12/02/2014

A Hands-On COO

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In this installment of our 30th anniversary interviews, Chad Childs, Executive Vice President and Chief Operating Officer (COO) at Aquila Investment Management LLC (sponsor of the Aquila Group of Funds), talks about opportunity, vision, and why it’s better to be local.

How did you begin at Aquila?

It was the fall of 1987. I’d gotten my MBA and was job hunting. My family knew the Herrmanns, so I contacted Lacy just to network, hoping he would pass my resume to some of his Wall Street contacts. Instead, Lacy asked me to come to New York to see him. We scheduled our meeting for Monday, October 19, 1987. Yes, Black Monday. Suffice to say, I didn’t meet with Lacy that day or the next, as all heck broke loose. We met later that week. Aquila was growing–it had launched the Colorado and Kentucky municipal bonds funds the previous May and Lacy needed help running a couple of money market funds. He said let’s give it a year and evaluate. I’ve been here ever since.

What drives you and your colleagues?

Chad Childs, COO, Aquila Investment Management LLC

Chad Childs, COO, Aquila Investment Management LLC

Our organizational structure is flat compared to larger firms. There is less bureaucracy—anyone can directly contribute to the firm’s success. That opportunity is what drives the people at Aquila. There is already enough red tape with the regulations in our industry, so it’s nice not to have to deal with it where we work, on a day-to-day basis.

What do you enjoy most about working at Aquila?

At any small company you have to wear several hats–you have to be prepared to roll up your sleeves and perform a variety of tasks. In larger companies, job functions are more narrowly defined and there’s often less variety. I enjoy being involved in all aspects of the firm, from product development to sales and marketing to operations, even fund governance. I consider myself very fortunate in this regard. I wouldn’t have had the same opportunities at a larger organization.

What accomplishments are you most proud of?

Having helped Aquila successfully transition from an entrepreneurial business to Diana Herrmann’s vision of Aquila as a boutique asset manager. It was important to maintain the foundation that Lacy had created and to move forward.

She had the passion required to succeed. She had a vision for where she wanted to take the business. Our refreshed branding is an important step toward that vision, and we all can be proud of the outcome.

What makes Aquila different from other fund companies?

Aquila is highly service-oriented. Many firms claim this, but we’re really able to do it because of our origins and the way we’re structured and incentivized. Consider how Aquila communicates with the financial community, potential investors, and shareholders. First, we make our portfolio managers available to visit face-to-face with financial advisors to provide timely insights on their investment strategies; local, state, and national issues; interest rates, and the like.

Second, with the municipal bond funds, we offer local annual and outreach shareholder meetings. These gatherings of shareholders and their financial advisors allow them and us to connect and put faces to the names. The meetings also give financial advisors, shareholders, and potential investors the opportunity to talk directly with trustees, portfolio managers, and senior officers to learn first-hand about their investment.

Finally, Aquila’s representatives are local—for example, Sherri Foster in Hawaii, who was featured in a previous Insight. Our representatives meet regularly with financial advisors and their clients, providing information about our investment strategies and updates on the funds.

As a shareholder yourself, how do you think shareholders benefit most from investing with Aquila?

I think shareholders get the most from our local presence–and not just the shareholders in the state-specific municipal bond funds, where Aquila has in-state portfolio managers. I also mean the boots-on-the-ground aspect of our two Aquila Three Peaks funds. Their bottom-up fundamental analysis includes onsite company visits with the objective of knowing as much (or more) about a firm’s financial condition as its own management.

Regarding Aquila’s state-specific municipal bond funds, our local investment professionals have a leg up in conducting due diligence on bond issues. I think their local presence better enables them to understand the credits, compared to a portfolio manager selecting securities from afar. The comfort we offer shareholders all goes back to our local, on-the-ground presence.

How does Lacy’s legacy live on at the firm?

In our Guiding Principles including to manage conservatively, focus on what you know best, and put customers first. One of Lacy’s favorite sayings (and he had many) was that he wanted shareholders to sleep well at night, meaning he wanted them to have a level of comfort with our investment strategies. He sought to offer comparatively conservative investments. Our fund family is a direct result of his thinking.

Lacy didn’t want to be all things to all people. He wanted Aquila to focus on what we do best—to provide relatively conservative investments and high-quality service. Lacy always put shareholders first. He was a pioneer in educating shareholders with his “Thought for the Month” mailings and annual/outreach shareholder meetings.  As he also said, “it’s your money invested in projects in your state.”