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Cover Story

Mike Nicholas discussion with Mesirow CEO Natalie Brown – the first woman CEO in Mesirow’s 86-year history

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User 631176803 · Natalie Brown Discussion for Fixed Income Insights

Mike Nicholas:

I am Mike Nicholas of the Bond Dealers of America, and welcome to the cover story of the fall 2023 issue of Fixed Income Insights, which is the only magazine dedicated to the US bond markets and with a Washington DC policy focus. Fixed Income Insights is produced by the BDA as the only trade group in Washington DC, solely focused on the US bond markets in representing dozens of securities dealers and banks, headquartered nationwide. One of those member firms is Mesirow, headquartered in Chicago and with at least 19 branch offices including London and Hong Kong. The CEO of Mesirow is Natalie Brown, and it's worth noting that she's the first woman CEO in the company's 86 year history. Natalie joined Mesirow in 2018 as chief financial officer. Today, as CEO, Natalie oversees firm-wide growth and profitability, the execution of strategic initiatives and shareholder value creation, partnering with the firm's executive chairman and board of directors to establish and implement all facets of corporate strategy. I'm pleased to feature the following discussion with Natalie as the cover story of Fixed Income Insights. For additional information on Mesirow, please go to www.mesirow.com. Now to my discussion with Natalie Brown.

Mike Nicholas:

Welcome Natalie Brown, CEO of Mesirow and long-time supporter of the Bond Dealers of America. We’re thrilled to have you join us and to kick off I’m wondering if you can tell us about your background and your path as now the first woman CEO in Mesirow’s 86-year history.

Natalie Brown:

Thanks Mike. I'm delighted to be here. Thanks so much for having me. I started my career in public accounting, I'm an accountant by trade. I spent the majority of my career at Nuveen Investments here in Chicago. I spent nearly 20 years there in roles of increasing responsibilities within corporate finance. Some notable roles were I was the head of investor relations when the firm was a public company and when the firm was also taken out in leveraged buyout transactions. So I spent a lot of time with buy and sell side analysts on the phone, fixed income and equity analysts. I also managed a large diverse team there as part of finance leadership. So when I was looking for my next role, Mesirow has a great reputation in the city of Chicago, the firm is known as an employer of choice. And when the CFO role became available here, I interviewed for it.

And I think those two roles that I had at Nuveen really helped me stand out and get the role here at Mesirow. Culturally, the firm fit like a glove for me from the first moment. I never expected to become the CEO. I thought I'd be the CFO for 10 years, that was my plan. But after I was the CFO for two and a half years, the president role became open and I was encouraged by some people I really respect here to kind of throw my hat in the ring for that. And I ended up as the president and after one year I transitioned into the CEO role.

Mike Nicholas:

If you could talk a little bit about the history of Mesirow, the company, how It's evolved over time. My first exposure to Mesirow was sitting on Bruce Young's couch in his office probably in 1998 when I was at the Bond Market Association with my boss at the time and talking about some fixed income policy issues. So we knew Bruce really well. I know the company has evolved a lot since Bruce was in that seat, but I wonder if you could talk a little bit about that and especially your time there from CFO to president and now CEO, how it's kind of evolved.

Natalie Brown:

Sure, sure. Bruce is a dear friend and mentor. I saw him just last month. So I'll let him know that you mentioned him. The firm was founded 86 years ago by Norman Mesirow. Our flagship business is in wealth management. The culture of the firm being an employee owned private firm, the culture here is really quite intentional and employee focused. We have 16 individual businesses. I don't like to use this word, but it's like a collection or a conglomerate of financial services, small to medium sized businesses. We have about 500 employees and we're headquartered here in Chicago. We have offices though throughout the country and an office in the UK and an office in Hong Kong. You mentioned asset management before. We do have institutional asset management businesses. Some of that collection of the 16 businesses that I mentioned are institutional asset managers. So that part of the business I did have experience in when I came from Nuveen.

Certainly the firm has evolved, both since I've been here and throughout its history. One thing I'm particularly proud of is these 16 businesses that I referenced are now collaborating a little bit better and operating as one Mesirow, where historically they've been a little bit siloed. And what has strategically happened over time is that oftentimes this was a place that a talented person with a great idea might be able to come and grow a business. We've had success in that model sort of over and over again. We've also had some great success with strategic acquisitions and lift ins as well.

We still have that flagship wealth management business, but over time, we've added and subtracted as the market has evolved and as we follow our strategic direction for organic growth. One example of our recent collaboration is we were able to bring some of our institutional alternative strategies to our wealth management clients, our proprietary private funds to our wealth management clients with feeder funds and that's how we're seeing our businesses sort of collaborate together to bring customized solutions to our clients. We're also expanding our distribution reach into new channels and we're investing in technology and talent for organic growth in some of our niche year businesses where we do have strong and growing market share, some of the businesses I'm referencing have a 12 to 15% market share. And we're a small 500 person firm, so in some instances we do punch above our weight class.

Mike Nicholas:

I know you're very employee focused and it's easy for any business to say that. I know It's a real commitment at Mesirow. In fact, you've got a section on your website titled, We Invest In Our Culture and a quote from you and I'll read it, "We sustain our intentional culture and reputation as an employer of choice by enabling colleagues across the firm to connect, learn, and advance in their careers." I think That's powerful and it sounds like it resonates daily within the walls at Mesirow. And I wonder if you could just talk for a second about how that thinking internally at Mesirow, how it impacts current employees and how it impacts recruitment of more junior professionals as well.

Natalie Brown:

We really are committed to the best career experiences for people. The employee-centric and focused culture is very real. There are lots of positives associated with that. Sometimes I've experienced people who've come here and been here their whole career. They have a very different feeling about how employers feel about employees or having a voice at their firm. Everybody does have a voice here and I think that that's great. It can be challenging if you're me from time to time because I hear a lot of those voices. But it can also be really helpful because those voices inform the decisions that we make. And I do think that part of our success has been driven by the fact that our talent and the ideas within the walls of Mesirow are respected more than I've ever seen any place else I've ever worked. And I do think that that generates differentiated product for us and it does generate revenue and success for us.

From the first day I came here, people think and act like owners here and we do own the firm and you feel it in all meetings that you're in. We have a long-term focus and we have a P&L and a shareholder value driven focus. It's very refreshing and has been for me from moment one. I think that young professionals really do. To fully answer your question, I think young professionals pick up on this right away. We have a bigger internship program than our headcount would indicate. We had about 35 interns this last summer and I meet with most of them, they're all welcome to an in-person meeting with me if they want one. And they really, they notice this and they comment on this and they talk to their friends that might be at larger firms and having a very different experience than they're having here at Mesirow. And They're very attracted to it.

And they're really invigorated about being in the office. They really wanted to gather with us and one of the reasons we're in the office is to help develop our young professionals and maintain that intentional culture. So seeing the energy from these young professionals and how they responded to our culture and to our hybrid work structure was really refreshing.

Mike Nicholas:

Yeah, that's a great lead in to another question I was going to ask about. I was going to dive into business at Mesirow in 2023, but let me ask first about the remote work policy, the hybrid work policy post Covid, where we're still just about everybody in the business is still wrestling with What's the best hybrid work policy. At my firm, it appears that to me that it really varies based on who you're talking about within the firm and how essential it is for them to be in the office at their desk five days a week or even three days a week, which was obviously the norm pre covid and nobody really thought that it could change as much as it has successfully I think. So, could you talk about the current in-office work policy at Mesirow both in Chicago as well as branches and how has that evolved over the past couple of years?

Natalie Brown:

We were remote from March of 2020 through March of 2022. In March of 2022, we implemented a hybrid work structure in which we gather on Tuesday, Wednesdays and Thursdays in our office location. We are optional remote on Monday and optional remote on Friday. Most people do take advantage of that. There's a lot of leadership and there's a lot of traders and salespeople that come in on Monday. I typically come in on Monday. I think it's worked really well for us because it enables us to maintain the intentional culture that you referenced, that you read on our website and then also develop the younger professionals as they are. I think that there are those of us who are later in our career that know how to be productive from anywhere. But when you're in that rapid development phase of your career, I think you really glean a lot of knowledge and you grow from being proximal to more experienced people.

So that's what really drove that decision and you can't please everybody, but I will tell you that we've gotten a lot of great feedback in our employee engagement surveys about this hybrid structure. I think that we are all doing a better job respecting each other's personal time and trusting each other. So I think we're seeing so many things got canceled during the pandemic and I think we're seeing people not want to miss a swim meet or soccer game for their kids or a family event of any kind. So we know that we can jump back on after we go do that. And We're all very respectful I think of people's time and we trust each other and we can take care of each other in a different way. And that feels very present here. It feels different and new and I am personally really enjoying the hybrid structure and I think, again, well you can't please everybody. I think it pleases more people than it doesn't.

Mike Nicholas:

I hear you and agree. And the second part of that question was about young professional development. I can remember in 2020, 2021, maybe early '22, one of the biggest issues with fixed income dealers was the lack of ability to sufficiently train, say a trader on the desk when the head trader's not on the desk in the office. And because obviously it's impractical to think that junior trader is going to go sit in the trader's basement in their house and learn the ins and outs of fixed income trading. And so that was a real concern, I know among firms large and small all over the country during Covid. But it sounds like you're finding a way around that and to deal with it, especially by folks who are coming in three days a week.

Natalie Brown:

It hasn't been an issue and I think we enjoy gathering. I think there's still a lot of energy and idea generation around gathering.

Mike Nicholas:

So the policy is in place, do you have a team you meet with every quarter to talk about how the policy should be revised or should it be revised or is the policy in place, the stamp is on it and You're not going to revisit it unless something else comes up.

Natalie Brown:

I'd say B. If it’s not broken, we’re not going to try and fix it. This is working. I mean this is working and we're getting good feedback from our employees. And so unless something changes, I don't see the need to revise the plan.

Mike Nicholas:

Let me stick with employees for a second before business and ask you about your DE&I program, which I know we talked about before. I've had a separate about a year or so ago podcast with Leo Harmon at Mesirow about the DE&I program. In my view it's kind of an industry leading initiative, especially among middle market regional broker dealers.

Natalie Brown:

We're certainly committed to inclusivity and we know that we make better decisions when we hear from diverse voices, our young professionals that we're hiring demand a commitment to inclusivity and our clients demanded it as well. So we're all aligned there. The focus of our DE&I efforts is really our council, our diversity, equity and inclusion council, Richard Price, my predecessor formed that council subsequent to the murder of George Floyd. And that council has a high profile within the firm. They present at our board meetings, town halls, shareholder meetings, they go on road shows and spend time with our business leaders to talk through various initiatives. What they also do is they inform me and help me with decision-making. So they are providing guidance on training. Most firms do start out their DE&I efforts with unconscious bias training, we've taken it a step further and we've now done inclusive hiring training for managers.

We also have a community spend associated with DE&I and the council allocates those dollars. We're particularly focused on education for youth and underserved neighborhoods, that's something that the DE&I council has a focus on and helps us with. They also think through our vendors and our professional development. One thing that they've done that's been great is they put together our next gen leaders program, which trains groups of younger employees in the fundamentals of finance, effective communication, leadership skills and team building. So I've been really proud of the council and I've enjoyed partnering with them and we have more work to do, but they have a lot of accomplishments over the past couple of years.

Mike Nicholas:

Yeah, no, there's no doubt about it then. And I would encourage folks to go to the website and read more about that initiative at Mesirow because it is very impressive. So let me turn to business for a second. So just tell me about not just fixed income but business at Mesirow in 2023 and how it compares to business last year in particular. But you could even go back maybe if there's a big difference between pre Covid and 2023, I'd like to hear that as well, but how is it this year compared to last year?

Natalie Brown:

Sure. So certainly the shift from a lower rate environment to higher rates has been challenging and has significantly impacted our fixed income business. But it's really impacted all of our businesses. We have seen some of them where transaction volume is significantly down or even potentially frozen, might be the word that I hear from time to time. But we've also got other bright spots because we do have a differentiated model. Our currency management business that hedges out interest rate risk has also experienced a strong pipeline during this time because I think that larger institutional pension plans are really focused on risk mitigation and our currency overlay strategies have been really in demand. So we're seeing opportunities and challenges associated with this, but certainly the uncertainty that we've been feeling, it drives more challenges than opportunities.

Mike Nicholas:

Sticking with business challenges you see not only for Mesirow but broadly for middle market and regional broker dealers, what are some of those unique challenges today, especially as a non-bank owned firm?

Natalie Brown:

That's a good question. So We're certainly proud to be a privately owned independent broker dealer and our size and high performing talent, it gives us a unique advantage in the market even if we don't have the balance sheet and employee count of some larger competitors, we were a top 10 ranking firm in domestic placements for eight consecutive years with 12 billion in transaction volume and we're typically in the top 10 in municipal competitive underwritings. Our smaller model certainly allows us to have deeper and more meaningful client relationships. Our size also means that we don't have the same balance sheet as our larger competitors and certainly some regulatory issues that are capital focused are going to be disadvantageous to us. And our cost of capital is obviously more expensive than firms that can access the discount window, which can also put us at a strategic disadvantage for some underwritings.

But our size also gives us the opportunity to focus on niche aspects of the market that really may not be big enough for some of our larger competitors to care about or consider. And I would say finally, one of the things I enjoy the very most about being an independent private firm is the fact that we can really focus on our long-term goals. We're never tied to hitting a number in a particular quarter. Having that long-term strategic focus is certainly a luxury, I think strategically for us.

Mike Nicholas:

And middle-market focus and client relations is, I think, spot on, focused on niche markets that maybe some larger players overlook or just don't invest the time and money in. And then long-term goal focused I think really resonate, especially I guess there's a big difference between a middle market firm or larger that's owned by a commercial bank or owned by a large insurance company in some cases, whatever, that they can't be as independently long-term focused as you can.

Natalie Brown:

That's exactly right. And another real important advantage I think, and this is a consistency among all 16 of our businesses. Our businesses are relationship based. I don't see that changing anytime soon. Certainly that we do have a focus on technology, but I believe that all of our businesses will continue to be relationship driven and our sort of specific knowledge and specific regional markets really does, it provides us with a specialized differentiated advantage with some of our clients.

Mike Nicholas:

You mentioned technology and not just related to fixed income. It's one of the top issues for BDA member firms. In fact, the BDA just formed a Fixed Income Technology Clearinghouse to help BDA member firms navigate complicated waters with regard to trading technology, back-office technology, clearing and more. There are so many third party and vendor solutions and it's evolving so quickly that we formed this group to try to help navigate those decisions, for our member firms. But how has technology changed and evolved at Mesirow and how has it changed the firm?

Natalie Brown:

As you mentioned, technology and investment in technology is critical to our success. You're right, the technology in the marketplace is evolving so quickly and we need to innovate ahead of our clients. We need to know what they need before they do so that's what we need to do in order to remain competitive. So we're certainly building our technology internally, but we are a small firm and we also leverage key third parties to help develop our technology. We buy and we build. Being able to aggregate information on securities value, whether from trades bids, offers, credit events, benchmark changes, third party evaluations, or even other key indicators. This can all be highly beneficial for our clients and traders in evaluating opportunities and really making the investment decisions that they need to make.

So we're also adopting new technologies to streamline operations and create efficiencies and really mitigate risk. So technology is one of our strategic priorities. It's a pillar of what we're trying to do. Again, being a small firm, we don't have that luxury of the huge technology spend that some of our competitors might, but we need to innovate ahead of our clients and like I said, buy instead of build when we need to.

Mike Nicholas:

So, I want to end with challenges and opportunities, whether market conditions, shifting demographics, competition, regulation, technology and more, I'm kind of wondering if you could identify one challenge or issue that keeps you up at night?

Natalie Brown:

Well, I will say I'm fortunate, I sleep very well because I do believe in the talent that we have here at Mesirow and their ability to grow this firm. But I will say the biggest challenge, and I am sure it's not going to surprise you, to me, it's the continued uncertainty in the market right now. It's just a tough market, that's really the feedback that I'm getting from most of my businesses, not all of them, but most of our businesses are saying that, particularly within institutional sales and trading. Now certainly we're starting to see that shift, issuers need to finance projects and while the start of the year has been slower compared to 2022 with rates leveling off, we are seeing banking deals starting to get to completion and we're expecting the new issue market to pick up. But at the same time, this market uncertainty is having a profound impact on our business. And I would call that the biggest challenge.

Mike Nicholas:

Opportunities - if you could name one or two bright spots and opportunities you see at Mesirow, what would they be?

Natalie Brown:

We're always focused on strategic acquisitions and lift ins to help grow our business that way, particularly in wealth management. Also, we continue to be focused on hiring key talent. These markets have left us with an opportunity to hire some really unique and specialized talent across the country. We've opened offices in Seattle and Nashville, so the talent in those areas, we have access to now as well. And we have onboarded some new really important critical key hires during this time. We're also, and I know I'm giving you more than one opportunity, but I think we also have an opportunity to enhance our distribution reach into new channels. We're very focused on investing in distribution, both within institutional sales and trading and outside of institutional sales and trading our centralized distribution team that services the whole firm.

Mike Nicholas:

Natalie, I really appreciate the time. You're doing an incredible job at Mesirow, and It's exciting to watch. Thank you for Mesirow's long-standing support of the BDA, and we’re fortunate to have your colleague George Barbar on the Executive Committee of the BDA Board of Directors. We look forward to working with you again soon and thank you for being our featured cover story for the Fall issue of Fixed Income Insights.

Natalie Brown:

Thanks so much, Mike I'm delighted and I really enjoyed our conversation.