07. Inside Lloyd’s: Guillermo Donadini on Risk, Capital and Leadership

Guillermo Donadini joins Sean Thompson and Hartej Singh to discuss how investment strategy supports the Lloyd’s insurance market. As CIO of the Corporation of Lloyd’s, Guillermo manages the central fund while overseeing investment risk across the broader marketplace.

Guillermo begins by reflecting on his early exposure to economics growing up in Argentina, where economic instability made financial understanding a part of everyday life. His career path, from research roles to global CIO positions at AIG and eventually Lloyd’s, was shaped by curiosity, resilience, and a belief in being “part of the solution.”

He explains how the Lloyd’s model differs from traditional insurance companies. Instead of operating as a single insurer, Lloyd’s functions as a marketplace where multiple syndicates share complex risks. The central fund acts as a financial backstop, making its investment strategy critical to maintaining market confidence.

The episode explores how Guillermo approaches asset allocation, risk appetite, and portfolio resilience. He discusses how liquidity stress testing and scenario analysis help ensure that assets remain available when claims arise, even during extreme market events.

Guillermo also reflects on lessons from earlier crises, including Argentina’s sovereign default, and how those experiences shaped his approach to risk management. He emphasises the importance of preparation, contingency planning, and disciplined processes.

Beyond investing, Guillermo shares insights on leadership, mentorship, and personal purpose. For him, the ultimate measure of success is not only strong portfolios but also developing the next generation of investment leaders.

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Transcript

SPEAKER_00 0:10

Welcome to the CIO Chair, a podcast hosted by the CIO Investment Club in collaboration with the Pension Insurance Corporation. In each episode, we will sit down with top chief investment officers to explore their unique investment philosophies, decision-making processes, leadership strategies, and personal career journeys. Now let's get started. Welcome everyone to the CIO Chair, hosted by me, Sean Thompson. And me, Hart Edge Singh. The CIO Chair's guest today is Giamo Donardini, Chief Investment Officer at the Corporation of Lloyds. Guillermo has over 35 years of experience in global investment and asset management across life, pension, and general insurance portfolios. He previously served as global CIO for AIG's General Insurance Division, where he led the investment strategy for a$100 billion portfolio across 49 countries. He has also held senior roles at ING Bank and MetLife. Guillermo has a strong track record in multi-asset portfolio management, governance, and international leadership. A committed advocate for diversity and inclusion, he was executive co-sponsor of AIG UK's Gender Equality Matters Employee Resource Group and received several industry awards for his work. Guillermo is also a trustee at Independent Age and a member of its Finance and Resources Committee and Chair of its Investment Committee. Welcome to the CIO Chair Guillermo. It is a pleasure to have you here. And as I always say to our guests, I hope you are sitting comfortably.

SPEAKER_02 2:02

Thank you for having me here, Jean. So I'm very comfortably here and looking forward to our conversation. Thank you.

SPEAKER_01 2:08

Fantastic. So we're really looking forward to this conversation, not only because of your interesting journey to the role, but also to hear about Lloyd's Corporation, which is a fascinating organization with a long history. So we're going to start with going through your journey to the role, and then we're going to ask you some more questions about Lloyd's. So when we go back to the very start, please tell us about your earliest experiences with economics and how you sort of started this journey.

SPEAKER_02 2:37

Well, my experience with economics started when I was very young, like five years old or so, because my father was uh he's still a professor uh in economics, very well known in my home country in Argentina. Um so we used to spend uh like uh 15 minutes per day uh picking up the car from a garage which was far from our house. And he basically explained me economics uh since then. And that was very interesting. And and he was very, very good in explaining economics for the language of a child at the time. So uh this is when basically was my first experience with economics, and I remember of also because when you live in Argentina, um Argentina, as you know, is a country that always has some economic turmoils. So you're always exposed to this. Everybody talks about economics, right? Um so basically, economics is also part of your life because if you don't understand it, you don't understand inflation, you don't make it to your adulthood because you died beforehand, right? So we have to know economics. And and I remember of being a child and and having coins from Europe at the time, before the euro, of course, and and it was basically following the effects um changes uh, you know, every every month. So that was something that started from the very beginning. I was not aware of it until I started working in finance and I I loved it, right? But that was basically the beginning of my relationship with this.

SPEAKER_01 4:02

Amazing. So, how did you decide from your love of economics to go into finance and what was the opportunity that helped you make that transition?

SPEAKER_02 4:11

So actually, it was by chance because when when I finished my master's degree in economics, at the end of 1990, it was very hard times in Argentina at the time. Um, and it was very hard to find a job. And and I remember went to one of my professors at the university and asked him, I said, Do you know what is an opportunity for me? And he basically introduced me to this very important Argentinian think tank that they were looking for someone uh to do uh basically fixed income analysis. Um and I started doing that. At the same time, I studied also a post a postgraduate uh in finance uh because of that, because everything came together and it was amazing and I loved it. Um so it was by chance, I didn't have a plan. Actually, I was more interested in trade economics uh when I finished my my degree. Uh but I ended up working in in that, so I worked in this think tank, and then I worked in another one, and then I worked for ING Bank to build the research uh area uh of ING in Argentina. And from there I went to I joined AIG in 1994, basically working for a company, for a pension company that was built by um by AIG at the time. It was a new system coming over in the country. And this is when I started basically working for pensions, then life insurance, then property and casualty, Latin America, and and more and more. So that was basically the story. Is making sure I was always part of the solution, not part of the problem.

SPEAKER_01 5:41

Obviously, you had finance experience, but then to become an insurance CIO, you obviously had to understand the insurance business. Did that come like over time through the lots of different experiences you have? How did you fill those two worlds, the the language of insurance, the language of finance?

SPEAKER_02 5:58

Well, the language is very similar, right? Uh what I found is very similar. And actually for me, insurance, what it gave me was purpose. You know, one of the challenges for me beforehand managing assets is that there was no clear purpose. I mean, benching beating the benchmark could be a purpose, but it's very hard. And it's like an empty purpose, right? Um at least for me. So in insurance, basically you are running assets, you are managing an investment portfolio to pay a claim because that money will be used by someone else that needs help. So that gives you a completely different approach. The way you balance risk and returns is different, and of course, you need to understand very well how those needs are defined. So you need to have a lot of conversations with actors and with the CFOs to understand exactly how to build that purpose, how to build those, what we call ALM or or whatever you want to call him. But it's it's that actually for me that is the most interesting part. It's not managing assets per se, it's managing assets to cover future liabilities. Um, and that's basically what makes for me this job quite exciting.

SPEAKER_01 7:09

That's fantastic. And and I think that leads us on to so the Lloyd's Corporation itself. For those who aren't familiar with it, what is the role it plays in global insurance and and obviously the purpose that it serves for its customers?

SPEAKER_02 7:22

Yeah, so Lloyd's is not an insurance company, right? It's um it's a global marketplace where basically specialists and the writers come together to ensure some of the world's most complex and unusual risks. So brokers bring the risk into the market, syndicates of insurance share them, which makes it possible to cover things that traditional insurance companies cannot do. And globally, this plays a major role in providing expertise and capacity for high-risk sectors like uh marine, aviation, energy, cyber, etc. Right. Um so it's um and Lloyd is licensed in 80 countries and provides uh reinsurance in over 200. So is that basically um Lloyd's is like uh, you know, is a is a benchmark of of how complicated risks are are basically made.

SPEAKER_00 8:11

It's a marketplace, isn't it? It's it's where people come together to then individually underwrite insurance um within the different managing agencies, stroke actually syndicates that operate under the Lloyd's market. Exactly.

SPEAKER_02 8:24

So it's a marketplace with rules, right? With rules of engagement. And this is it's awesome because you can see the most uh talented people finding solutions for clients uh everywhere in the world.

SPEAKER_00 8:37

I have a soft spot for uh the Lloyd's Market. I've had my first job working for a Lloyd's managing agency back in 1986, uh the Merikt Group. So I've always and ever since I've always had some connection uh with the Lloyd's market throughout my career. So it's uh it's a it's a place that I like and uh I I speak a lot of.

SPEAKER_02 8:57

Yeah, and and actually it's it's a very for me after working so many years in insurance, but basically now at law, it's it's a completely different dynamic uh because it's not just your responsibility, as in my case, I'm serving as a CIO, which is uh investments, it's also about the interaction within the marketplace, which makes it actually quite ritual. It's a quite unique experience and fully recommended for everyone.

SPEAKER_01 9:20

And so to sort of to bring together your CIO experience and the Lord's Corporation, what is the role of a CIO of the Lord's Corporation?

SPEAKER_02 9:28

So my role is basically to lead a team that has two basically two goals. One is to manage the central fund, which is the ultimate layer of capital of what we call the capital stack of the corporation, which is around 3 billion sterling, and also to oversee uh what is the investment process and investment risk that is run by all the different syndicates and managing agents in the corporation, is uh around 100 billion sterling as well in assets. So basically that's what we do, right? And some of that we do it uh in terms of the central fund, we do that um internally uh and also using external asset managers. And we also manage a part of what is called uh the PTF, which is the trust funds uh that the Lloyds have. But we do it for the overseas. I mean, something we can talk about this later, but it's it's something that is also we we pay attention to that. But that's basically what we do.

SPEAKER_01 10:29

Fantastic. And in terms of uh your investment objective as the CIO, what does that look like? One in terms of time horizon, and two in terms of returns and risk taking.

SPEAKER_02 10:42

So we make decisions on the central fund, right? So that's basically what we we made decisions over and we defined investment strategy. So the central fund um has a long-term investment horizon because it's it's very low. The probability of using those assets to pay claims is very low, so we can have that approach. So basically, we have a 10-year view. Yeah, we don't have uh two or three years. Uh, in terms of uh what they are, the overseas transfunds, uh, the market has a much shorter investment horizon because those are basically assets that are supposed to be paying claims in the future, uh, which has a basically a market investment horizon of three to four years, basically. Um, and the way that the returns and the risks are calibrated is what is most important is to calibrate our uh risk capital at first to make sure that is aligned to our target credit risk rating uh for the entire ecosystem. Today is a double A minus. So from there, then we define the strategic asset allocation and we build that strategic asset allocation, making sure that under different stress scenarios, uh we don't jeopardize dramatically uh our risk rating, right? So it's uh maximizing risk trends, but very clear anchor in terms of how much risk can be taken.

SPEAKER_00 12:05

Can I just ask a question, Guyana? Because you're managing the central fund, which is so just for those listeners who don't know, so initially you have the syndicates and you have the syndicate's money that's paying off the claims. If that money is no longer, then they go to the funds at Lloyd's, which is where they hold the capital to allow them to underwrite at Lloyd's. And if those funds no longer become available, they then come to you at the central fund to say, look, we can't meet our claims, could you please pay it? Because the unlikelihood over, I mean, the last 330 years plus, there's never been uh that that sort of claim on the central fund. Are you able to think about investing the central fund out longer than possibly um syndicates might be able to do?

SPEAKER_02 12:55

Actually, yes, because we have more equity in the central fund that actually uh the syndicates have uh of the managing agents. We have a higher concentration of private assets as well, because our liquidity requirements are lower, right? So definitely uh the central fund can have that approach. But again, the limitation is given by what happens on those scenarios. Because what we need to understand is how the central fund operates together with the rest of the investment risk within the ecosystem, right? So um definitely is uh the less probable you will need those assets to be used in the short term, you can have longer-term horizons, which means that you can take more risk and more liquidity risk. Uh, but of course, that is always needs to be uh very, very well calibrated because the uh you know the the rating of the market holistically is made with all the assets, right? So we cannot do that in isolation. We cannot define the asset allocation in isolation, irrespective of what the rest of the market is doing.

SPEAKER_00 14:00

Got it. Thank you.

SPEAKER_01 14:01

And to go back to so so the risk appetite is obviously your most important sort of uh sort of decision to make, and then that leads to your strategic asset allocation. What does that look like and and how important is the strategic asset allocation within your process?

SPEAKER_02 14:18

So there are different ways on different components to define the risk appetite. The one is the typical value at risk, which is uh how probable is you know your your that your fund will decrease in X percent in one in 200 years and later, and all that those indicators. But also we have another uh another elements to define risk limits, which is basically what are the effects composition of the central fund, and we align that effects composition to what is the economic currencies that those claims will be paid or are you know linked to. Also, in terms of uh interest rate risk, we don't take too much interest rate risk, that is unnecessary. We prefer to focus the risk on uh those risks that are diversifiable, like rate risk, for instance, right? Or equity risk. So this is basically where we define most of our strategies. So that that's basically the way. So it's a value-at-risk component, is uh effects and interest rate limits, and and making sure that you know everything is aligned together. And what is very important in understanding if that risk calibration actually works is when you define your strategy, you stress that with different potential or historical um you know market, negative market events. Uh, and this is when you need to understand very well how that works. Another component that I forgot to mention, which is very, very important, is uh liquidity risk, which is another constraint that we have. And basically we build um a liquidity framework which is based on those scenarios where you can need to have more liquidity that were required in normal circumstances, and at the same time where your asset portfolio is less liquid than usual. And you combine those two scenarios where you is the worst case in terms of liquidity, and and if you are uh okay, is basically what you need to run. And that's that's very important, right? Because uh at the end of the day, uh you need to have the assets and make sure they can become liquid the moment you need to honor your obligations.

SPEAKER_01 16:33

That's fantastic. I I was gonna ask you about private assets later, but it feels like given the conversations around liquidity and private assets, um, do private assets feature in your portfolio, given your longer time horizon? And how do you think about that given what you just talked about in terms of one, the aim for returns, but also the need for liquidity?

SPEAKER_02 16:53

Yeah, exactly. So um definitely the limit. So the way we limit our allocation in private assets is basically on uh using uh that liquidity framework, right? Because public assets are liquid, but becomes less liquid in in financial stress. I mean, we assume that private assets are always illiquid, right? That's I think is uh is a good, it's a good and safe assumption uh to be made, even though we know could be liquid, but uh the assumption is to assume that they are not liquid. And and we basically, again, we we calculate in that framework, which again I repeat, is when we need more liquidity than is expected to be needed, and at the same time where our assets are less liquid, and we see uh what are the minimum liquidity requirements, we make very um very aggressive assumptions about how those liquid assets can be liquidated under those stress scenarios. And based on that, we define okay, this is the portion of those assets we can have. That affects privates, definitely, but also uh high-grade fixed income. Because you know, high-grade fixed income under stress are also become less liquid, right? So that's the way we incorporate that into our framework and the way we define, okay, these are limits in terms of uh how much privates we can have in our portfolio, both credit and equity assets.

SPEAKER_01 18:12

Do you have a say, for example, like some of the funds are taking longer to pay out, for example, specifically in the private equity space than they have historically. How do you account for that? The fact that some exits are taking a bit longer than they historically have?

SPEAKER_02 18:27

Well, again, it we don't make any assumption about liquidity for those funds. So we don't use those funds as a source of liquidity. We source them as the liquidity premium and source of diversification. So private assets are for us the way, the reason for having them is because they have a great diversification benefit. Um and also because you have an additional layer of risk premium, right? But we we never use those asset classes as an asset that will be paying uh you know in the future. So the central fund is defined in terms of size based on very unlikely scenario that all of it will be used to pay claims, right? So basically, no more than 20% of that central fund is invested in private. And that's in a scenario where probabilistic is almost impossible to happen, that we need those assets to pay claims. So it's more like a total return approach on those uh than the cash flow matching kind of approach on those.

SPEAKER_00 19:29

And when you're looking at the different types of assets that you're investing in, how do you go about deciding on which ones you might be um looking to manage in-house versus those that you might actually think about um appointing third party? And and going on further from that, perhaps you could also give us an idea about how you go about looking for those third-party managers.

SPEAKER_02 19:51

Yeah, so that's a very good question because there are two approaches on that, right? Um one approach is the efficiency approach. So where you say basically I will keep inside or in-house uh the bulk of our investment portfolio, and then I will outsource the uh the other ones, which are smaller in AUM, let's say, right? Or in participation of your portfolio. The thing is that most of the time, those risky or more complex asset classes are very expensive to run. But at the same time, because they are very risky, you want to understand very well the risk. So if you move from the efficient approach, efficiency approach, what you want is maybe to have your more sophisticated asset classes run internally, and then to outsource the other ones which are simpler to follow, right? And you don't need to understand the risk that much, okay? Like government bonds, for instance, right? Or others similar. But the problem with that is that to do that, you need to have a very, very big investment portfolio that makes efficient of having those uh very expensive and sophisticated investment teams in-house, right? So at the end of the day, from my perspective, my preference is to have the risky assets internally and the simple ones externally. But again, that depends on size. And the size is way above maybe$100 billion equivalent, right? Or something like that. Um depending also what is your asset allocation, et cetera. So at the end of the day, it depends on the size of the portfolio that you may end up to decision. But my preference is to keep the risky assets closer because you can understand much better what's going on, particularly in crisis.

SPEAKER_00 21:42

And that's overall a small part of the AUM that you're investing in, which is very different, I think, to the way in which the corporation of lawyers have operated in the past, where they've um operated and in the simpler AUM being invested in house. So do you see that as something over time, Guillaume? That you you might look to change?

SPEAKER_02 22:02

I don't think so in the short term because it's it's the the the size you need to to afford those teams internally it's is remember that law it's so the entire ecosystem is more than 100 billion sterling. Yeah yeah uh but that is not managed centrally, that is managed within the entire ecosystem of different asset managers, different uh managing agents. So the scale is lost there uh in terms of AUM. So I I don't think that's actually something that is is going to change in the near future.

SPEAKER_00 22:33

And you've just mentioned about the the market as a whole. How do you get involved with the others, um, the syndicates, the the managing agencies, the other CIOs um that operate uh within those um managing agencies that are out there? Is is there some sort of connection with yourself, you know, the investment team at the corporation of Lloyd's, or is it very much you'd leave that to them to manage their own assets, et cetera?

SPEAKER_02 22:58

Yeah, the investment decision is theirs. Yeah. So we what we have is uh is a set of rules which is basically based on principles. Well, there are certain things that cannot be done, certain things that can't be done, and approaches, etc. So that is well defined, and you can find it on the webpage if you're interested. But we don't tell the managing agents or the syndicates how to build their investment portfolio. Of course, the more risk they have, they need to put more capital back in that risk, which is how solvent institution works, right? All risk frameworks work in the world. So that is that is not different. But the the decision is theirs. So we we don't intervene, right? Um we just manage the central fund and we manage some overseas trust funds, uh, which is part of the PTF, right? But this is a regulatory requirement overseas to make sure that there are assets in different jurisdictions to pay claims in the future if that happens. This is something that always happens. Even in insurance companies that have a very intensive uh reinsurance programs internally, where you transfer risk from one jurisdiction to the other, you need to keep like a you know a fund as a guarantee uh in those jurisdictions where the risk is flying from, right? To make sure when the claim happens, there is some money. The regulators want to have control on those assets in the future.

SPEAKER_00 24:22

So those those funds are held in perhaps US dollars, Canadian dollars, or or other currencies. The central fund is is that purely held in sterling?

SPEAKER_02 24:33

The central fund, no, actually the uh the FX composition of the central fund is is m mostly in dollars.

SPEAKER_00 24:40

Similar to the managing agencies where the insurance business is.

SPEAKER_02 24:43

Exactly. Because at the end of the day, we we need to align uh the risk profile of the central fund um with uh the economic risk that we are backing, right? Um so most of the insurance market operates in dollars. Most of the risk is priced in dollars. Um that's why we have a quite big concentration of assets in in US dollars.

SPEAKER_01 25:06

That's fantastic. And and so when we're looking at the environment which, you know, we've got effectively another war in the Middle East, gold, gold prices high, oil prices high. Is this a time where you're going off script versus your regular principles, or how do you integrate this unusual environment within your investing framework?

SPEAKER_02 25:26

That's an excellent question. Actually, we define our investment framework to be bulletproof, right? So we don't assume that we will be both capable to predict these kind of events and to react accordingly, even if we knew. So I think the challenge we have is to build investment portfolios which can navigate through major circumstances that can be somehow quantified. And so this is when this is why we make all this stress testing, right? Using different past and potential economic scenarios. But also it's not just about making sure that we understand the downside of the investment portfolio under these circumstances, it's also about making sure that major decision makers can stomach the risk. Um, because there are two different components here. One is the rational one, which is what we try to explain with uh stress tests and see how resistant our uh capital stack is under those scenarios. But then the other one is having the comfort um that you can stomach that risk. Right? Where you know where the markets actually are in at the very bottom of the drawdown, you don't feel compelled to basically the risk, but that would be a big mistake. That's actually the moment where you should be increasing risk, right? So definitely we need to keep these situations very, very, very closely. Uh, we need to understand if something may happen that is outside what we may have expected in terms of stress testing, but again, this is we we have to do that assuming that we are bulletproof, right, in most of the time, in all of the times, right? And I think that's when TAA is very important for. Um, there is always this discussion about tactical asset allocations role, if it's about trying to go into the right asset class at the right moment to read the, you know, the economic cycle, etc. From my perspective, and given that we invest for a purpose, and we invest to make sure that we provide a service and we can fulfill our obligations even in the worst scenarios. For me, the purpose of tactical allocation is to see, okay, what we need to do to hedge, how we can enhance our business, okay, uh under those scenarios with derivatives, right? Um but it's it's more like second layer of security rather than assuming that we will be able to predict and act accordingly under these circumstances.

SPEAKER_01 28:14

So if your portfolio had uh deviated a lot from from some of the scenarios that you've created to sort of the portfolio to withstand, is that the point at which you might decide that a tactical sort of move outside of the normal rebalancing would would be appropriate?

SPEAKER_02 28:30

Yeah. But this is actually the the scenarios we have in mind are so are so negative. That's actually um hopefully very unusual that we were in that situation. Because again, we we stress our portfolios using the GFC, for instance, right, where liquidity was completely out, uh great spreads widened dramatically, stock markets uh dropping 35%. That's the kind of scenarios we basically are talking about.

SPEAKER_00 28:57

Do you see any opportunities that you might be thinking there are now because of uh what's going on around the world that you might not have considered before?

SPEAKER_02 29:07

It's very hard to answer that question. So um my perception about where the market has been during this year is actually very pricey. I mean, the market has been pricing um assets very optimistically, has been also very optimistic about assumptions in terms of how liquid private asset classes might be uh for withdrawals. We have seen some events, so it's it's very I mean, it's very hard to understand what's actually how this plays out in the future, right? And given that we are coming to this geopolitical crisis at the at the market levels which are very high, it's very hard to find opportunities these days, from my perspective. But again, I it is it's very hard.

SPEAKER_00 29:54

It's it's uh there are so many things going on that it's it's very hard to um and just going back to um a question, uh when you look at other um or when you look to outsource as a third-party asset managers, what's your process? How do you go about that? And and and what what are you looking for when you're looking to appoint an asset manager, appreciating that we're looking at different asset classes that you might be looking at? But how do you go about it?

SPEAKER_02 30:19

So uh we have a process, it's very long. I don't I I don't want to go into detail because I I would need to have that information in front of me. But it's it's basically what we look for is reliability. So definitely an asset manager that has experience on the asset class, has stable teams, that have systems that can talk with ours, um, so we can look through daily if possible about what they are doing. So it's making sure there are no bad surprises. And of course, the the bet the better the track record is, the best. But from my perspective, a robust investment process is not based on beating the benchmark, it's based on understanding what is the best mix of assets to harvest uh risk premium, right? It's it's a different approach. It's not about predicting, it's about having a robust process. So the asset managers that we usually look for is the one that can fit into that approach the best.

SPEAKER_01 31:24

And you talked about um systems there, and certainly the role of technology over the you know the last couple of decades has really sort of increased. What is the role of technology within your team and how does that help make decisions?

SPEAKER_02 31:39

So we have been investing very heavily in the last couple of years in technology and IT infrastructure for assets. So since October of last year, we are using the Aladdin investment platform for managing our portfolios and also to understand the holistic uh risk profile of uh the central fund. That is an amazing tool. This is state-of-the-art, um, great reporting, great performance metrics. So actually, um it's quite long learning by doing process because it's so vast, it's so rich, uh, that it takes time to take advantage of its old capabilities. So that's one, and we have invested very heavily on that. So, from technology in that case has been used for a much more robust uh operational framework and and to be able to understand and understand the risk which we have in our central fund. At the moment, as we speak, we are in the second stage of this tool to be implemented not just for the central fund, but also to use this as the as the tool where we basically do over oversight role uh for the market. So this means that by the end of the year uh we are going to regularly uh all the assets uh of the different syndicates and managing agents and and will basically be fed into Aladdin. So we will have a much more comprehensive understanding about the overall risk and how the portfolio are evolving uh for the entire ecosystem. Syndicate by syndicate, managing agent by managing agent, right? Uh member by member. So it's going to be a completely much better way of understanding those risks. Uh, do the same risk uh stress tests and to monitor the ecosystem holistically. So uh definitely uh technology plays a very important role in what we are doing, and and we are basically spending a lot of resources, uh monitoring material, you know, and time uh on those. So uh we have been quite conscious of that.

SPEAKER_01 33:47

Um congratulations on the onboarding of the of the system. You know, it's always it's always good to see you know things complete. Um, have you seen any evidence of your asset managers using new technology that helps sort of help serve you like as an end customer? So whether it's in terms of providing extra information, reporting, or or evidence of let's say more analysis being done by them on investments that you're looking at.

SPEAKER_02 34:12

Yeah, that there is a quite a patch of uh experience on that. Most of uh what I saw, because always I ask, okay, are you using AI? Uh for what I use in AI, and and I remember when I was in AAG, we have a team to basically use AI tools to improve our investment processes. And most of what I saw, and I'm seeing actually is in terms of how those tools make the operational uh work much more fluent and much more efficient. And then the question is okay, when AI will be the one uh defining uh strategic asset allocation or maybe tactical asset allocation. I haven't seen anything so far about that. Which I think it's uh I think we are quite far away from there. And then the question is, okay, depending who has the best model will be the one beating the march mark, right? But again, I think the the biggest challenge for investment managers is how do you handle surprises? And there is no AI model that I I I don't I don't think that actually will answer that question for quite a long time.

SPEAKER_00 35:19

Interesting. You you you spoke about efficiency there. I think something else that's as recently been, or not not so recent now, I suppose, is the Lloyd's investment platform that you've now offered and is now available to Lloyd's managing agencies to be able to use to transfer some of their monies onto. Can you just explain a little bit about that and how that operates? Um, and I think more importantly for the asset managers who might be listening into the podcast, how they might be able to get onto the Lloyd's investment platform and what they need to do.

SPEAKER_02 35:50

Yeah, so one of the things I want to I want to make sure. So we don't offer the investment platform, right? So we it's not our product, it's Shredder's product. So what we basically help Shreders to develop that product because we know how Lloyds operate, right? So we've basically been the sponsors, but we we we don't offer that service. Is Shredder's doing that? Um, and asset managers that are basically managing the assets of different funds within the platform. So the investment platform is an idea for basically those those managing agents and syndicates that wants to do more uh in terms of asset allocation to provide a vehicle that is efficient. And it's let's say Lloyd's approved in terms of the requirements that all these uh investment instruments needs to operate within the Lloyd's ecosystem, which is not in terms of uh financial profile, but it's basically the structure, how the funds are structured, etc. All the legal details. And what also can help is in defining what is the asset allocation for those managing agents. So it's not just uh the funds, but also how to define the mix of funds, which for those uh syndicates that are at the starting uh of their lifespan, they might not have the size to justify an investment team that can do their work for them. So they can go and take these off-the-shelf solutions, which are very efficient, again, are works very well in the ecosystem, um, and they can provide uh better investment returns than having the money in short-term instruments or in cash, which sometimes is the case. It um has been growing quite substantially in the last uh couple of years. So, with this new model portfolio solution that Shredder is offering, will have allowed more participants into understanding how to do this uh and how to take advantage of that possibility because at the end of the day, insurance is not just having profits from insurance risk, but also from investment risk, right? So uh and the magic is that both risks don't correlate to each other. So um it's it's something that if if you don't have the right asset allocation, you are basically missing part of the of the potential of the business model uh that you can have.

SPEAKER_00 38:13

And the asset managers therefore then need to go to Schroeder's solutions, do they to sort of talk to them about what they might be wanting to offer and it could they be part of the platform? Okay, exactly.

SPEAKER_02 38:23

And Schroders basically are the ones selecting the asset managers. So, of course, we give this uh advice in terms of what may work in terms of the structure. Yeah, Schroeder's is are the ones to go.

SPEAKER_01 38:36

Thank you. So I have to ask about Lloyd's, just it given it's such a history um institution, how long has it been about and how does that impact the way that you might approach the portfolio?

SPEAKER_02 38:50

So Lloyds have more than 330 years, so it has been around since 1688. And I but it's a so it's very traditionally driven, it's uh is as I mentioned before, it's a completely different way uh of operating. But at the end of the day, the rules are very similar to an insurer, right? And the asset allocation of the entire ecosystem, at the end of the day, works in the same way that it it does in every insurance company. So for that perspective, um, even though it has complexities, you have uh, you know, and it takes six months to learn all that process. But when you learn it, you basically uh understand that at the end on aggregate, it works as an insurance company. Um so the approach in terms of how we define our investment strategy is very similar. The difference is that when you work in an insurance company, you define the entire capital stack, okay, and you decide where to do what in that capital stack. But in the case of Lloyd's, those assets, banking reserves, and that first layer of capital is defined by the different syndicates. So I have no influence on that, just by a set of rules and principles. And then we need to uh define the central fund based on that to make sure that everything makes sense together. So no really major changes, is it's more the operational challenge, which is different. Um, how things are made.

SPEAKER_01 40:23

And and given you're based in the UK, but you have exposure sort of throughout the world, how do you think about geographical bias? So is there a natural bias towards the UK or is it more sort of diversified globally?

SPEAKER_02 40:37

That's a good question. But as I mentioned before, the the first um component is a DFX component of our portfolio, right? So we need to invest like 65% in dollars. So that gives you already quite a bias. Because you know, dollars, the biggest, so you you you find emerging market instruments in dollars as well. But at the end of the day, the currency creates some kind of bias. At the same time, we want to be as diversified as possible. Definitely is most of our investments in sterling are based in the UK because it says where you find, you know, sterling assets. But because of our global footprint, even though we are based here in the UK, our business and our risk comes from all over the world, in different currencies. So at the end of the day, this is what defines our exposure. And again, the idea is to be as diversified as possible. That's one of the first principles, you know, in any investment process.

SPEAKER_01 41:34

Absolutely. Um, so so I guess now we're going to talk about uh mistakes and lessons so that people can understand how you know a CIO views the the sort of the ups and downs uh of the role. Um and so I'd like to start with what's an investment that you've made that you're especially proud of? Something where perhaps you had a counter-consensus thesis?

SPEAKER_02 41:55

So it's actually was maybe the the one that I comes to my mind is in 2001, where I was in in Argentina. So we basically saw the crisis coming. So for those that are not very well informed about the history of emerging markets in 2000, at the end of 2001, Argentina entered a massive default, right? Uh which also has a defects component. I mean, long story short, we were basically an insurance company fully invested in Argentina because local regulation forced us to invest in local instruments. And we saw this coming, right? Uh we saw this crisis coming. But of course, you you never know when, you never know how, you know, always like that. But we saw the stress. So we basically what we did is to put together a contingency plan very well defined in terms of okay, what to do if certain variables were start triggering. The major challenge for that was to convince many players within the organization and AIG at the time when I was working. So I had to go to New York, talk to people, you know, and was uh for for Argentina, it was a quite important investment portfolio, not for AIG globally. But we put in place uh a plan that actually, when the time to be executed happened, we executed it fantastically. And we avoid all the defaults. Um we managed to, without entering into details, but basically we avoid losses of$350 million, right? So it was not about an investment, it was actually about a contingency plan, right? Uh where basically we allowed basically having been impacted by a sovereign default. So that's maybe my proudest moment, okay, in terms of investment decisions. But again, it was more about process than anything else.

SPEAKER_00 43:43

But I suspect you for having learned from that as well and being your proudest moment, it probably carried through uh for the rest of your career in terms of thinking about how you think about things.

SPEAKER_02 43:53

Exactly. Yeah. Because it's it's about again, it's thinking how things can go wrong and what you do in those cases. And again, making sure. So, you know, this is the problem we have at that time is that when you are operating emerging markets and you cannot invest overseas, you have no risk-free assets. So you need to have you need to find a way to make it, you know, in a different way. And definitely this is something that then you repeat all the time in your mind, say, okay, how things can go wrong, how things can go wrong, right? And and and that's um, yeah, that's uh like a mantra.

SPEAKER_00 44:27

Excellent, thank you. So tell us a little bit about your association with independent age. That sounds quite interesting. And how long has that been about?

SPEAKER_02 44:37

So I joined Independent Age in 2022. Um, so I'm working there as a as a trustee. It has been an amazing, an amazing experience. So Independent Age is a charity that helps uh all people in financial hardship, right? Um, and has an endowment quite sizable for the charity, it's around 170 million pounds. And most of the model of the charity is basically use the proceeds of that endowment, okay, to help people, basically different ways, right? So the way we do it is to help people, different needs is because it's not about money, it's about help. It's about making sure that these people understand their rights, uh, what they can have access to. One of the hardest things with these people is that sometimes they are alone, uh, they have nothing to rely on. So basically, I'm working as a trustee, so I'm a member of the board, but at the same time, my role basically is to help define the investment strategy for the endowment and making sure that the charity actually operates quite robustly in terms of income, uh, a different scenario. So it has been amazing. Has been one of the you know, it's a way to give back to society from where you you feel like you can add more value, right? And I've been doing this for so many years, so for me it's a no-brainer to help from that perspective in independent age. It's uh it's a great charity. It's the level of impact on these people's lives is amazing. I would do it 25,000 times more.

SPEAKER_00 46:12

Fantastic. And and and also I mentioned right at the beginning, you're a big advocate for diversity and inclusion. So, how do you get involved with that these days? Um, obviously, you were very involved at AIG, but uh, how do you get involved with it these days? Um, and how do you support that going forward?

SPEAKER_02 46:30

So I also am a certified coach. This is something that I did many years ago uh because I like it. And what I do is to provide free coaching services to minorities, basically, people that it wants to, you know, um progress in their careers and they don't have the the financial resources to pay for a coach. So I do it in my free time. Um that's basically what I'm doing. And again, it's a great experience because I feel sometimes that it's I'm learning more than what they learned from me, right? Um because having those different perspectives also makes me teach me a lot of things as a leader about the things that we have to make sure we we do and we don't and we stop doing is basically about that. And again, I mean I'm a portfolio manager at the end of the day. So how shall I not support diversity? So a portfolio manager basically does that is is to put together different things because together they work much better, and and and that's basically what I'm I'm helping with better from a humanitarian side.

SPEAKER_01 47:36

Could you tell me what belonging means uh in a high performance team?

SPEAKER_02 47:41

Uh belonging means is feeling that you are part of something bigger than you, where you can trust, you can speak your mind, you can bring your ideas, you can be brutally honest, where you can say, sorry, um I made a mistake and nothing happens, right? So let's try to fix this. So belonging is is when you feel like you know that people will support you, right? And you will support others. And again, is is as I said before, is waking up in the morning and say, I'm going to be part of the solution because I don't want to be part of the problem, right? And that actually is the glue, is is what makes a team work together. Again, when you have this diversity of ideas, diversity of experiences, diversity of angles, um, makes that so strong. But you have to create that moment, that energy, right? Is is when people want to have a conversation, you know. I I mean I have friends that study with me at university, and with them I can have a brutal honest conversation about things. And we know that we all have different views, but actually that's the beauty of it, right? And we can have a conversation, and and it's not about us, it's about the ideas. It's about finding, you know, the right the the truth, which maybe doesn't exist, but it doesn't matter, right? So this is the same thing. It's that belonging, that where you can feel like everybody is on the same path, on the same direction, and and and we all work together and we all reach the goal together. I mean it's very hard to explain because it's a feeling, right?

SPEAKER_01 49:27

I think it's a timeless lesson. I I think it's very well articulated.

SPEAKER_02 49:31

Okay, thank you. But it's it's it's that is is no one of the things I like the most is when people that used to work with me called me to ask for advice. I love that.

SPEAKER_00 49:40

So going on to that then, what what advice would you give to someone early in their investment career, just starting out, or even maybe someone sort of in their, you know, currently in the uh middle of their career, what what advice would you give them?

SPEAKER_02 49:53

Oh, investing in emotional intelligence. That's paramount. At the end of the day, we do things with people and for people. So we need to understand people how understand what they feel, how they think, what they need, how uh how to communicate with different people in different circumstances. And and the best way to do that is first understand ourselves. If we don't understand ourselves, we don't understand other people. And that the process is emotional intelligence, is is is training on that, and everybody can do it.

SPEAKER_01 50:29

That's incredible. And without like without hesitation, it was investing in key. It was, wasn't it? Didn't have to think about it. If you're gonna look back on your CIO career, what would you like your legacy to be?

SPEAKER_02 50:43

My legacy is about forming those teams and forming those executives that will be in the future running, you know, different CIOs. One of the things I feel very proud of is that people that have been working for me in the past today are CIOs in other places. Right? Um I love that. Uh and I keep going to the city. Exactly. It's about that. Um, because you know I can define a process, but someone else will come, would say, no, I don't like it, we'll change it, right? But people is is helping them into to reach their potential. That's what I think is my legacy.

SPEAKER_00 51:25

Fantastic. Listen, Guillermo, we've come to the end, but we we have got to the point where we asked the quick fire questions. Um, you might not be prepped for this, but we're gonna ask. Favorite sport? What's your favorite sport? Football, of course. Any any team that you want to tell us that you you support? Boca Juniors. Boca Juniors.

SPEAKER_02 51:48

Uh and in the UK I support Chelsea.

SPEAKER_00 51:52

Okay, brilliant.

SPEAKER_02 51:53

In Argentina, Boca Juniors, yeah.

SPEAKER_00 51:55

I saw Boca Juniors once when I was in Argentina, many, many, many, many years ago. I think before you were born, Guillermo.

SPEAKER_02 52:01

Have you been there to the bombonera?

SPEAKER_00 52:03

Yes, yeah, yeah. Wow. It's uh it's amazing. My parents were actually in Argentina for the 78 World Cup. So, and I and I was over there around that time, but I wasn't, unfortunately. My parents went to the World Cup, but I I didn't. I was still at school. Uh but there you go. Um favorite film or TV drama?

SPEAKER_02 52:25

I love so usually I I like uh The Godfather, I love it. Right. I I like mafia movies and I love Godfather, but the other one that I saw the other day, which basically was put me thinking for one month, was Parthenope. Parthenope, I don't know how to pronounce that in English. Parthenope is one from Paolo Sorrentino, which is an Italian director.

SPEAKER_00 52:54

Okay.

SPEAKER_02 52:55

Amazing, amazing movie.

SPEAKER_00 52:57

I will look that one up. I will look that one up.

SPEAKER_02 52:58

But you know, it's it keeps you, it it puts you in a thinking mode for one more month. Well, so be very be careful with that.

SPEAKER_00 53:06

Brilliant. Um favorite drink? Uh Scotch. Scotch. Not not Argentinian Melbeck. I like it. But my favorite one is one of my favorites, Melbeck. Uh yeah, favorite, uh favorite book.

SPEAKER_02 53:25

Oh, I let's say let's put it this way. The book that put me on again in this thinking mode for many years was one called A Year to Live by Stephen Levine, which is basically a book that challenges you in living one year as if it were your last year.

SPEAKER_00 53:50

Got it.

SPEAKER_02 53:50

Oh, that's interesting.

SPEAKER_00 53:51

Wow. Oh, I'll I'll definitely look that one up as well. Uh, and lastly, favorite hobby.

SPEAKER_02 53:57

Favorite hobby? Um walking. I love walking. That's a pretty good hobby. I love walking. I love walking with my wife. Uh yeah, I love that.

SPEAKER_00 54:10

I'll make sure that your wife hears this.

SPEAKER_02 54:13

We'll make sure she does.

SPEAKER_00 54:14

Um listen, Guillermo, it's been an absolute pleasure. I really enjoyed talking to you today. So thank you so much. Uh, we look forward to talking to you again sometime soon. Thanks so much, Guillermo.

SPEAKER_02 54:26

Thank you for having me, and it has been a real pleasure. And uh, let's keep in touch.

SPEAKER_00 54:30

Thank you so much for listening. Be sure to stay tuned. In the meantime, follow the CIO Investment Club on LinkedIn, Threads, and X to stay in the loop about our upcoming guest interviews on the CIO Chair Podcast. For more information about us, please visit our website at www.cioinvestmentclub.com. Thank you and goodbye.