2021 Knowledge Brokers

Terrence Keeley

Terrence Keeley was nominated by a well-respected CIO, who noted “he has been called upon by kings and priests during their times of trouble and walked them back to health. Keeley is a devoted man with extraordinary skills, great wisdom, unique passion, and incredible breadth.” As managing director, global head, and senior adviser of the Official Institutions Group (OIG), Keeley is responsible for overseeing the relationships and services BlackRock provides to central banks, sovereign wealth funds, finance ministries, and supra-nationals around the world. He also runs the BlackRock Educational Academy and the BlackRock Client Relationship Academy, the firm’s learning initiatives for clients and those who serve them.

Before joining BlackRock, in 2011, Keeley was the founder and senior managing principal of Sovereign Trends LLC, a New York-based advisory firm and, before that, starting in May 1988, he worked in managerial positions for UBS’ investment banking and asset management subsidiaries, operating out of London, New York, and Chicago and overseeing teams that were responsible for asset management assignments, transactions, credit exposures, debt underwritings, and restructurings with governmental agencies globally.

Prior to his work in the private sector, Keeley worked for US Rep. David Stockman and for President Ronald Reagan’s Council of Economic Advisers, where he wrote speeches for the chairman, Murray Weidenbaum. Keeley has been a lecturer at the University of Notre Dame in business and ethics. In 2012 he was appointed by Pope Francis to serve on the Vatican bank’s advisory board, reviewing the banking and financial operations of the Holy See. Also the founder of the Financial Hippocratic Oath movement, Keeley serves or has served on advisory boards for the Asian Development Bank, the University of Notre Dame, and Oxford University (Christ Church).

He is widely published in financial publications on a number of macroeconomic and investment topics. He holds a bachelor’s degree in politics and philosophy from the University of Notre Dame and a master’s and doctorate in history and economics at Oxford University (Christ Church).

CIO: What qualities do you look for in a manager/service provider given the pandemic’s financial and economic impacts?

Keeley: The pandemic simultaneously forced the acceptance of two undervalued risks. The first was a once in a century left tail event: a pandemic that effectively shut down 35% of the global economy in a few short months. The second was the rapid implementation of modern monetary theory, a radical policy construct that consists of limitless, concurrent monetary and fiscal stimulus. The extent of global monetary and fiscal intervention unleashed over the past 18 months dwarfs anything ever seen, including that of WWII.

The skills most needed in this environment are uncommon macro acumen, strategic vision, and discipline. We are still navigating unconventional policies. Many pre-pandemic trends—e-commerce, broadband access, telemedicine, more flexible work—have accelerated. Others—urbanization and globalization—have been put on hold or reversed. Dispersion between winners and losers has been and will likely remain higher than normal. That creates a particularly attractive environment for gifted, active managers.

CIO: What changes are you making to your asset allocation advice?

Keeley: The current policy mix will undoubtedly spark higher inflation in the short-to-intermediate term. I worry it will persist. God help us if it does.

Inflation has been quiescent for the past few decades because of excess supply relative to demand. That dynamic has been inverted. With rates at or below zero in real terms, investors must also actively diversify their diversifiers. What can plan managers own that will remain stable and liquid during the next, inevitable drawdown? Whatever that is—carbon credits, disaster insurance, long-duration high-quality bonds—own it.

Finally, it is now abundantly clear that trillions of dollars will remain in motion for years to come as we attempt to navigate the coming energy transition. New technologies that create energy efficiency, promote more economic circularity, or help remove carbon from the air—you’ll want to own those as well. 

CIO: What do you think will be the biggest innovation in your industry in the next 10 years?

Keeley: The biggest innovations to come in the asset management industry will be more sophisticated methods for environmental, social, and governance (ESG) measurement and implementation. Right now, ESG is a big bowl of spaghetti: Dozens of new products are being launched with scant evidence of their long-term value. A day of reckoning is coming. $100 trillion in assets are not “ESG integrated,” even though they now claim to be. Regulators are trying to rein things in by creating more uniform standards, but that could also backfire, creating crowded trades that ultimately burst.

Meanwhile, climate risk is real investment risk. If investors don’t get the “E” right in their exposures, it’s likely the “S” and “G” won’t matter. All risk needs to be deliberate, diversified, and properly scaled. How many portfolios today are aligned with +4.5⁰ C, the globe’s current temperature trajectory? None that I know of.

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