Charles D. Ellis, founder of Greenwich Associates and author of Winning the Loser’s Game and other books on investing, recently sat down with Antti Ilmanen and Rodney N. Sullivan of AQR to discuss contemporary challenges in pension investing. This is the second in a series of “Words From the Wise” interviews to be published on AQR.com.
Active investment management (and investing, generally) is characterized as a “loser’s game” in which mistakes and unforced errors cause one to fall behind. As Dr. Ellis makes clear in the interview, it’s a game that can be won — measured as persistence in outperformance — but wherein success is increasingly difficult. The winning approach is simple to understand and explain, though certainly not easy to implement. Winning the active management game, he said, requires some indispensable features, importantly high moral character, good governance, and expert knowledge and execution.
The conversation then turns to Yale as a case study in successful investing. Yale, while maintaining an aggressive strategic asset allocation, stresses defense in its thinking and approach. We then turn toward gaining a better understanding of the challenges facing defined-benefit and defined-contribution pension plans and the opportunities to increase the strength and reliability of these two pillars for savings and retirement, especially given the challenging environment currently facing investors, globally. We conclude with a discussion about how Charley initially came join the investment management profession, as well as an exploration of individuals and organizations that he believes stand out as exemplars of thought leadership and investment practice.