Spotlight on Women: A Conversation with Lacey Greenwalt, CFA
Spotlight on Women: A conversation with Lacey Greenwalt, CFA, Assistant Vice President and Portfolio Manager, Fixed Income Investment on her role at Fiera Capital and her outlook on ESG integration, inflation and challenges and opportunities in the current market environment.
What interested you in joining Fiera Capital?
Ms. Greenwalt: I joined Fiera Capital through the acquisition of Samson Capital in 2015. The acquisition was an exciting time at Samson, as the partnership with Fiera opened the door to significant opportunities for career development, particularly as a young investment professional. Although much larger than Samson, Fiera is quite entrepreneurial. I’ve found a willingness by the investment professionals to accept thoughtful ideas, new investment strategies, and award responsibilities when earned.
What are your responsibilities as a portfolio manager in fixed income and what is the most interesting / rewarding aspect of your work?
Ms. Greenwalt: I am a portfolio manager for short term investment grade strategies. In this role, I am responsible for portfolio construction, relative value and short-term market analysis, and corporate bond trading across strategies at the firm. I am a member of the fixed income investment committee and participate in our quarterly macroeconomic and interest rate forecasting sessions. I am also a co-portfolio manager on the tax efficient inflation strategy.
With the backdrop of rapidly evolving markets, one of the most exciting aspects of my work is having the tools to create and implement an investment thesis using macroeconomics, policy themes, and the contemporary trading market environment. Listening to clients tell their personal stories and explain the passions that drove them to earn their wealth is also very interesting.
You recently participated on a panel at the MIT Sloan Investment Conference on Understanding Risk in Fixed Income: Rates, ESG and Inflation. What are the top 1-2 key takeaways hailing from that discussion that should be on investors’ radars?
Ms. Greenwalt: Investors need to take a critical look at the major forces in the contemporary economy and identify where these forces may have competing and divergent impacts. I’d argue that at the moment, these major forces are policy related. Domestic fiscal policy and domestic monetary policy will drive interest rates and inflation, and ultimately the credit and economic cycles. Shifts in the economic and credit cycles represent significant risks to fixed income markets.
As MIT Economist Rudi Dornbusch famously noted frequently in the late 1990s, “None of the postwar expansions died of natural causes, they were all murdered by the Fed. Time and time again, inflation was the issue.”
The economy has sustained one of the largest expansionary periods in the post-war era. Fiscal and monetary policy effects are magnified at this late stage in the cycle. The economy likely has another 12-24 months of support from existing policies. Key inflation indicators such as Core CPI and Personal Consumption Expenditures (PCE) have shown that inflation has been relatively benign in recent years. If, however, expansionary fiscal policies lead to inflation, it may cause central bankers to withdraw liquidity and accommodative policies faster than anticipated. The interaction of fiscal and monetary policy at this juncture has the potential to end the current expansion and turn the economic and credit cycles.
ESG investing has become increasingly popular and was a key theme of your panel discussion. How does Fiera Capital think about ESG from a fixed income lens?
Ms. Greenwalt: We view ESG as an additional tool to measure risk in a fixed income portfolio. ESG should not be considered in isolation; an ESG framework can inform the portfolio manager’s relative value decisions during portfolio construction and trading. A company or issuer that scores well from an ESG standpoint but is cheap on a relative value basis compared to comparable companies within a sector may present an opportunity to invest. On the other hand, a fully valued issuer that scores lower in an ESG framework may represent a funding opportunity for those investments where we see potential engagement opportunities or improving ESG stories. It is important to realize that a high credit rating does not always translate into a high ESG score; the opposite can be true as well.
In this current environment of market volatility and political uncertainty, what are the primary risks and opportunities you are seeing in your market?
Ms. Greenwalt: Investors need to analyze the impact of the interaction of fiscal policy and monetary policy as we exit a period where markets were driven by monetary policy. The “beta” trade of the monetary policy driven environment in the post crisis period is ending as fiscal policy begins to create dispersion in corporate credit markets. Although the economy is receiving additional stimulus from federal spending, corporate tax reform is likely to drive returns in the corporate bond market. A lower overall corporate tax rate certainly is more broadly beneficial. However, recent tax reforms have changed the optimal capital structure of many firms and debt is more expensive. Repatriation of cash and opening that cash for domestic use may be positive for corporate growth if used for M&A and investments. Yet, these activities may result in balance sheet deterioration as companies don’t often voluntarily shore up their balance sheets with additional earnings or cash.
Fiscal policies will impact the cross-section of returns within credit markets and will likely result in decompression among quality (Investment Grade vs High Yield, but among credit buckets within these sectors as well). Lower quality issuers may be very meaningfully impacted by the changes to interest deductibility and the higher cost of debt. There is significant opportunity in understanding which companies and sectors will benefit the most from the effects of fiscal policy changes and identifying current mispricing situations related to those effects, as many are yet to be determined.
What advice you would give a younger version of yourself in pursuing this profession or someone who is interested in the asset management industry overall?
Ms. Greenwalt: Constantly learn and challenge yourself — you are responsible for your intellectual and professional development. There are many great minds in the industry – make the extra time to read and learn from all of their work and research. Learn from smart people. Let them help you. Your contributions are your currency in this industry, and you must strive to constantly improve the quality and depth of your work. Don’t simply repeat what has always been done. Don’t take the easiest route. Be willing – and prepared – to work hard.
There are opportunities to challenge how even very well-established asset classes, like investment grade fixed income, are managed and viewed in the marketplace by sophisticated investors. Find those opportunities – they can make your career. Know that true opportunities are earned. Don’t be intimidated by others who challenge your effort to earn the next opportunity. And remember at the end of the day, while you are trading bonds and constructing portfolios, it is a privilege to have the responsibility to manage wealth earned from someone’s lifetime of work.
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About Spotlight on Women Spotlight on Women is an event series hosted by Fiera Capital, which is dedicated to promoting diversity and female leadership at the firm and across the asset management industry. Learn more about Fiera Capital’s female leadership: |