Wellington Management’s culture of innovation can be traced back more than half a century to the Daily Morning Meeting, a ritual enduring to this day in which portfolio managers, research analysts and staff from other functions discuss timely investment ideas.
The purpose of the meeting has naturally evolved over the years as information has become a lot more accessible thanks to technological change, although its importance to Wellington’s culture has not.
“For more than 50 years, we’ve begun every business day with this dynamic exchange of ideas. It is one of our primary forums for sharing and debating the varied investment perspectives of our multi-disciplinary investment organisation,” said Janet Perumal, head of Asia Pacific and head of investments for Asia Pacific at Wellington Management.
“Participants challenge and disagree with one another. Profitable ideas are often born here and each day we have the opportunity to improve ourselves and our investment ideas.”
That culture of innovation, which the Daily Morning Meeting seeks to inculcate, has spawned new initiatives ranging from tokenisation and AI through to new fund launches and efforts regarding sustainability.
Fund tokenisation
Wellington has been one of the leading firms when it comes to tokenisation of private funds. Last year, it completed a proof of concept with Citi and WisdomTree in which a Wellington-issued private equity fund was brought onto a distributed ledger technology network.
The fund’s distribution rules were also encoded into a smart contract and embedded in the token, which was then transferred to hypothetical WisdomTree clients.
As part of the experiment, various transfer scenarios were evaluated using smart contracts, relying on simulated identity credentials issued by WisdomTree and using a private fund token as collateral in an automated lending contract with DTCC Digital Assets.
Perumal (pictured) noted that the benefits of tokenisation would include enhancing operational efficiency in an asset class which is currently plagued by a lack of standardisation, while it would also help boost liquidity and even democratise access to private assets.
“Moving from an off-chain paper records and reconciliation system to an on-chain API-driven system, combined with digital identity solutions and embedded compliance controls, are major benefits. Enabling secondary transfers of ownership should open up pathways to liquidity for clients with shorter settlement times while reducing primary market in/out flow activity leading to lower cost for issuers,” she said.
“Two of the benefits of tokenisation that could help democratise access to alternative funds include fractionalisation – the ability to reduce investment minimums and liquidity – the ability to circumvent lock-up periods and illiquidity by enabling efficient secondary transfers of ownership for trading and collateralised bonding.”
AI adoption
Similarly, Wellington has been at the forefront of developments with regards to use of AI. Perumal drew a distinction between general productivity such as use of AI with Microsoft Office tools and core business, where the firm is rolling out solutions that closely integrate with their data and business processes.
With regards to the former, everyone at the firm has access to ChatGPT functionality through Microsoft Copilot Web as well as Copilot Web through Microsoft Office tools. Some of the most frequently used features are question answering, summarisation, content drafting and content editing.
With regards to core business, last year, the firm launched Welly, an AI assistant to help retrieve approved client request for information response and auto-generate first draft responses. Welly has since been expanded to other areas including thought leadership.
“We have already answered thousands of questions with the assistance of Welly and it shows strong potential to quickly integrate additional knowledge sources and improve productivity. However, we need continuous engagement and feedback to help it grow and mature,” said Perumal.
Perumal is confident that AI will continue to be used for more value-added work and points to a proof of concept involving Investment Science, in partnership with +Investment Platform Technology, which demonstrated the ability to harness generate AI from the firm’s investment research.
“This work will improve research summarisation and search, as well as introduce chatbot functionality across our investment research, laying the foundation for more advanced capabilities,” she said.
Sustainability
Wellington’s culture of innovation is not limited to just technology though as the firm has been at the forefront of addressing the impact of climate change through their partnerships with the Woodwell Climate Research Center and CAlPERS.
According to one estimate from Force for Good, $79trn of global credit risk is linked to environmental considerations and over 60% of companies in the S&P 500 own physical assets that are at high risk of at least one type of climate change-related physical risk.
In 2018, Wellington struck a partnership with the Woodwell Climate Research Center to better grasp the relationship between climate risks and asset prices.
This has also spawned Climate Exposure Risk Application, an integrated spatial finance software that helps Wellington’s investment teams decipher physical climate risks.
“During our earliest visits to Woodwell Climate Research Center, our climate research team realised the central role maps play in their climate science research and analysis. Maps provide spatial context for data and help viewers internalise information and we immediately understood how additive climate mapping could be for the investment process,” said Perumal.
“We had been synthesising and sharing climate data with investment teams across Wellington since the start of our research collaboration with Woodwell in 2018, but we knew that for investors to be able to integrate climate projections into their investment process, they needed to translate climate data and insights into measurable outputs. To that end, we created our Climate Exposure Risk Application.”
Similarly, in 2019, Wellington and CalPERS announced a new framework designed to help companies disclose their physical vulnerabilities.
New funds
At the same time, Wellington has also proven itself to be nimble when it comes to its strategies. The Wellington Credit Total Return strategy, for example, has seen significant growth in assets with its AUM more than doubling in five months, rising from $1.4bn in May 2024 to $3.2bn in October last year.
In April, the firm signed an exclusive partnership with Standard Chartered Private Bank to offer the strategy to clients in Hong Kong and Singapore. Managed by Connor Fitzgerald, the fund invests in a global portfolio of US dollar-denominated treasury, corporate, high-yield and emerging market fixed-income instruments.
The strategy tactically rotates between credit and US Treasuries, owning credit when there is value in doing so and seeking refuge in US Treasuries and cash when valuations appear stretched, which is something that Perumal views as critical.
“Amid the ‘new economic era’ characterised by higher and more volatile inflation alongside shorter and more pronounced economic cycles, we believe investors can benefit from adopting a total return approach that looks beyond benchmarks and shifts between Treasuries and credit to exploit pricing inefficiencies while capturing returns beyond income,” she said.
“Possible dangers for investors against the backdrop of today’s environment are overpaying for income and underestimating price volatility. It is easy to get drawn in by the allure of yield alone. Given investors’ desire for yield at any price, fixed income market pricing is often pushed to extremes inconsistent with fundamentals and reasonable expectations for forward-looking returns.”
Wellington has also continued to see investor interest in its Next Generation solutions, despite the dwindling appetite for thematic funds generally across the industry.
