Professor-Turned-Advisor Boyson's Take On Hedge Fund Activism

Doctor Nicole Boyson’s resume is enough to give anyone impostor syndrome. An 18-year tenured professor at Northeastern’s D’Amore-McKim School of Business and co-editor of the Financial Analyst Journal, I first met Professor Boyson sitting in a middle seat on an airplane home from a financial conference. (She’s the kind of person who strikes up that conversation with strangers. I’m the kind of person who puts on the eye mask and embraces my non-existence.)

By the end of that flight, I knew that she was the real deal. I spend a decent amount of time reading the work of and talking to financial academics but never had I met a professor so enthusiastically curious about the nerdy underbelly of how markets – and specifically incentives – work. She’s been deep down the well on how advisors are compensated and, most recently, on how hedge fund activism (and trading) impact the real world.

And then she announced she’s joining Longview Investment Advisors… in her spare time… to get her hands dirty in the real world of serving clients as a financial advisor. Here’s my conversation with Nicole.

Nicole Boyson, Professor of Finance at Northeastern University and principal at Longview Investment Advisors

Nicole Boyson, Professor of Finance at Northeastern University and principal at Longview Investment Advisors

Dave Nadig, Financial Futurist, VettaFi: OK, Nicole, now I feel like you’re just making the rest of us look bad. What’s the connection between the academic and the advisory practice work?

Nicole Boyson, Professor of Finance at Northeastern University and principal at Longview Investment Advisors: I think of myself as a classic academic in the sense that I do both research and I teach. I’m a little bit unusual in that I work really hard to make my research practical and applicable to industry folks. I started in 1998 and was really fascinated by Long-Term Capital Management, not only because they blew up so spectacularly but because it was my first exposure to the hedge fund space.

My first job before my Ph.D. I was a public accountant auditor. I worked for KPMG, then Commercial Bank, and then for a small investment advisor. I learned a lot about fixed income, mutual funds, and how they were distributed and sold. Then I went to work at Ernst and Young in public accounting again, where my background in banking and advising made me want to do research that I thought people in those spaces would want to read.

My research has focused on investments broadly and understanding how portfolio managers make money. If they’re in the alternative space, what does that look like? Are those funds actually better because they cost more and have different incentives?

I was also interested in the performance persistence of advisors. A huge chunk of the first part of my work was all about managers and manager scale. I moved into hedge fund activism because I just thought it was super cool, and there weren’t many people working in the space. I’ve been fortunate to be a little bit of a first mover in a couple of my areas.

Nadig: A lot of financial academia is focused on big, easily usable data sets – trade information, portfolio data, and market internals. You seem to go after topics where you can’t just mine data. Isn’t that making life more difficult for yourself?

Boyson: As an academic, a lot of what you choose to work on is driven by career concerns; you have to get tenure. Once I got tenure, I started researching the activism space, which got really messy: you have to read 13D filings, and for some of my papers, I’m looking at the entire activism campaign and reading everything. There are two reasons why I read everything; because I think no one else will do it, so I have a competitive advantage in telling a story that no one else is willing to dig into, and also because I’m really fast and I’m really good at reading through things and categorizing them.

Pondering the Pendulum of Activism

Nadig: It feels like we’re in a slightly new world of activism, moving from the hedge funds and the closed piles of capital towards the open piles of capital, like ETFs. What’s your take on that? How would you think about stewardship, activism, and proxy voting?

Boyson: I’m teaching Alternative Investments right now, and in my class just yesterday, we debated on “is hedge fund activism good for society?” Of course, the answer is we don’t know. Activists actually care a lot about governance: they want independent boards, they want non-super-majority voting, and they don’t wish to dual-class stock.

I think the pendulum swing is happening. There’s such an overwhelming, obvious need for people to care about this stuff because we have global warming, racial disparity, and all kinds of issues. I also think that as we get better at this environmental part of investing, I think we’ll find that doing stuff in an environmentally sound way is going to be better long-term. We know the very long-term consequence of ignoring these things.

More and more smart and thoughtful investors, whether they be hedge funds joining with pension fund managers or hedge fund joining with social activist groups, actually do care. Every now and then, I read something that feels like a bit of an uprising and pretty sincere. I hope it is.

From Academic to Financial Advisor

Nadig: Let’s shift gears a little bit. You’ve been in academia for a very long time, and to my knowledge, this is the first time you’ve taken a turn back into the advice business. What prompted you to do that, and what are you hoping to accomplish?

Boyson: I’ve resisted consulting work, but this opportunity is really cool. I knew what Chuck Brown’s firm was like beforehand and what his philosophy was, and it lined up perfectly with mine; lots of client service, low fees, low-cost indexing, and spending your time on your clients and broad allocation versus picking.

I started doing work in the space and really understood it, and he wanted to go out on his own, and he asked me if I would like to join him and Bob Pozen [NOTE: Legendary Fidelity exec who authored the definitive textbook on the mutual fund industry, now at Longview]. I was hesitant about joining a firm partly because I’m an independent researcher; that’s my superpower. But I also realized that if I join a firm that’s perfectly aligned with my morals, philosophy, and values and can help him build that firm, then that’s pretty exciting.

My role right now is as a principal working with Chuck: our focus at Longview is generally on smaller nonprofits and also families. There are lots of opportunities in the nonprofit space — they’re stuck in this weird place where they have assets and they’re reasonably substantial, but they’re not big enough, in my opinion, to be really going for things like private equity and hedge funds. The complexity of those in the smaller space always strikes me as a little bit risky, and my own research and other academic research indicate that as well.

Nadig: Well, who better to help folks like that navigate complexity? Thanks for taking some time to catch up.

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