Eulogy for Doug Metcalf: A Man of Markets for People
Those who knew him are in shock over the traffic accident death of Doug Metcalf, a financial innovator of using financial markets to help people.
Just no words.
So many people pass, but for me, his passing is like losing a brother. A mentor. A close friend.
Many knew Doug through his family, or his Church. He was a devout family man and Christian. We can take comfort that Doug is in Heaven. (Son-of-a-gun, we are all left here to battle Covid-19 and a bunch of other stuff. Doug, you always were a good market timer.)
I knew Doug as a boss and later as a business partner, and friend. So please allow me to share a few memories and vignettes from his business life as illustrative of what one individual can do to make a positive impact using financial markets.
Doug was the CFO of First Interstate Bank in Arizona in 1983. He was asked to come to HQ in LA to clean up a big mess. A hot dog investment banker had started executing complex financial derivative trades that exposed the bank to untold risk if bond markets moved even a little bit. It was such a Gordian Knot that the bank was terrified. It is the kind of mess that has sunk numerous large financial institutions, like Barings. Who ya gonna call? Senior management said only one person can fix this: Metcalf, Metcalf! Nancy, his rock, agreed to the move. Doug took the challenge. Just the kind of thing he thrived on.
After he got his arms around the unauthorized trades, he realized that indeed, the bank had enormous unhedged exposure similar to futures contracts that were highly leveraged. A large move in interest rates could sink the bank. He determined how to hedge the exposure and put the pin back in the hand grenade of live highly leveraged market exposure. He saved the bank from huge potential losses.
Most ordinary people would then report back to the bank President and ask what to do next. Not Doug. He realized that the fixed income derivatives market, especially interest rate swaps, were extremely useful instruments for financial institutions to manage their risk, and if carefully developed, could become a highly profitable low risk business for the bank. He pitched the bank President and got a green light to develop the business for the bank if he could figure out how to manage the risks. Doug had an amazing nose for business opportunities.
Doug started putting together the best team he could find. That was another of his many skills. He knew how to recruit and develop outstanding teams of people, a skill needed to successfully undertake the high-wire act of global arbitrage.
Doug recruited a team of A players: Matt Bayles, sales; Brad McKinnon and John Van Slooten as analysts and traders; David Blocker on systems; Joel Goldberger, a brilliant financial programmer. Plus, many other A players. (Not sure how I got on the team as Head Trader.)
After two years, Doug’s team was cited by Euromoney Magazine as one of the top five derivatives teams in the world. Just imagine, a regional bank being named above most of the investment banks in the world as tops. A fantastic achievement that Doug created through his many talents and vision.
Doug’s team developed ways to manage interest rate swaps, now a $350 trillion market. His team also invented and executed the first swaption. When Doug first saw the opportunity, it was in its infancy. Just stop and think about that. What kind of mind could see that opportunity then, and more importantly, establish a world class team and outperform Wall Street? Only one in a million like Doug. He printed almost $200 million in income over several years for FI with no losses. ROI was over 400%/yr. Nice!
Doug and I both left for bigger pastures, The Big Apple. Doug set up another successful investment operation at Nomura Securities, one of the world’s largest investment banks. He returned to LA and took a job at TCW to set up a bond investment operation there. After a year he hired me a second time, at TCW.
We worked together on the account for the central bank of China. Brilliant positioning. PBOC had $10 billion in assets when we took on the assignment to help modernize it. Assets grew to over $3 trillion as Doug helped me advise PBOC for the next 15 years. Doug cherished the role because he knew his work helped reduce poverty in China dramatically. That is the kind of thing that motivated Doug, using financial markets to help people.
I started Seagate Global Advisors in 1996. Doug joined Seagate as a Partner in 2000. He was instrumental in helping Seagate to be ranked as the #1 fixed income performer in 2004, and top 10 in the world in both fixed income and emerging markets over a 3-year period. Being #1 or even in the top 10 in the highly competitive field of asset management is rock star performance, and Doug was a financial rock star.
After the crash of 2008 which Doug helped Seagate successfully navigate, we moved more into private equity and direct lending. Doug helped lead the pivot. We went to China together and became financial advisors to the Province of Yunnan in SW China, a province of 50 million people. He helped raise money for investing in a free trade zone there that reduced the cost of food in the region. As compensation for his efforts the government offered land for Seagate to develop.
The Chinese official had a map of Kunming and showed Doug 30 plots of land he could choose from to develop. Doug said, “We will take all of them.” The stunned official said, no, you can choose one. Doug looked at the map, pointed to the largest track of land and said lot #29. The official, nonplussed said, “but that is the largest track of land in downtown Kunming, 29 acres.” Doug said yes, I know that is why I want #29! LOL. Just like Doug.
We traveled extensively together throughout China and were invited into places and meetings that few Westerners ever see. Doug always comported himself with the utmost dignity in these situations. Plus, the Chinese were intrigued by this big Western guy and his charisma.
Doug helped Seagate set up trading operations between China and South East Asia, focusing on the Philippines. We met with President Gloria Macapagal Arroyo at the Presidential Palace. He helped bring investors to the Philippines from around the world and conducted trading operations to help reduce poverty there.
He was hosted at President Noy Noy Aquino’s family compound, Hacienda Luisita, where he led strategy sessions with the Aquino government on how to use the financial system to increase foreign direct investment in the Philippines (example).
In Malaysia he helped set up operations that were the basis for Seagate's innovative Smart Loan Program.
Doug decided he wanted to spend more time with family and friends in the US so moved to another more domestic firm.
Several years later we reconnected and set up trade finance operations to export US agricultural goods internationally as well as financing re-cycling plants. The kinds of things that help people and the planet in addition to being solid investments.
Seagate was appointed as financial advisor to the Autonomous Region of Bougainville, a break-away island from Papua New Guinea. It was a pro-bono effort to help some of the most forgotten people on earth after a vicious civil war. We set up the Seagate Bougainville Development Corporation and Doug was the CFO. Only recently a new President there was chosen, and after years of effort we may now start to move forward on helping set up their financial system, something he was keen to contribute to. He will be missed on that project.
Over those many years I got to know Doug quite well. Traveled all over the world with him in all conditions. Great times when we both made money, and some tough times when we didn’t. He took all outcomes with equanimity. I never heard him utter a profanity. Take a drink. Touch coffee. Make even the slightest off-colored comment or make women uncomfortable in any way. He was not a racist or misogynist to any degree. The exact opposite is true. Doug was a gentleman. And he was fun to be around. He was scrupulously honest. Brilliant in finance. A devoted family man. He loved his Church. Really, I just have no words to express what a model human being he was for us all who know him.
He was a true financial market innovator using his extraordinary creativity and insight to help people and improve the planet. He contributed so much to others. Had the wisdom so lacking today in the public domain. Adam Smith would label Doug a “lovely” person, the ideal for people to strive to.
Farewell to a great boss, business partner, friend, and humanitarian.
Doug, you showed us how to do it. Great job. A life well lived! All I ask is one more favor. You hired me twice. Please hire me one more time for the position as your wingman up there when my time comes.
Lunada Bay, California
September 26, 2020