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Erin Patrice O'Brien

Marie Chandoha

SAN FRANCISCO | The CEO of Charles Schwab Investment Management, which recently became the third-largest asset gatherer in the U.S., beat the odds to become the fourth most powerful woman in finance (as ranked by American Banker). Originally hired to clean up someone else’s mess (a fixed-income fund that cratered in 2008), she grew Schwab’s exchange-traded fund business from a couple billion under management to more than $120 billion (U.S.).

You’ll be leaving Schwab in March. What made you decide it was time?

We have great momentum, a winning strategy and great people, and I feel like it’s a good time to hand off the baton. And after 35 years, I’d like to spend more time with my family, do some travelling and serve on boards.

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Also, you want to spend more time with your cows.

Well, my husband and I do own a ranch in California, and we raise grass-fed beef.

You were hired because of your expertise in fixed income, but you spent a lot of time building the ETF business. Is that what you expected?

I did expect that area to grow, for a few reasons. Right after the financial crisis, I think it was a real reckoning for a lot of investors. You know, some active products did not perform as expected, and I think investors began rotating to index-based products, because you know what you’re gonna get—you’re gonna get performance that matches the benchmark. I also think investors became more cost-conscious, and ETFs are lower-cost.

What kind of year is 2019 going to be?

Increased volatility will be a bigger theme. We’re coming to the end of the economic cycle; there is more uncertainty in the world politically, and around trade and tariffs. So it’s really important for investors to focus on being more defensive. That can include adding more exposure to fixed income, which helps generate a smoother ride.

That puts investors in a tricky spot, though, because rates are going up.

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The Fed has been focused on increasing rates over the past three years, and they’re probably more toward the end of that process than the beginning. And when the Fed raises rates, it’s focused on short-term rates. If you’re in money markets or cash-type instruments, that’s good because you’re getting a higher rate. Longer-term bonds are more impacted by inflation expectations, and that’s more muted today.

Are you personally moving more into fixed income?

I moved more into fixed income in the summer. So yes, I have also moved into a more defensive posture.

What’s your personal approach?

I have about 40% in fixed income and the rest in equities. And I do use a lot of index-based products in my portfolio. So I eat my own cooking.

What keeps you up at night? A lot of people are worried about Trump’s tariffs and U.S. trade with China.

That’s something to worry about—but it also creates opportunities. For example, the emerging-market sector has been hit very hard because of oil prices, the strong dollar and concerns about trade. But it’s gotten hit so hard we’re actually beginning to see clients put money to work there because the sector has become so undervalued. So volatility creates opportunities too.

You’ve been a passionate advocate for women in finance. What advice do you have for women entering the field?

One thing I’ve seen in the 30-plus years I’ve been in the business is that men tend to raise their hands more than women and really make sure their managers know what their career aspirations are.

You have also advised women to be selective. What does that mean?

When I’m hiring women or other diverse candidates, I find they really think about the firm they’re interviewing for—are they supportive of women and diversity? I think choosing the firms that have better cultures will put someone on a faster path toward promotion or success.

Looking back at your upbringing, what allowed you to achieve success?

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You know, both of my parents were immigrants, and I saw them work really hard. That had quite an impression on me in terms of how I led my life—especially in terms of not being afraid to press forward, no matter what barriers came up along the way.

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