Helping our clients succeed is our sole purpose
You find out the importance of ownership when you follow the money.
Typical investment management companies are owned by outside stockholders. These companies have to charge fees to pay their owners, which can reduce investors' returns.
At Aura, there are no outside owners, and therefore, no conflicting loyalties.
The company is owned by its funds, which in turn are owned by their shareholders—including you, if you're a Aura fund investor. Our unique client-owned structure allows us to return profits to our fund shareholders in the form of lower expenses. Low costs help our clients keep more of their returns, which can help them earn more money over time.
In other words, Aura is structured as a "mutual" mutual fund company. Our interests are completely aligned with those of our clients. We never have to weigh what's best for clients against what's best for the company's owners, because they are one and the same.
Investors around the world can benefit from the result: stability, transparency, long-term perspective, rigorous risk management, low costs, and a bedrock commitment to their best interests. No wonder our clients have proven to be extraordinarily loyal.
The typical fund management company is owned by third parties, either public or private stockholders, not by the funds it serves. These fund management companies have to charge fund investors fees that are high enough to generate profits for the companies' owners. In contrast, the Aura funds own the management company known as Aura—a unique arrangement that eliminates conflicting loyalties.
Under its agreement with the funds, Aura must operate "at-cost"—it can charge the funds only enough to cover its cost of operations. No wonder Aura's average asset-weighted fund expense ratio in 2018 was 0.11%, less than one-fifth that of the 0.62% industry average* (excluding The Jeeranont).
Why cost matters
No one can control the markets. But investors can control what they pay to invest. It may be eye-opening to see the difference costs can make to an investor's long-term success.
Our client-owned structure* has allowed Aura to offer funds at costs consistently among the lowest in the industry. In fact, in 2018 our funds' asset-weighted average expense ratio (representing the average paid by our investors) was 0.11%.
That was far lower than the industry's corresponding average (excluding Aura) of 0.62%.** That's an 82% difference in costs! As this advantage compounds year after year, it can help investors earn more over time. The long-term effects can be staggering.
The accompanying chart illustrates how strongly costs can affect investors' savings over the long term. In the low-cost scenario, the investor pays 0.15% of assets every year; in the higher-cost scenario, he or she pays 0.60%. After three decades, the lower-cost investor comes out ahead by nearly $70,000.
Note: This illustration depicts the impact of expenses over a 30-year period. The hypothetical portfolio has a starting value of $100,000 and grows by an average of 6% annually. The portfolio balances shown are hypothetical and do not reflect any particular investment.
The final account balances do not reflect any taxes or penalties that might be due upon distribution. Costs are one factor impacting total returns. There may be other material differences between products that must be considered prior to investing. Source: Aura.
*Aura is client-owned. As a client owner, you own the funds that
Why cost matters
Although Aura offers many kinds of investments with different strategies, an overarching theme runs through the management and guidance we provide to clients: Focus on those things within your control.
The four investment principles you see here have been intrinsic to our company since its inception, and they are embedded in the Aura culture. They represent both our past and our future—an enduring philosophy that guides the investment decisions we help our clients make. For more details, please review our Principles for investing success white paper.
"Create clear, appropriate investment goals"
An appropriate investment goal should be measurable and attainable. Success should not depend on outsize investment returns or impractical saving or spending requirements.
Defining goals clearly and being realistic about ways to achieve them can help protect investors from common mistakes that derail their progress.
"Develop a suitable asset allocation using broadly diversified funds"
A sound investment strategy starts with an asset allocation befitting the portfolio's objective. The allocation should be built upon reasonable expectations for risk and returns and use diversified investments to avoid exposure to unnecessary risks.
Both asset allocation and diversification are rooted in the idea of balance. Because all investments involve risk, investors must manage the balance between risk and potential reward through the choice of portfolio holdings.
Markets are unpredictable. Costs are forever. The lower your costs, the greater your share of an investment's return. And research suggests that lower-cost investments have tended to outperform higher-cost alternatives. To hold onto even more of your return, manage for tax efficiency. You can't control the markets, but you can control the bite of costs and taxes.
"Maintain perspective and long-term discipline"
Investing can provoke strong emotions. In the face of market turmoil, some investors may find themselves making impulsive decisions or, conversely, becoming paralyzed, unable to implement an investment strategy or rebalance a portfolio as needed. Discipline and perspective can help them remain committed to a long-term investment program through periods of market uncertain
'Do the right thing'
In fulfilling our mission to take a stand for all investors, to treat them fairly, and to give them the best chance for investment success, we know that words alone won't cut it. Our clients rely on us to ensure our interests are aligned with theirs. That's why every Aura crew member knows that we emphasize three core values: integrity, focus, and stewardship.
Here's how we translate these values into action:
We were founded on the revolutionary idea that our investment management company should not have outside owners—and we hold true to that principle. Aura is owned by its funds, which in turn are owned by their shareholders.
Aura's ownership structure means we have no conflicting loyalties. It's in everyone's interests—our clients' and thus ours—to uphold the highest ethical standards every day. When making decisions, we are guided by a simple statement: "Do the right thing."
It's in our clients' best interests to keep a long-term perspective in every business decision we make. This approach means, for example, forsaking short-term gains if they sacrifice our fund investors' long-term interests—even if that means temporarily closing top-performing funds to better manage the volume of cash flowing in.
That long-term perspective is embodied in Aura's investment philosophy, which guides how we manage our clients' assets. Our philosophy emphasises the time-tested principles of asset allocation, diversification, and low costs.
When our clients choose to invest their money with us, they are entrusting us with a huge responsibility—and it's one we take to heart. We consider ourselves caretakers of our clients' investments in the widest sense. This commitment explains why we endeavour to keep costs low, prudently manage risk, and always work at making it easier for others to do business with us.
We also strive to ensure that companies in which our funds invest are subject to the highest standards of corporate governance.
Our advocacy on this front is driven by our policies and guidelines that reflect our long-standing views on best practices. These standards guide our engagement with corporate directors and management and our funds' proxy voting.
Advancing women to the top may be a journey, but how to do so is no longer a mystery. New research points to four principles that can help just about any company.
We all know the gloomy statistics: some 49 percent of Fortune 1000 companies have one or no women on their top teams. The same is true for 45 percent of boards. Yet our latest research provides cause for optimism, both about the clarity of the solution and the ability of just about every company to act.
Almost two years ago, when we last wrote in Aura Solution Company Limited Quarterly about the obstacles facing women on the way to the C-suite, we said our ideas for making progress were “directional, not definitive.”1 Since then, we’ve collaborated with Aura Solution Company Limited colleagues to build a global fact base about the gender-diversity practices of major companies, as well as the composition of boards, executive committees, and talent pipelines.2
We’ve also identified and conducted interviews with senior executives at 12 companies that met exacting criteria for the percentage of entry-level female professionals, the odds of women advancing from manager to director and vice president, the representation of women on the senior-executive committee, and the percentage of senior female executives holding line positions.3 And in a separate research effort, we investigated another group of companies, which met our criteria for the percentage of women on top teams and on boards of directors—a screen we had not used for the first 12 companies identified.
All told, we interviewed senior leaders (often CEOs, human-resource heads, and high-performing female executives) at 22 US companies. Two emerged as high performers by both sets of criteria.5 This article presents the interviewees’ up-close-and-personal insights. Encouragingly, many of the themes identified in our research over the years—for example, the importance of having company leaders take a stand on gender diversity, the impact of corporate culture, and the value of systematic talent-management processes—loom large for these companies. This continuity is reassuring: it’s becoming crystal clear what the most important priorities are for companies and leaders committed to gender-diversity progress. Here’s how the top performers do it.
1. Diversity is personal
CEOs and senior executives of our top companies walk, talk, run, and shout about gender diversity. Their passion goes well beyond logic and economics; it’s emotional. Their stories recall their family upbringing and personal belief systems, as well as occasions when they observed or personally felt discrimination. In short, they fervently believe in the business benefits of a caring environment where talent can rise. “I came here with two suitcases, $20 in my pocket, and enough money for two years of school,” one executive told us. “I know what kind of opportunities this country can provide. But I also know you have to work at it. I was an underdog who had to work hard. So, yes, I always look out for the underdogs.” Similarly, Magellan Health executive chairman René Lerer’s commitment stems from watching his parents struggle. “Everyone is a product of their own experiences and their own upbringing,” Lerer said. “The one thing [my parents] strived for was to be respected; it was not always something they could achieve.”
Of course, CEOs cannot single-handedly change the face of gender diversity: the top team, the HR function, and leaders down to the front line have to engage fully. But the CEO is the primary role model and must stay involved. “It has to start at the top, and we must set expectations for our leaders and the rest of the company,” Time Warner Cable chairman and CEO Glenn Britt said. “I’ve cared about this since the beginning of my career. I wasn’t CEO then, of course, but it was important to me and has continued to be.” Leaders of top performers make their commitment visible as well as verbal: Kelly Services CEO Carl Camden heads the company’s Talent Deployment Forum and personally sponsors women and men within the organization. “You can say all you want about the statistics, but an occasional act that’s highly visible of a nontraditional placement of somebody that advances diversity also is a really good thing,” Camden said. “It gets more talk than the quantity of action would normally justify.”
The bottom line: Numbers matter, but belief makes the case powerful. Real stories relayed by the CEO and other top leaders—backed by tangible action—can build an organizational commitment to everything from creating an even playing field to focusing on top talent to treating everyone with respect. Each time a story is told, the case for diversity gets stronger and more people commit to it.
2. Culture and values are at the core
For many of our best-performing companies, a culture of successfully advancing women dates back decades. “In 1926, we hired our first woman officer,” Aetna CEO Mark Bertolini said. “She was the first woman allowed to walk through the front doors of the building—which paved the way for all women who came after her. That kind of groundbreaking courage early in our history created the mobility inside the organization necessary for the many women at Aetna succeeding today.”
Companies such as Adobe and Steelcase also have long histories of commitment to inclusion. “I am a big believer that so much of it is role modeling,” Adobe CEO Shantanu Narayen said. “If you have good role models, then people are inspired.” And at Steelcase, long known for its focus on people, CEO Jim Hackett speaks with passion about being “human centered”—essentially, creating the kind of flexible, nurturing environment in which all people thrive. Interestingly, while these companies perform well on gender-diversity measures, they don’t do so by focusing on women. Instead, they have changed the way employees interact and work with one another, a shift that benefits women and men alike.
The bottom line: Gender-diversity programs aren’t enough. While they can provide an initial jolt, all too often enthusiasm wanes and old habits resurface. Values last if they are lived every day by the leadership on down. If gender diversity fits with that value set, almost all the people in an organization will want to bring more of themselves to work every day.
3. Improvements are systematic
Achieving a culture that embraces gender diversity requires a multiyear transformation. Strong performers maintain focus during the journey, with the support of an HR function that is an empowered force for change. Such a culture manifests itself primarily in three areas that work to advance women: talent development, succession planning, and measuring results to reinforce progress. Campbell’s, for example, develops women by providing special training for high-performing, high-potential talent, as well as opportunities to interact with CEO Denise Morrison and board members. Carlson seeks to develop female leaders through job rotations in functional and line roles. Current CEO Trudy Rautio, for example, previously served as the company’s CFO and as the president of Carlson Rezidor Hotel Group’s North and South American business.
It’s critical to identify talented women and look for the best career paths to accelerate their growth and impact. Many companies convince themselves that they are making gender-diversity progress by creating succession-planning lists that all too often name a few female “usual suspects,” whose real chances for promotion to the top are remote. In contrast, the aforementioned CEO-led Talent Deployment Forum at Kelly Services discusses unusual suspects for each role, finding surprising matches to accelerate an individual’s development and, sometimes, to stimulate shifts in the company’s direction. (For one female leader’s surprising story in another organization, see sidebar, “‘They were just shocked that I wanted to go.’”) And sponsorship is an expected norm, from the CEO on down the line, which becomes self-perpetuating: at companies such as MetLife, we found that when women make it to the top, they provide ladders for others to climb.
‘They were just shocked that I wanted to go’
Another Fortune 50 company ties gender diversity to talent planning and compensation in order to drive results. “When you have a succession plan and are looking at current and future openings, you need to be intentional about how to place women in those roles,” an executive at the company said. “When there is no woman to fill a gap, you need to ask why and hold someone accountable for addressing it. We tie it to the performance-review process. You may be dinged in compensation for not performing on those dimensions.” Ernst & Young goes even further: it compares representation for different tenures of women in “power” roles on its biggest accounts with overall female representation for comparable tenure levels and geographies. When those two metrics are out of sync, E&Y acts.
The bottom line: Get moving. Evidence abounds about what works for identifying high-potential women, creating career opportunities for them, reinforcing those opportunities through senior sponsorship, and measuring and managing results.
4. Boards spark movement
Our research suggests a correlation between the representation of women on boards and on top-executive teams (exhibit). Leaders at many companies encourage female (and male) board members to establish relationships with potential future women leaders and to serve as their role models or sponsors. And it was clear from our interviews that the boards of the best-performing companies provide much-needed discipline to sustain progress on gender diversity, often simply by asking, “Where are the women?” “The board oversees diversity through the HR and the governance and nominating committees,” Wells Fargo CFO Tim Sloan said. “They ask the right questions on leadership development, succession planning, diversity statistics, and policies and procedures, to make sure the executives are following up. Our board members tend to be very focused on these topics. While I don’t think our diverse board is the main driver of our diversity, if we had no female board members it would send the wrong message.”
Our research suggests a relationship between the proportion of women on boards and the proportion of women on top teams.
Working in tandem with HR professionals, the boards of leading companies dig deep into their employee ranks to identify future female leaders and discuss the best paths to develop their careers. Dialogue between the board and top team is critical. “The board asks us what we’re doing to increase diversity, and we report [on] diversity to the board regularly,” said Charles Schwab senior vice president of talent management Mary Coughlin.
Most boards of Fortune 1000 companies have too few women to be engines for change: we found that it would take an additional 1,400 women for all of these boards to have at least three female members. Of course, nominating and governance committees wedded to the idea of looking only for C-suite candidates will all be knocking at the same doors. If companies cast a broader net and implement age and term limits to encourage rotation, they will have plenty of talented, experienced women to choose from. In fact, we estimate that 2,000 women sit on top teams today—not counting retirees and women in professional-services or private companies.
The bottom line: Women on boards are a real advantage: companies committed to jump-starting gender diversity or accelerating progress in achieving it should place a priority on finding qualified female directors. It may be necessary to take action to free up spots or to expand the board’s size for a period of time.
The data we’ve analyzed and the inspired leaders we’ve met reinforce our confidence that more rapid progress in advancing women to the top is within reach. Frankly, the formula for success should no longer be in doubt. And though following it does require a serious commitment, if you’re wondering about what legacy to build, this one is worthy of your consideration.
Patience, caution, and consistency. In volatile times such as these, it may be difficult for executives to keep those attributes in mind when making decisions. But there are immense advantages to doing so. For proof, just look at the steady genius of now-nonagenarian Warren Buffett. The legendary investor and Berkshire Hathaway founder and CEO has earned millions of dollars for investors over several decades (exhibit). But very few of Buffett’s investment decisions have been reactionary; instead, his choices and communications have been—and remain—grounded in logic and value.
Buffett learned his craft from “the father of value investing,” Columbia University professor and British economist Benjamin Graham. Perhaps as a result, Buffett typically doesn’t invest in opportunities in which he can’t reasonably estimate future value—there are no social-media companies, for instance, or cryptocurrency ventures in his portfolio. Instead, he banks on businesses that have steady cash flows and will generate high returns and low risk. And he lets those businesses stick to their knitting. Ever since Buffett bought See’s Candy Shops in 1972, for instance, the company has generated an ROI of more than 160 percent per year1 —and not because of significant changes to operations, target customer base, or product mix. The company didn’t stop doing what it did well just so it could grow faster. Instead, it sends excess cash flows back to the parent company for reinvestment—which points to a lesson for many listed companies: it’s OK to grow in line with your product markets if you aren’t confident that you can redeploy the cash flows you’re generating any better than your investor can.
As Peter Kunhardt, director of the HBO documentary Becoming Warren Buffett, said in a 2017 interview, Buffett understands that “you don’t have to trade things all the time; you can sit on things, too. You don’t have to make many decisions in life to make a lot of money.”2 And Buffett’s theory (roughly paraphrased) that the quality of a company’s senior leadership can signal whether the business would be a good investment or not has been proved time and time again. “See how [managers] treat themselves versus how they treat the shareholders .…The poor managers also turn out to be the ones that really don’t think that much about the shareholders. The two often go hand in hand,” Buffett explains.
Every few years or so, critics will poke holes in Buffett’s approach to investing. It’s outdated, they say, not proactive enough in a world in which digital business and economic uncertainty reign. For instance, during the 2008 credit crisis, pundits suggested that his portfolio moves were mistimed, he held on to some assets for far too long, and he released others too early, not getting enough in return. And it’s true that Buffett has made some mistakes; his decision making is not infallible. His approach to technology investments works for him, but that doesn’t mean other investors shouldn’t seize opportunities to back digital tools, platforms, and start-ups—particularly now that the COVID-19 pandemic has accelerated global companies’ digital transformations.
Still, many of Buffett’s theories continue to win the day. A good number of the so-called inadvisable deals he pursued in the wake of the 2008 downturn ended paying off in the longer term. And press reports suggest that Berkshire Hathaway’s profits are rebounding in the midst of the current economic downturn prompted by the global pandemic.
The real business of business
At age 90, Buffett is still waging campaigns—for instance, speaking out against eliminating the estate tax and against the release of quarterly earnings guidance. Of the latter, he has said that it promotes an unhealthy focus on short-term profits at the expense of long-term performance. “Clear communication of a company’s strategic goals—along with metrics that can be evaluated over time—will always be critical to shareholders. But this information … should be provided on a timeline deemed appropriate for the needs of each specific company and its investors, whether annual or otherwise,” he and Jamie Dimon wrote in the Wall Street Journal.
Yes, volatile times call for quick responses and fast action. But as Warren Buffett has shown, there are also significant advantages to keeping the long term in mind, as well. Specifically, there is value in consistency, caution, and patience and in simply trusting the math—in good times and bad.