Managing in a Pandemic: Lessons Learned & Next Steps with Conning’s Cynthia Beaulieu

Stewart: Welcome to another edition of the Insurance AUM Journal podcast. My name is Stewart Foley and I’m your host standing with you at the corner of insurance and asset management with Cindy Beaulieu, the chair of Conning’s investment policy committee. Welcome, Cindy.

Cindy: Thank you, Stewart. Great to be here today.

Stewart: So you haven’t been in this seat for very long. January of 2020. Not much has happened since then, obviously. So when the pandemic hit three months later, you got a crash course, pardon the pun. What did you learn? 

Cindy: Sure. Yeah. Thank you, this is a good question. It was certainly great timing, right? To take on a new role in a very senior part of our firm, setting strategy for the company at a time when, as you said, not much happened. But what it really did is it was a quick reminder of how quickly liquidity can just absolutely dry up in the markets. It brought me back to 2008 and I guess maybe the benefit of having done this and been in this business for a long time, you always learn something from every crisis you go through with the markets and 2008 was probably one of the greatest learning events I think really in our industry for a long, long time.

Cindy: But that liquidity issue that came out in 2008 came right back in March of this year and we saw … You could not trade anything, even commercial paper. It was the start again of breaking the buck, which we hadn’t heard that talk for many years.

Stewart: Many years.  You and I both remember it, but it has been many years.

Cindy: Yeah. Yes, right. That pre-dates ’08. So it was certainly that reminder that liquidity can go away in a moment’s notice and when it’s gone, what you thought you could be able to do, you just simply cannot. I think the other thing that was an interesting take away from it is that markets still have faith in the fed. We’ve certainly heard enough criticism of our federal reserve over the years. There are policy actions, questioning their timing, what do they see? What do they know? But the quick reaction of Powell and the Federal Reserve to come out with certainly policy actions that gave us an idea of where rates were going to be and they’ve continued to keep that clear to the markets for the foreseeable future, but also the programs that they put in place to support the markets. Taking some pages out of the 2008 playbook, but they were quick to react and they were rapidly supportive and the markets showed up quickly those recovered as well.

Cindy: We saw spreads snap in, we saw dollar prices recover fast, and that really is owing to the fact that there’s faith that the Fed had this under control and it was their support that was going to get us through this.

Stewart: It’s really interesting that the idea that the Fed … I’m with you on their response, but the Fed has become so much more transparent between now … It used to be reading the tea leaves, right? And markets like the transparency that they’re seeing from the Fed. I think that also is a part of their confidence in their response.

Cindy: Yeah, absolutely.

Stewart: So at that time, I know people say this all the time, “We’re in uncharted waters.” We were really in uncharted waters. Right? A global pandemic was the last thing on my list that was going to be an economic factor in 2020 and yet it’s the story, right? What were you hearing from your clients at the beginning and how did that change over time?

Cindy: Sure, yeah, thank you. Another good question. It’s funny, you think back to how we started the year and we came into 2020 with this expectation the Fed was on hold. To your point, they were very clear about that. There was nothing on the horizon that was going to cause them to act. The only question was whether or not we’d maybe see inflation peter this year. So that was really the Fed side of things.

Cindy: From the economy’s perspective, we were expecting that low 2% growth rate and it was going to carry for the balance of 2020 with little to disrupt it. Maybe China and trade issues would linger out there and cause some disruption, but otherwise not a big deal, and the only thing the markets were really concerned about was how the US Presidential elections were going to play out. So you think back to then and quickly in March, now you’ve got a whole different situation. We had spreads and equity markets that were at very full valuations when we came into the year, so everybody is feeling good and then March hits.

Cindy: So clients, initially when market prices dropped so quickly and now, and right at a quarter end, which I know, having been in the insurance asset management business you can appreciate what that means, but it’s that what do we have to consider impairing? What do we have to have write ups for to support what we don’t impair,  all of those accounting decisions and things that might make you change your strategy for portfolios, those came into play. But the single biggest message we got from clients was either the ones that needed to preserve liquidity and they were very clear that they needed a lot of liquidity because they had greater concerns about what this meant to their business. At the same time, they’re sending their employees home. They don’t know how this is all going to play out for them.

Cindy: So you can appreciate the concern from the seat that they’re in about being able to continue to fund the business and so you can’t have it tied up in a 30 years BBB corporate bonds when you need to really have cash. So we had a number of clients that were in that situation. We did have some, though, that were opportunistic and that was good for us as well. I think we certainly tried to play that side of it and be opportunistic and we had clients that wanted that. But we did see a number that, at least initially, it was the pull back, let’s conserve cash and let’s figure out where we go from there.

Cindy: I will say though, that then what we saw is when we kind of flipped over to the second quarter and we had gotten through the first quarter with a little bit of recovery right at the end, which helped, but then the rating agencies came in and that wreaked a little bit more havoc. But then the liquidity started to loosen up and so I would say that by the time we got into probably the middle of May, I would say almost all of our clients were fully active in the markets and able to pursue the strategies that we had intended for them.

Cindy: But there was a period there of a couple of months where we had a number of clients that were really holding back, because they had to and it’s completely understandable.

Stewart: I just want to take a little step back. For those people listening to this podcast who may not be as familiar with Conning, right?  Your focus has always been in the insurance asset management arena and so when you were talking about marking bonds down and so forth, that’s because you do the accounting for many of your clients. Right? I just want to kind of get that out there so that people can kind of understand in context your comments there in the last piece.

Cindy: Sure. Yeah, I mean, whether we directly do the accounting or we guide them as to where markets are and where we think there’s a potential recovery or not, but we are either the book of record or we supply and augment help with that process.

Stewart: You’ve talked a little bit about how insurance companies went through the crisis. Do you think it changed how they view risk and how they view their asset management allocation of risk?

Cindy: I think really that it was kind of a … Again, kind of a reminder that you can have market disruption that comes from an outside source that’s completely unexpected and you need to appreciate what happens when your entire portfolio is marked down 10%, 15% in a very short period of time and the reminder that everything is so highly correlated. So when you think about some of the other brief market disruptions we’ve had over the last 10 years or so, they’ve been concentrated. They’ve been … The energy industry certainly had its issues in 2016. We had influence of what was going on in Europe that affected certain parts of the market in kind of the 2011, ’12 timeframe. We’ve certainly had impacts from China affect different industries in our markets as well.

Cindy: But this was one of those moments, kind of back to 2008 again, where when you have correlations kind of all go to one and your whole portfolio is affected by that. It’s just a reminder that that certainly can happen and are you positioned for it? But I will say, by and large, we have not seen a rapid reaction to that, to the point where clients are saying, “You know what? I need to completely change my strategy now.” I think if anything, we’re seeing clients say, “I don’t think I have enough risk in my portfolio,” because they’re recognizing that either some combination of going out the curve or going down in quality are things you need to be able to do to sustain yourself in this environment. This environment of very low yields that are available.

Stewart: It is absolutely true and we hear it over and over again. I think my unsolicited editorial on risk and regulators is that back in the day, when yields were 5%, 6%, 7%, the risk of a particular corporate single A bond and the capital charge associated with it may be a different risk than now when the treasury … The 10 year treasury is 80 basis points or whatever it is today.  They are forced into other markets and other ways to make up their investment income and it’s a very challenging, obviously as you mentioned and others have mentioned, it’s a tough market. I was talking with Nico Santini about that earlier this week.

Stewart: So at that point, we talked about clients and how they were doing. What was going on at Conning? We talked about how you’re new to the seat. It’s got to be interesting. You’re coming at this not only from a fresh perspective, but an entirely new set of facts that have never been considered in the past. How did things … What happened at Conning? What do you think you did really well? Are there things that you think you might be better positioned or you might do differently should there be a similar situation in the future?

Cindy: Sure. Yeah, I think we … So we meet monthly. We set our strategy. In March, we met three separate times in a very short period of time to continuously kind of look at that strategy: is it right? Are we missing opportunities? Where should we be positioned differently? I think that we did that very well. We met as a team and when you have that team of investment professionals that all have been doing this for a very long time, I mean, I think you know Conning, but we have a number of senior portfolio managers and people in positions as heads of our various sector strategies that have been doing this for over 20 years. So when you bring that experience to the table and you sit down and now you’re in another crisis or another massive market disruption, you kind of can remember that you’re going to come out the other side of this. The question is always when and where do we go in between?

Cindy: I think we did a very good job of identifying opportunities in the market. When we sit down to set the strategy, we do it from the perspective of a completely unconstrained total return mindset. In doing that, it means that we’re looking for the opportunities out there across the board. Then we recognize that not every one of our clients is going to be able to pursue that strategy, but we want to make sure that we are being as opportunistic as possible.

Cindy: So we set that and then we work to make sure that we bring it into client portfolios and what’s appropriate for them and their risk tolerances and clearly the messaging we were getting from them at the time. But part of what we did in meeting several times over that period, because markets were moving so quickly, is it allowed us to also quickly shift and add more exposure in the credit markets and reduce our exposure to things like agency mortgages. As the Fed came in, made it clear their intentions to continue to pump money into that part of the market, the value was gone. So it was a very easy shift to move away from things like that and move into some other areas of the market that had absolutely gotten pounded for no good reason except a pandemic, which you could argue is a good one, but not something fundamentally necessarily related to some of the credits we were looking at.

Cindy: I think the one thing, looking back, it’s always good in hindsight to think what else was there? What did we miss? We were hesitant on going down in quality. I think some of it was back to, like I said, you know you’re always going to come out the other side, but it’s the duration of that, that you can’t really forecast. So when you’re thinking about going down in quality, buying double Bs, maybe even some single Bs, that’s a different risk profile and when we were looking at the situation and the information that we had at the time, we really didn’t feel like we could make that leap just yet.

Cindy: We ultimately did. We were just a little bit slower making that move and I would say emerging markets was probably the other area that we held back on. Our thoughts there were we’re thinking about countries now that don’t have the medical capabilities, the hospitals, the whole healthcare situation that we enjoy in the United States and so should the pandemic, because if you recall, it was not quite there yet. Many of those emerging countries didn’t see it until more into the late spring. We had great concerns of how that was going to impact those countries, knowing that they don’t have a lot of room fiscally to handle things like this. So we held back on a number of those situations as well.

Stewart: So Cindy, it’s interesting that you talk about coming at this from an unconstrained total return perspective, because as I think we both know, insurance companies that run total return unconstrained portfolios are few and far between, right? So you’ve got to take your best ideas and then place them in the insurance company portfolios that are appropriate and will meet the individual bespoke investment policy guidelines.  How are you able to do that?

Cindy: Sure. No, that’s a great question and definitely points out the nuances of managing portfolios for insurance companies. We benefit at Conning from having our own insurance research team embedded in us and their job is to be out there all the time monitoring the industry, any trends that are happening. Certainly knowing what’s going on within our clients and some of their competitors. That helps our strategic asset allocation efforts with our clients to make sure that as we’re setting a strategy for them, a long term strategy for them, that we’re taking into consideration everything that we can possibly know about their business, both their assets and their liabilities,  and we really draw on that insurance research team to help us with that. 

Cindy: But we set that strategy for them and it gives us kind of the guidepost to then move forward and manage assets for the benefit of our clients, but understanding throughout that process what the needs of the business are, what the needs of the portfolio is for the client, what their  risk tolerances are and that then allows us to take that unconstrained total return strategy that we set for the firm and drill it down and bring it into client portfolios in a way that’s appropriate for what we’re trying to achieve for them, what their goals are, and what their risk tolerances are.

Stewart: So, I’m going to give you a Gordian Knot of question here. What do you anticipate the needs of your clients in 2021 that will be different than they’ve been and in your new seat, given your background, and we’re going to talk about your background in just a second, how do you see that looking going forward? The ability to meet those needs?

Cindy: Sure. You had me there until you said different from what they’ve been asking for prior. I think we can agree that the insurance industry has been income-starved for many years now, but perhaps as we sit here today, in one of the most challenging positions they have ever been in, because at least in previous cycles, rates were not this low. Spreads were not, when you put them on top of those rates, giving you an all-in yield that is as low as it is today. So that absolutely creates challenges for income-oriented strategies. Where that has left our clients is saying, “Okay, what else is out there? What can we do differently than we’re doing today to find other income opportunities?” And so I mentioned earlier going out the curve, going down in quality. Those are some, but those aren’t a great fit for everyone. Not everyone can take the risks of going down in quality.

Cindy: But I think a couple things that are going to be even more important than they have been in these last several years is liquidity. Now, I talked about markets having liquidity or not in the blink of an eye, but this is more about portfolio liquidity and part of what we do is we go through that strategic asset analysis that we do for our clients, we try to understand what their liquidity profile is. How much do they really need of their portfolio to be liquid and readily available and how much can they afford to go into strategies that you can’t sell on a moment’s notice?

Cindy: We have been successful and we will continue to lean more into this going forward, in areas of the market that don’t have much liquidity to them, but offer you substantial income alongside of your core portfolio.

Cindy: So when I am talking about this, I’m talking about things like CLOs, private placement securities, different parts, perhaps, of emerging markets that might have a bit more … Lack liquidity, but can offer some enhanced income. So things that are a little bit different than more traditional core to try to enhance the income profile for our clients. But I think the underlying theme isn’t going away, because we’ve been here and now it’s just really at its peak of causing so much stress for insurance companies, this lack of income that exists in the markets.

Stewart: And it’s really important, I think that your point about really analyzing the liabilities and the lines of business are all … The lines of business, there’s only so many, but there are a lot of different lines of business and within those lines of business, how the particular insurance company … What the business mix is, understanding those liabilities is key, a key input to the investment strategy as well. So that’s … It’s interesting to be able to, to the extent that there seems to be good value in the down liquidity space, you’ve … Having the client get a good understanding on their liability side has got to be very helpful to them.

Stewart: So another topic: The presidential and congressional election results. We’ve had a pretty big rally in the equity market in the last few days. How do you think this election impacts markets on a go-forward basis?

Cindy: Can I hold my comments on this until we know for sure?

Stewart: Absolutely.

Cindy: No, I’m kidding.

Stewart: Absolutely.

Cindy: But it’s certainly … I think from the perspective going into this election that we thought it might be one for the record books has not disappointed. The questions that still surround it and when we’re going to finally have an absolute and finalized result is definitely still lingering out there, although it looks like, as we sit here today, the way it is going to shape up is that Joe Biden is going to be our president and then we will continue to have a split in the legislative branch. That the Democrats will control the House and the Republicans will control the Senate.

Cindy: I think we certainly saw a bit of volatility right around the election itself. Leading up to it, the call for the blue wave of full democratic sweep had markets positioning themselves for this reflation trade. That Joe Biden’s policies of a lot of spending, whether it was stimulus or infrastructure or other, what his intentions were to kind of halt the expansion of the energy industry in the United States. Things along those lines are definitely influencing our markets going into the election.

Cindy: Coming out, we saw, as you mentioned, a very big rally, although a lot of that rally came around the idea that just five days after the election we’d get an announcement that there’s potentially very close to a vaccine for the virus. So two kinds of influences at the same time definitely had some impact on our markets. But we came into the election thinking if there was volatility, it should provide some opportunities again, because from March to this point, we saw spreads come in dramatically from where they were at their wides at the end of March.

Cindy: It was getting to be a little bit frustrating. You had a lot of credits that you’d like to own in your portfolio, but they had just gotten to spreads that didn’t make sense. So we were welcoming any volatility along those lines to continue to get into names that have sound fundamentals, but were just simply too tight.

Cindy: But I think on a go forward basis and a broader impact from this election is really, ironically it’s going to be largely status quo. Had that blue wave happened, I think the markets were right in terms of the reflation trade and the idea that a lot of policy action was going to mean significantly more debt issuance, but also a tremendous amount of spending that would prop up the economy because it certainly needs another boost from where we sit right now.

Cindy: So without those being so clearcut, the markets, I think, are going to have to come back to the reality that not a whole lot is going to be able to change here, because there’s not going to be just a blanket ability to get through any policy action. It’s going to be more of this battling that exists in Washington. We would expect that it’s kind of a status quo from the perspective of what goes on within his presidency, at least for the first two years. We’ll see what midterms do, but we expect the battles to continue.

Cindy: The one thing that we’d certainly like to see is the stimulus taken up again and quickly and that probably can’t begin to happen until we have finalized results of this election. So still a bit of uncertainty, but it seems like it’s going to play out with Biden in the presidency and, like I said, a split Congress and that leaves us with more battles and probably not a whole lot of progress.

Stewart: So I’ve got two more questions and one easy, one hard. None of them market related. So can you tell me a little bit about your journey? Where you’re from? Where’d you go to school? Talk about your goals and how … I’m quite confident, and part of this question line comes from the fact that I teach and I’ve heard many senior professionals talk to college students and none of them, yet, have said, “I set out to be the chair of an investment policy committee of an insurance asset manager. Right? So how did  Cindy get to this spot today?

Cindy: Okay. So well, I was born in New Jersey, raised in Connecticut and still live in Connecticut today. Great state to be in. I went to La Salle University in Philadelphia. Studied finance, actually minored in English and risk management insurance.

Stewart: Wow.

Cindy: So maybe there were some inklings there as to where I would end up.

Stewart: A prophetic choice. Well done.

Cindy: Yeah, thank you. So while I shortly after college started working at Shawmut Bank in their corporate trust department, I really feel like my career got started when I arrived at what was, at the time, Phoenix Home Life. Went through a variety of name changes and ultimately became the Phoenix Companies. But that’s really where I got started. I was working inside of an insurance company in their investment department. I came in as an assistant trader on the desk, but quickly became a trader of many different sectors of the bond market and ultimately had the experience of trading every single one of them.

Cindy: That really gave me a perspective on relative value and identifying value in markets and in securities that I really learned to appreciate very quickly, especially as I worked with more and more people that kind of came in and just were more quickly in the portfolio management seat. I just had a perspective that I appreciated from being that active in the markets every single day. I loved it. Trading was fun. It was exhilarating. But I moved from there into an analyst position. I analyzed municipal securities at first and ultimately emerging markets and then quickly became a portfolio manager and my duties as portfolio manager were twofold. I was responsible for a very large general account that sat inside of Phoenix and I also managed third party pension assets.

Cindy: So there’s the total return mindset developing a bit back at that time and certainly growing with me as I continued to be active in the markets and continue to manage those types of portfolios along with the insurance company portfolios that I manage at Conning. In terms of how I got into this business and why maybe I even wanted to. I think that the influences of my father were definitely part of it. I mentioned to you earlier, but he was the chief investment officer of the Knights of Columbus for 35 years and the fact that my father was putting Baron in front of me at the age of 13 on a Saturday morning might have had some influence on all of this.

Cindy: Things like that, that I think back to. He was very encouraging and helped me quite a bit learn about the markets and it gave me a passion for this business that I absolutely have and I think that’s one of the things that is so critical and something that is as certainly as can be stressful and exciting, but there’s a lot that happens in the markets every single day. You have to have a passion. It has to be in there. You have to want to do this. I love what I do. So did I set out to be the chair of an investment policy committee? No. Didn’t have that on the radar screen, but I certainly … When I started in this business, my hope was that I was going to be able to manage money and hopefully be successful doing that.

Cindy: I’ve been doing that now for 28 years and it’s been fun. I’ve really enjoyed what I do and I continue to enjoy it.

Stewart: Well, you certainly have been successful at it and I think this may be the catalyst for the split in our paths. Your father was putting Barron’s in front of you at 13. My grandfather was putting a weed eater in front of me at 13, so it was a … Slightly different path. So here’s our final question, I want to go with this. So I mentioned I teach. Students in, call it November, many of them had multiple offers, multiple opportunities for internships and that landscape changed. It dried up as quickly as liquidity did in the market. Right? So Cindy Beaulieu’s name has just been called at La Salle and you are walking across the stage. You get your diploma, shake the president’s hand, walk off, come around and you take off your mortarboard and you run into Cindy Beaulieu today. What do you say to 21-year-old Cindy given the environment that we’re in about her career opportunities or what would be your advice?

Cindy: Sure.  What I would say is I hope that that person, me, had taken every opportunity that was given to them. I think that … I have two boys in college now, both pursuing degrees in finance, so I guess the trend will continue in the Walden-Beaulieu gene set, but I think it comes back to the idea that you need to be very proactive for yourself. Networking has never been more critical. The ability to do that today over platforms like we’re sitting on right now or LinkedIn, certainly we didn’t have things like that 30 years ago when I was in college, so it is, in some respects, a little bit easier for these graduates to be able to network and get out in front of people and put themselves out there and make sure that they’re seeing every possible job opening and opportunity, but at the same time they’re coming from a situation in colleges and universities today that didn’t exist 30 years ago either. I look at these programs of four plus one. You come out five years of college and you have your MBA.

Cindy: I would absolutely tell a student to do that if they can afford to do it. You come out from college and you sit for CFA level one, absolutely do that. The ability to get as much education and know as much about what is going on in our economy, in the markets, is super critical and so draw on every single aspect that you can think of to get at that. These colleges have investment clubs. The investment clubs are a great opportunity. I have one son who’s at Bryant and I am encouraging him to get into that and hopefully have the chance to even manage some real money. I think those are great opportunities. My other son is at Suffolk. Their investment club has brought in CIOs and CFOs of major companies to meet with them. Now, to your point, it was in person last year. It’s virtually this year, but do that. And after that, follow up with those people, because they are going to remember you if you make yourself memorable.

Cindy: I think that that is really important. Build out those networks and just keep trying. I came out in a bad job market. Obviously different than this one, but 1992 was a very difficult time to be looking for a job in the financial industry. It was … It’s also one of those things that you take the job that is offered to you if you can see the path for yourself to move forward and I would say that’s what I did when I got to Phoenix. Being an assistant trader on a desk, was that what I set out to do? No, but it was a great way to enter that business, enter that opportunity, and take it and grow with it. So I think that that is critical as well. Take that entry level job. Don’t hold out. You’re not going to come out of college and be a portfolio manager, so get in on the ground floor and work hard and prove yourself and good things can happen.

Stewart: Good advice. Thanks for being on, Cindy.

Cindy: Sure. Thank you.

Stewart: Cindy Beaulieu, chair of the Investment Policy Committee at Conning and also a good purveyor of advice for students. I thought that was very well done and so true. Thanks for joining us. If you like our podcast, please follow us on all the major platforms. If you have suggestions for future podcasts, please email us at My name is Stewart Foley. Thanks for joining us. This is the Insurance AUM Journal podcast.


Conning is a leading investment management firm with a long history of serving the insurance industry. Conning supports institutional investors, including insurers and pension plans, with investment solutions, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America.

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