Breckenridge’s Incoming CEO Shares Formula for Growth

by John ManganaroMay 29, 2024 Breckenridge Capital Advisors announced late last year that Ognjen “Oggie” Sosa, its current chief investment officer and a former Fidelity executive, had been tapped to serve as the firm’s  next CEO.The plan revealed at the time was for Peter Coffin, Breckenridge’s founder and longtime leader, to retire and for Sosa to take the reins in June. In a new interview with ThinkAdvisor, Sosa said that timeline is a go.Sounding equal parts optimistic and excited, Sosa said the transition period has been instructive, and he emphasized the firm’s strong footing with respect to some of the big investment management trends affecting financial advisors and their clients.Having joined Fidelity in 2007 following his early career work as an equity research analyst, Sosa held various roles at the firm before becoming retirement income investment lead in 2020. He also spent six years as a team leader for Fidelity’s Global Institutional Solutions, where he led the company’s outsourced chief investment officer business and oversaw $22 billion in client assets.Sosa said he continues to draw on those experiences in the current role as CIO at Breckenridge, which manages $48 billion of advisor-intermediated assets as of March 31, and he expects to do the same once he’s formally in the captain’s chair. While the new job will require more people and systems management, he added, the focus on high-quality investment outcomes will remain a priority.Here are some highlights from our conversation:THINKADVISOR: Before we discuss your new role at Breckenridge, can we look back and discuss your time at Fidelity and how that has informed your current approach to the job?OGNJEN SOSA: Yes, of course. I actually started at Fidelity as an analyst supporting the build-out of institutional target-date strategies, and I ended my time there working on institutional retirement income solutions in the light of the Secure 2.0 Act. As you know, that law brought up some new income guarantee optionality in the TDF space, which was a big development.It was a great experience because, over that period, the importance of target-date funds in the institutional retirement marketplace just grew and grew. They are the dominant investment today. In that sense, I think I have benefitted from either luck or serendipity in my career, because my work has always kind of been attached to these big, growing trends in the industry.I think it has helped me to find some of the success that I have. So, I’ve been able to bring all my prior experience to Breckenridge and I’ve been putting it to work as CIO here since 2021.What are some of the broad ways you’ve seen the investment industry evolve during your career?We could talk for an hour on each of these points, but I would start just by pointing out how much the capital market backdrop has been driven by monetary policy actions in the last decade or more. The market volatility we have seen has been, frankly, just dominated by policy questions and discussions, which has presented its opportunities and challenges.I also obviously have to point to the growing role of technology, increased personalization and the drive for scale. For us as an asset manager, the question is, how are we putting technology to work in a way that lets us deliver on our core value proposition in a highly efficient way?I would add that the role of a traditional asset manager has significantly shifted, as we are being called upon to be more responsive and consultative than ever before. The pendulum about active versus passive investing has also been moving. I think we’ve swung back towards a bit of a middle ground there, in this current moment.As a bit of background, you may know that our firm was founded a little more than 30 years ago by our current president and soon-to-be-executive chair Peter Coffin. In essence, he created Breckenridge based on the highly focused premise that existing mutual funds were not necessarily great solutions for people who were investing in the municipal bond market.Peter was a real forward thinker, and the firm found success focused on that issue for about 15 years. Then, it was roughly 15 years ago when they took another big step forward and ventured into our multi-sector capabilities and strategies, which remains a big focus today.The firm started incorporating and integrating some of the more esoteric risk considerations into the research process very early on, back before the term “ESG” was being talked about in the mainstream. In just the time since I arrived here, we’ve now expanded into an equity strategy, so the evolution has been pretty constant.Zooming in a bit, what goes into crafting a successful bond portfolio?To boil it down, we want to invest in strong issuers of municipal debt, and we also want to identify corporate issuers that have really strong balance sheets. Our premise is that, when people buy bonds — particularly municipal bond investors — they are generally doing it with money that they want to be “safe.”Our clients want to sleep well at night, but at the same time, they are employing us to find the right balance between preserving capital and seeking returns. They are also coming to us for our specialty research and analysis.This is especially true in the municipal bonds space. If you don’t work in the space all the time, it can be difficult to appreciate just how fragmented and inefficient the municipal bond markets are. It is one of those spots in the market that, in our view, really calls for highly skilled professional management of the type we deliver.Think about it. You have literally thousands of government issuers, right? And there are many more dealers to work with compared with other markets. It’s like 60 different dealers that we’re talking about here. It’s just a completely different animal compared with large-cap equities, for example.At a high level, we talk about our investment processes being a combination of top-down and bottom-up research — meaning that we do take into account some of the macro backdrop with respect to interest rates, but there’s so much more that goes into it.Besides interest rate uncertainty, are there other big questions your analysts are grappling with?Yeah, one thing that comes to mind is more of a market structure issue than a question about policy or where rates are heading.As you know, there has been so much wealth creation here in the U.S. in recent decades, especially among the baby boomer generation that is entering retirement and is now looking, in many cases, to dial back their overall investment risk. As you can imagine, that means there’s been a tremendous amount of demand for municipal bonds, but unlike the other parts of the bond market that have boomed, the municipal bond market hasn’t budged in about 10 years.That is, the muni-bond market was valued at about $4 trillion a decade ago, and it’s still a $4 trillion market today. The result is a real supply-demand imbalance. Why is this happening? Some of it is related to the regulatory backdrop, which has seen some rules that have created some disincentives for issuers of new debt, but there’s also just the need for local governments to balance their budgets and avoid unsustainable debt loads.The result is a really constraining investment environment, and we need to keep that in mind as we think about things like the relatively attractiveness of municipal bonds versus taxable bonds. A lot of people are still using their value benchmarks that they set up five or seven years ago now, but you need a fresher perspective.Are there other big questions you hear from the advisor community?I get to speak with a lot of advisors, because all of our business is distributed through intermediaries — with many of them working at RIAs or at the wirehouses. Generally, they bring up a lot of the dynamics that you and I have been talking about today.They tell us they want higher-touch service on our end so that they can, in turn, deliver more personalized investments portfolio exposures to their clients. They want to make sure our approach is as tax-efficient as possible, and many of them have clients who are leaning strongly into their family or personal values while building a portfolio.They assign a lot of value to anything we can do that helps them stand out as thought leaders and educators for their clients. Finally, they tell us about how important it is to have transparent and detailed reporting on what is happening within their clients’ portfolios.The original version of this story was published on ThinkAdvisor.