Nobel laureate Myron Scholes will deliver Insight Lecture on the future of asset management

By Andrew Baulcomb, DeGroote School of Business, October 16, 2017

Nobel laureate and McMaster alumnus Myron Scholes has made a career out of studying uncertainty. Now, he'll bring more than five decades of experience to the DeGroote School of Business' forthcoming Insight Lecture.

Scholes, who graduated from the Faculty of Social Sciences in 1962, was co-recipient of the 1997 Nobel Memorial Prize in Economic Sciences alongside researcher Robert C. Merton. The pair was recognized for their work to develop a new method to determine the value of derivatives. Scholes is currently serving as Frank E. Buck Professor of Finance, Emeritus, at Stanford University's Graduate School of Business.

His Insight Lecture, titled The Evolution of Asset Management: What the Future Holds, will take place Wednesday, Oct. 25 at Toronto's Fairmont Royal York. DeGroote Dean Leonard Waverman will set the stage for the talk. Scholes is poised to offer his perspective on the importance of risk management in enhancing terminal wealth, as well as how to successfully employ various risk management techniques. He'll also visit McMaster's main campus in Hamilton for the first time since 2012, when he attended his 50th class reunion.

"It will be a busy day and night, but that always energizes me," says Scholes, who received an honorary degree from his alma mater in 1990, and was inducted into the Alumni Gallery in 1992. "I'm excited about having an opportunity to talk with alumni and friends of McMaster University, and in particular the next generation of scholars that are attending McMaster at this time."

So what does the future of asset management hold? For Scholes, digital transformation will continue to have a profound impact. The distribution of risk is not the same as it was a decade ago, or even five years ago, he explains. The digital age is giving us more data than ever, and data is power. The key is learning how to use data, and corresponding technologies, to enhance one's portfolio.

"I think there's a great connection between data and technology," says Scholes. "Technology allows one to do things faster and more individualized. It allows people to do things more flexibly, and that's what business is. Investment management is the same."

Instead of having a single portfolio with one level of risk, for example, it's increasingly possible to adjust desired risk levels, and to do so based on an individual's age, wealth, experience, personal preferences, and a host of other factors. "It changes the whole nature of investment. It changes the way we think about investment," Scholes continues. "We're moving from more of a product focus [mutual funds, fixed income funds] to saying, 'What does the client want? What pattern does the client want?'"

After graduating from McMaster, Scholes went on to pursue graduate studies at the University of Chicago, earning his MBA in 1964 and PhD in 1969. He then served as a faculty member at MIT for several years and at the University of Chicago for a decade, before landing at Stanford in 1983. He has maintained Emeritus status there since 1996.

Scholes has written several articles on investment banking and incentives, and developed a new theory of tax planning under uncertainty and information asymmetry. The latter resulted in a co-authored book, Taxes and Business Strategies: A Planning Approach, now in its fifth edition. Over the years, he has studied the effects of tax policy on asset prices and incentives, as well as the effects of the taxation of dividends on the prices of securities; the interaction of incentives and taxes in executive compensation, capital structure issues with taxation; and the effects of taxes on the optimal liquidation of assets.

He's currently Chairman of the Board of Economic Advisers of Stamos Partners. He previously served as Chairman of Platinum Grove Asset Management, and on the Dimensional Fund Advisors Board of Directors; American Century Mutual Fund Board of Directors; and the Cutwater Advisory Board. He was also a principal and Limited Partner at Long-Term Capital Management, L.P. and a Managing Director at Salomon Brothers.

The DeGroote Insight Lecture is graciously supported with a philanthropic gift from Adam Felesky, BA & B.Eng. ’99, President, Portag3 Ventures, and a great friend and supporter of the DeGroote School of Business and McMaster University. Felesky's generosity and commitment to higher education help ensure that these opportunities continue to be available to the DeGroote Network. The sold-out event will take place Wednesday, Oct. 25 from 7:30 to 9:30 a.m. at the Fairmont Royal York.