Overseeing three BNY Mellon Investment Management businesses keeps Stephanie Pierce on her toes, but by hiring and nurturing the best and most diverse talent, she is safe in the knowledge that Dreyfus, Mellon and BNY Mellon IM’s Exchange Traded Fund (ETF) business all keep ticking along nicely.
Pierce has responsibility for the development of the firm’s sponsored ETF offering as well as the index and money market businesses, overseeing some US$800bn in assets as of March 31, 2023.
Pierce has been in the investment industry for over 30 years, having joined Goldman Sachs after graduating from Stanford University. After spending 13 years at the firm in the private wealth, equity research and asset management businesses, she took on roles of increasing responsibility at Janus Henderson and later at Fidelity Investments, prior to joining BNY Mellon Investment Management in 2019. It is this well-rounded experience that Pierce believes laid the groundwork for the move into her current role.
“I cut my teeth through a number of market events and crises,” she recalls. “Between 1994 and 2001, there was the Mexican peso devaluation, the Asian economic crisis and the tech bust. I sat on a trading desk and saw what happens when markets freeze and you can hear a pin drop. That’s how I learned about market structure.”
Pierce says the route to CEO was not a linear one, seeing her move from the sell side to the buy side and from international to domestic equities and multi-asset. With each move, she managed a larger team of individuals. Looking back, her key takeaway is that, as an executive, you can’t be an expert in every field and most direct reports are in roles you have never done yourself. A strong leader is able to diagnose a situation, understand the problem and solve it by bringing together the right people, she says.
Pierce compares it with being the conductor of an orchestra. “You have to understand the role of each instrument and how to bring them together to create a symphony, but you don’t need to have played all the instruments yourself.”
She adds: “As a leader, I ask myself where are we today and how do we get to future state? What steps do we need to take and how do we bring everyone along for the ride? How does my vision become part of their vision so that we execute together in a seamless way?”
FIRST TIME FOR EVERYTHING
Reflecting on what she is most proud of in her career, Pierce says she has an affinity for places or times when she experienced a first. For example, becoming CEO of the three BNY Mellon affiliates and overseeing the launch of the ETF business. At Fidelity, she built the firm’s investment thought leadership program. “You never forget the firm that gives you the opportunity to do something for the first time,” she adds.
Pierce thinks about this a lot when “paying it forward” to the next generation at BNY Mellon. She likes to discover up-and-coming talent in the team and equip them with the right tools to be successful. “That was the gift given to me, so I think as leaders that is what we owe our people.”
Besides giving people the opportunities to succeed, how else does Pierce aim to inspire others? She says above all, leaders must have passion: people love to work with people who love what they do. On a personal level, what drives her is learning new things and being able to build businesses and teams.
She explains: “I like a situation that is in a molten state – think of clay before it goes into the kiln – when you have an opportunity to shape it and make it your own, whether it’s a product, a team or a business.”
As someone who has experienced numerous shifts in markets and economies, how does Pierce judge today’s backdrop? As the boss of a leading index business, she has seen first-hand the growing popularity of passive products. She believes this has been driven by a combination of mixed active performance and the secular shift to fee-based investment management among investment advisers.
“The value-add for advisers is to find components for a portfolio that are inexpensive, liquid and transparent so they can add value for their clients through asset allocation and financial planning. Index strategies are a natural fit from this perspective.”
Pierce notes the low interest rate backdrop over recent years has led investors to stretch for yield in portfolios, often into more creative and esoteric areas that might carry higher risk. But she says shifting to a higher interest rate environment has been a game changer in terms of portfolio construction because there is less necessity for investors to move up the risk curve or down the quality spectrum to get yield, which frees up risk budget for other areas of the portfolio.
DEMOCRATIZATION OF FINANCE
Freeing-up risk budgets has also seen investors increasingly exploring socially responsible investment opportunities, notes Pierce. “Clients increasingly want more than just the investment return,” she says. She flags the BOLD® share class, which stands for Black Opportunity for Learning and Development, on the flagship US$123bn Dreyfus Government Cash Management money market fund, as of March 31, 2023. The share class donates to the Howard University’s GRACE (Graduation Retention Access to Continued Education) Grant for undergraduates in need. Since it launched in February 2022, the strategy has raised over US$4bn in assets, as of March 31, 2023. “BOLD resonates with clients who want to align their investments with their values,” says Pierce. “If we have the potential to deliver investment returns that also deliver on clients’ non-financial goals, that is a win.”
Making investing accessible to a wider slice of society is something Pierce is passionate about. She argues the asset management industry has its work cut out to close the gap with underserved groups (see chart below), but BNY Mellon is playing its part. As well as the BOLD initiative, Pierce highlights Mellon’s US$13bn (as of March 31, 2023) AFL-CIO index collective investment trusts. These are a range of retirement savings vehicles run in conjunction with the AFL-CIO,1 America’s leading confederation of unionized workers.
Another example is a direct indexing collaboration between Mellon and Pershing X that gives retail investors access to institutional-quality index portfolios that can be tailored to their values and preferences, while getting broad market exposure and some potential tax benefits.
“These are examples of commercial initiatives that also seek to provide solutions for an underserved clientele who may not feel comfortable investing or may not have access to an adviser. We are doing some innovative things in that space both on the institutional and adviser side.”
Another underserved group in the industry is women, she says. In 2022, BNY Mellon published one of the largest independent research studies on women’s investment behaviors2 and the barriers women face to investing in financial markets. It found that if women invested at the same rate as men, there would be an additional US$3.22 trillion of assets under management from private individuals – of which an estimated US$1.87 trillion of additional capital could flow into responsible investments.
Pierce says one of the biggest challenges facing the industry is getting women to be both practitioners and customers, particularly if they don’t see anyone they recognize or relate to. Leveling the playing field between men and women goes right to the top at Mellon and Dreyfus, where 75% of the leadership team is female, and the BNY Mellon ETF board of directors, which is 50% female, as of March 31, 2023.
“Women coming up in the organization, and even my 13-year-old daughter, see all these female faces on the screen and say, ‘If they can do that, maybe I can too.’ It gives motivation and encouragement to the next generation.”
Who was Pierce’s own guiding light when coming up in her career? “There were definitely role models,” she recalls. “Most of them were men back then, but I think the more important part is how they behaved toward me and others.”
Pierce recalls one senior partner who took her under his wing when she was in her twenties and gave her opportunities to develop and try new things, and another who, no matter how busy he was, always ensured that when talking to her that he came out from behind his desk and gave her 100% of his attention.
“I learned those things from some of the best. If I can give those experiences back to my direct reports and cascade them down then I think we are paying it forward and doing something right from a leadership perspective,” she concludes.
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ETF shares are listed on an exchange, and shares are generally purchased and sold in the secondary market at market price. At times, the market price may be at a premium or discount to the ETF’s per share NAV. In addition, ETFs are subject to the risk that an active trading market for an ETF’s shares may not develop or be maintained. Buying or selling ETF shares on an exchange may require the payment of brokerage commissions.
ETFs trade like stocks, are subject to investment risk, including possible loss of principal. The risks of investing in the ETF typically reflect the risks associated with the types of instruments in which the ETF invests. Diversification cannot assure a profit or protect against loss.
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Socially responsible portfolios may forego opportunities to invest in other securities when advantageous, or may sell securities when disadvantageous for it to do so while pursuing its socially responsible criteria.
Past performance is no guarantee of future results.
Mellon Investments Corporation (MIC) is a registered investment adviser and subsidiary of The Bank of New York Mellon Corporation (BNY Mellon). MIC is composed of two divisions: Mellon, which specializes in index management, and Dreyfus, which specializes in cash management and short duration strategies.
BNY Mellon Investment Management is one of the world’s leading investment management organizations, encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally. BNY Mellon ETF Investment Adviser, LLC is the investment adviser and BNY Mellon Securities Corporation is the distributor of the ETF funds, both are subsidiaries of BNY Mellon.
Pershing is a subsidiary of BNY Mellon.
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