David Eichhorn - Serving Clients and Reducing Risk at NISA (EP.403)
Sep 2, 2024
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David Eichhorn, CEO of NISA, boasts over 25 years in the asset management game, specializing in risk-controlled fixed income. He shares lessons from his childhood entrepreneurship and highlights the shift to client-centric strategies in finance. The discussion delves into challenges in U.S. retirement funding, specifically corporate benefits and pension plans. Eichhorn also navigates the complex landscape of private credit, stressing the importance of risk management and the innovative 'micro battles' approach to client communication.
David Eichorn's entrepreneurial journey started with a childhood lawn mowing business, teaching him valuable lessons in customer service and management.
NISA's client-centric approach focuses on developing tailored investment strategies based on direct client feedback, distinguishing it from product-centric firms.
The 'micro battles' method fosters experimentation and creativity within NISA, enhancing scalability and reinforcing client relationships.
Deep dives
David Eichorn's Early Business Lessons
David Eichorn shares his first entrepreneurial experience running a lawn mowing service in South St. Louis as a sixth-grader. This experience taught him valuable lessons about hard work and managing customer expectations, as he learned to balance his schedule to meet clients' needs. Despite struggling with allergies, he found a lucrative opportunity in a small local market, which instilled in him the importance of customer service and efficient operations. This early endeavor laid the groundwork for his appreciation of entrepreneurship and work ethic, influencing how he approaches his career today.
Client-Centric Focus at NISA
Since joining NISA, David Eichorn emphasizes the firm’s commitment to being client-centric and strategically partnering with institutional asset owners. NISA’s approach differs from more product-centric firms by prioritizing client needs and developing tailored strategies based on specific feedback and requirements. Eichorn recalls that client input has been instrumental in growing their derivative overlay business, which originally began as a commodity engagement driven by client demand. This responsive approach has been a central theme in NISA's growth and evolution over the years.
The Evolution of NISA's Strategies
NISA has successfully evolved over the years, now managing over $400 billion in various asset classes while maintaining a strong focus on risk-controlled fixed income. Eichorn explains that the firm primarily runs US treasuries and investment-grade fixed income portfolios, complemented by their derivative overlay strategies. Their fixed income strategies have been developed through a rigorous process of analyzing relative values within the bond market and leveraging their research capabilities. This dedication to thorough analysis has allowed NISA to provide significant alpha generation while emphasizing safety and risk management.
Innovation Through Micro Battles
To address the challenges associated with growth, NISA employs a method called 'micro battles,' which encourages teams to rapidly test new ideas and strategies in a concise timeframe. This innovative approach fosters a culture of experimentation, allowing employees to explore new concepts while empowering them to take ownership over their projects. The results from successful micro battles have directly improved various operational aspects at NISA, including enhancing the scalability of existing products. Eichorn believes this strategy promotes creativity and collaboration, ultimately strengthening the firm's client relationships.
Concern Over Private Credit and Market Risks
Eichorn expresses concerns regarding the growth of private credit, particularly in a high-interest-rate environment, noting the risks associated with leveraged lending to certain companies. He highlights that while many companies have managed to navigate these turbulent times without significant distress, the longer-term implications of changing market dynamics remain uncertain. Additionally, he raises the potential impact on insurance firms engaging heavily in private credit, as their risk profiles may not align with traditional expectations for safety and performance. Eichorn advocates for careful asset allocation strategies to mitigate risks while embracing opportunities presented by evolving market conditions.
David Eichhorn is the CEO and Head of Investment Strategies at NISA, a $400 billion employee-owned asset manager of risk-controlled fixed income and derivative overlays that is widely respected for its highly collaborative client relationships. The firm is one of the largest derivative overlay managers in the world and the largest U.S. manager of LDI strategies. Our conversation dives into Dave’s twenty-five years at NISA, its client-centric focus, approach across fixed income and derivative strategies, culture, and opportunities and risks in the markets.
