Subramanian, Adams Chasing Abby Cohen Strategy Legacy
On Dec. 8, 2010, the Standard & Poor’s 500 Index had rallied 20 percent from its low in July when Savita Subramanian recommended investors bet on companies flush with cash for dividends and buybacks.
Subramanian, then head of Bank of America Corp.’s quantitative team, stressed in her 2011 preview that corporate stockpiles of cash were at about record levels and companies increasing dividends or repurchasing programs would benefit the most. While the S&P 500 is up 7.6 percent from its 2010 level, companies that returned money to investors with the biggest buybacks and dividends have climbed 12 percent.
Nine months after her call, Subramanian was named head of U.S. equity strategy at Bank of America. She’s making forecasts after funds, confronted with record correlations between the S&P index and its individual stocks, posted their worst year since 1999. For 2012, she predicts the S&P 500 will advance 11 percent to 1,400 and dividend-payers will continue to outperform.
“This is a challenging time to be a strategist,” she said during an interview at Bank of America’s New York office on March 5. “It’s tough to hang your hat on fundamentals, which is what we were all trained to do. It’s hard to break the pattern.”
Subramanian, 39, and Gina Martin Adams of Wells Fargo (WFC) & Co., face the additional pressure of being the only two women in the strategist role at 12 U.S. banks. The last time the list of Wall Street strategists tracked by Bloomberg had two female members was 2001, when Goldman Sachs Group Inc.’s Abby Joseph Cohen and Merrill Lynch & Co.’s Christine Callies were on the list, according to data compiled by Bloomberg.
Equity strategists make predictions on the S&P 500 and recommend industries to buy. They analyze economic trends and develop views on whether equities and sectors will rise or fall.
“I don’t think strategy lends itself to one gender or the other,” Subramanian said. “The glass ceiling -- it’s been there all along but maybe it’s a little higher now.”
Surging volatility amid a stalling economy pushed the correlation of S&P 500 companies to gains or losses in the full index to a record 0.86 in October, according to data compiled by Westport, Connecticut-based Birinyi Associates Inc. A level of 1 would mean all 500 stocks moved together. The so-called correlation coefficient has fallen to 0.47 after the stock measure jumped 7.6 percent this year, the best start since 1998, data compiled by Birinyi and Bloomberg show.
“You can look at all the drivers that you think will make stock prices do X, Y, or Z, but then what actually happens can be quite divorced from that process,” Subramanian said. “It makes for a frustrating market for fundamental stock pickers.”
Less than a quarter of the 525 global fund categories tracked by Morningstar Inc. beat their benchmark indexes last year, the fewest since at least 1999. A Hedge Fund Research Inc. index of industry performance fell 5.3 percent last year. It’s only the third annual loss since 1990 and the biggest decline since 2008, when it plunged 19 percent, according to data from the Chicago-based firm. The gauge rose 2.1 percent in February after gaining 2.7 percent in January.
In 2008, Adams recommended consumer-staple and health-care companies. That was just prior to the S&P 500’s 23 percent tumble from October through December, the biggest quarterly drop in more than two decades. Adams’s categories ended the year down 18 percent and 24 percent, beating the eight other groups in the benchmark equity measure as investors bet on stocks least tied to economic growth.
Adams projects the S&P 500 will climb 8.1 percent to 1,360 this year, compared with the median projection of 1,400 among the 11 strategists tracked by Bloomberg News. She currently recommends consumer-discretionary, health-care and technology companies.
While Subramanian and Adams have risen to visible positions on Wall Street, women still make up a smaller fraction of workers in the financial industry, and left at a faster rate in the past 10 years. The tally of women employed in the U.S. finance industry shrank 5.2 percent in the decade ended 2011, according to data from the Bureau of Labor Statistics. That compares with a 1.6 percent decline in the entire work force.
Goldman Sachs (GS)’ Cohen, now senior U.S. investment strategist at the New York-based firm, said women may gravitate toward careers in research and portfolio management because success is quantifiable in those areas.
‘Quality of Work’
“The quality of work speaks much more loudly than gender,” Cohen said in a telephone interview. “Clients are almost always the most open, because if you can do the good work for them, that’s what they want to know.” She added, “To be a strategist requires knowledge, expertise, and very importantly, interest in many different subjects,” saying “It is not an easy role to prepare oneself for or to be trained for.”
Cohen, 60, started her career in 1973 at the Federal Reserve working on econometric models, and went on to roles at T. Rowe Price Group Inc. and Drexel Burnham Lambert Inc. before landing at Goldman Sachs in 1990. While she has long given frequent television interviews, she recalls once being turned away from a New York club where she was to deliver a dinner speech. “When I came to Wall Street, women were more novelty items than anything else,” she said.
Adams, 35, who is based in New York, was an economist for Wachovia Corp. before the firm was purchased by San Francisco-based Wells Fargo. She has been in equity strategy since 2007. She said she was “surprised” to hear that there were so few women in the strategy space.
“It’s a shame because women can obviously bring their own perspectives,” Adams said in a telephone interview on March 5.
At Bank of America, 10 women hold senior macro research roles, according to spokeswoman Susan McCabe. In addition to Subramanian, the list includes Mary Ann Bartels, head of U.S. technical and market analysis; Priya Misra, head of U.S. rates research; Kate Moore, global equity strategist; Michelle Meyer, senior U.S. economist; and Sabine Schels, head of fundamental commodities research. [bn:PRSN=1498700]
Candace Browning , the New York-based head of global research at the firm, said the rate at which women in the work force increases should mirror the rising tide of female degree recipients. Women accounted for 57 percent of students enrolled at institutions that grant degrees in 2010, projected figures from the U.S. Department of Education show. That compares with 1970, when they made up 41 percent.
Half the Offers
Of the people who took the GMAT business school admissions test, 41 percent were female in the year ended June 30, 2011, the highest ever, according to figures this year from the Graduate Management Admission Council, which administers the exam.
“I can’t tell you there’s been a sea change or that two three years from now recruiting talented women is going to get any easier,” Browning said. “Senior leaders in the firm really need to be committed to it and make sure it’s an inclusive place. If they do that, women can get promoted and succeed.”
Adams said an interest in macroeconomics and finance drew her to her current career path. The fact that men represented a higher proportion of Wall Street positions “never really crossed my mind,” she said.
She studied finance and marketing at the University of Florida, starting her career in a management training program with First Union Corp. and then in investment strategy at Evergreen Investments, the asset-management arm of Wachovia.
Subramanian holds a bachelor’s degree in mathematics and philosophy from the University of California at Berkeley, where she had long discussions with the philosopher John Searle about deconstructing big ideas into key parts. “That was the first time in my life that I became engaged in thinking that way and trying to boil down abstract concepts into concrete components,” she recalls.
While she had originally planned to pursue a doctoral degree in philosophy, Subramanian got a job after college developing software for equity portfolio managers.
Learning about the markets reeled her in to finance. “I saw the markets as very dynamic and exciting,” she said. “It was too late to go back.”
As the Internet bubble’s collapse sent business-school students across the U.S. chasing jobs in 2001’s tight market, Subramanian landed an internship in Merrill’s strategy group.
That “was the luckiest thing that ever happened to me,” said Subramanian. She had completed her first year at Columbia Business School when she worked that summer with Richard Bernstein, ranked by Institutional Investor as the No. 1 quantitative-research strategist that year.
The challenge of balancing work and a personal life may be one of the reasons why few women choose or advance their careers in equity strategy, according to Subramanian.
“If you’re a sell-side analyst, you’re on the road 30 percent of the time,” she said.
Subramanian said she remembers attending a luncheon while an intern at Merrill in 2001, featuring Jessica Reif Cohen, a media analyst who had been at the firm since 1994. “This is amazing,” Subramanian recalls thinking at the meeting. “She’s an incredible analyst. She’s risen in the same trajectory as any of her male colleagues.”
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