, you will, in the spirit of full fairness, you will get a chance to write a secret question to the next guest on the podcast.

Carol Geremia: Should I read it?

Vishal Hindocha: Please.

Carol Geremia: Yeah. So, assume you've been called to testify at the House hearings on ESG. What is the essential message you would want to deliver to them?

Well, I would quote the person that asked me this question because I think he said it really well the other day, is that ESG is not woke. It's not about trying to be idealistic and even get into the political two-sided approach to any of this. Sustainability, ESG, active management is about capitalism and allocating capital well. And ESG applies to every single business, every company, private or public. It's not just about the energy companies, it's about all of us.

And then ultimately, I would also say is the most important thing we can do in the US is to help the consumer understand why this matters. The most important thing that we can do from a government perspective, an industry perspective, is to educate, powerfully educate so that people see the opportunity of things that are going to be built in the future.

And that's how money's going to get made. That's how capital's going to be allocated. That's how people are going to decide where they're going to want to work. It's all of it. It's all about opportunity and optimism. And if we can't show people that today, Congress, then we're actually fighting the future. We're not going to have the opportunities that we do if we don't embrace this.

And he did a follow-up question here too, just in terms of the ISSB and the voluntary adoption in the US. I do think unless we change the middle of the system on the investment side of how we're holding each other accountable, if that doesn't change, we're going to have a tough time. So, I'm getting a little worn down on just holding the issuers in public companies. It's sort of like corporate America needs to change. I actually think there's a lot to be said there that is true. I also think we all need to change about how we think we're going to measure to ensure that we allocate other people's money responsibly. And we can.

Vishal Hindocha: And we can. That's a beautiful place to leave it, for us to look at ourselves in the mirror and make sure that we are holding ourselves as accountable as all of the stakeholders. It is important for us to also exercise our agency over this. So, thank you, Carol, for all of those insights and that wisdom and taking the time to be with us on the podcast today.

Carol Geremia: Yeah, delighted to be here. Thank you for having me.

Vishal Hindocha: So that was Carol. She left it in a really beautiful place, thinking about what is the role that we have in the investment industry and how can each of us step up beyond our role? So good luck on your desk on Monday, thinking about how to play a bigger game, how to step beyond some of the confines and structures that we have within our industry. And remember to email us at allangles@mfs.com. We'd love to hear from you on what you're doing to play a bigger game, or to reach out to us and figure out what we are doing to play a bigger game too. Thank you.

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