Northern Trust’s Chief Investment Officer Shares Career Insights with Students

The varying success from year to year of private asset classes provides a perfect illustration of the importance of diversification in managing portfolios, said John Skjervem, ’91, chief investment officer for Northern Trust. “It’s pretty difficult, if not impossible, to handicap which asset class is going to come out on top each year,” Skjervem said during a talk presented by the student-led Investment Management Group at Gleacher Center on March 8.

In any given year, huge variability exists among the returns in each asset class, he said. “The best way is to build a diversified portfolio and have an exposure to all of those asset classes,” Skjervem said.

Skjervem climbed from portfolio manager to national CIO by staying open-minded and embracing everything he learned. “Many people enter an industry or profession at a certain time and they just lock in on what’s happening then and there and they don’t change,” he said. “The only thing I did differently to move up was that I constantly challenged the status quo.”

Skjervem recognized Northern Trust’s portfolios were not sufficiently diversified, were too heavily reliant on proprietary capabilities, and could access better capabilities outside the company. “I got in the position I’m in because I recognized that it did not make any sense to have a client in Seattle with a totally different investment experience than a client in Sarasota, when they’re both under the same brand,” Skjervem said. “Entire companies and divisions get struck in ruts.”

The analytical skills Skjervem gained at the GSB have been invaluable in his career, he said. “The great thing about the GSB is that you recognize the folly even in what are considered contemporary investment management practices,” Skjervem said. “The GSB gives you humility in an industry where humility is often a rare trait. Most of the ego and bravado in this business is unfounded. You wouldn’t believe how many people confuse brains with a bull market.”

Skjervem was able to get senior or longtime employees to listen to his ideas by trying to persuade them with facts. “I present the vision and then I present the facts that support the vision,” he said. “As diplomatically and earnestly as possible, I just refute the objections. The objections are usually based on urban myths and all sorts of silly stuff. Yet you have to be genuinely respectful or you will be dismissed immediately. You might be addressing identities people have held in the deepest part of their souls for, in some cases, 20 years.”

Because many members are interested in changing careers, the Investment Management Group invited Skjervem, a chartered financial analyst, to share insights on how to break into investment management, said Sorin Dan, co-chair of the group and a student in the Evening MBA program. “The main takeaways from his talk are that the GSB gives you a lot of advantage but you have to get your CFA, and if you want to work in personal finance, you have to have people skills,” Dan said. “He gave a really good perspective on what to look for when you work for a large asset management company and what skills you need to bring to the table.”

 

--Phil Rockrohr