Aug 6, 2018 · 1h 20m · capital-allocators
Roz Hewsenian –Helmsley Trust's Chief of People and Process (Capital Allocators, EP.63)
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In this episode of Capital Allocators, host Ted Seides interviews Roz Hewsenian, Chief Investment Officer of the Helmsley Charitable Trust, detailing her journey from special education to institutional consulting at Wilshire Associates and leading Helmsley's six billion dollar endowment. Roz outlines her innovative investment philosophy, including a four-tier liquidity architecture, a concentrated 50-manager cap, generalist diligence pods, and effective institutional governance.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 17% of the talking time here. How this is scored →
Ted as informed peer 3.5 Guest teaching 5.0 Guest disagreement 1.2 Ted pushing back 0.5
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 56:35 Dissecting Autonomy founder destructive behavioral missteps
Roz bluntly lists the basic rules of discretion the manager violated and questions why a brilliant money manager engaged in self-destructive personal behavior.
Hardest push from Ted ▶ 27:40 Clarifying trading nature of Wilshire SEC investigationTed intervenes precisely to clarify whether the SEC inquiry at Wilshire stemmed from hedge fund trading or mutual fund market timing.
Biggest teaching moment ▶ 24:10 Contextualizing scale limits for mega-pensions versus foundationsRoz educates listeners and the host on the mathematical impossibility of three-hundred-billion-dollar pensions generating meaningful alpha from boutique hedge funds.
Ted holds their own ▶ 23:15 Probing full passive indexation logic for large pensionsTed synthesizes Roz's earlier observations into a sharp technical question challenging why multi-hundred-billion pension funds don't just index completely.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| AlphaSense AI Platform for Investment Research and Analysis | 0 | 0 | 0 | 0 | Solo host monologue delivering sponsor messages for AlphaSense and Intap DealCloud. | |
| Admired Leadership Executive Coaching and Alex AI Platform | 0 | 0 | 0 | 0 | Host monologue featuring Admired Leadership sponsor read followed by a biographical introduction of guest Roz Hewsenian. | |
| Early Career in Special Education and Essential Communication Principles | 3 | 6 | 1 | 0 | Roz explains how teaching learning-challenged children established core communication and empathy fundamentals applicable to institutional management. Ted prompts with open questions. | |
| Transition to Finance and Mentorship Lessons at General Foods | 3 | 5 | 1 | 0 | Roz describes breaking into finance as a woman in the late 1970s and shares managerial mentorship lessons centered on taking responsibility first when things go wrong. | |
| Fast-Paced Pepsi Culture and Pioneering Early 401(k) Plans | 3 | 5 | 0 | 0 | Roz recounts the intense culture at Pepsi, rolling out one of the earliest corporate 401(k) plans, and transitioning into consulting at Wilshire Associates under Alan Emkin. | |
| Core Consulting Tenets, Upward Management, and Investment Principles | 4 | 6 | 3 | 1 | Roz details the golden rules of investment consulting—never saying no to a client or boss—and lays out her core investment tenets regarding market efficiency, due diligence, and risk-return trade-offs. | |
| CalPERS Scale Constraints and Active vs Passive Allocations | 6 | 6 | 2 | 2 | Ted probes the limits of active management for massive pension systems. Roz details CalPERS's scale dilemmas, validating their shift away from hedge funds and towards indexation. | |
| Wilshire SEC Mutual Fund Investigation and Career Burnout | 4 | 5 | 1 | 1 | Ted clarifies details around the Wilshire mutual fund trading SEC investigation while Roz recounts the grueling 3-year audit and her eventual decision to resign due to burnout. | |
| Ridgeline Cloud-Native Front-to-Back Investment Technology Solution | 2 | 4 | 0 | 0 | Contains a sponsor break for Ridgeline followed by Roz sharing her turnaround role at Old Mutual subsidiary Clay Finley during the onset of the 2008 financial crisis. | |
| Joining Helmsley Trust and Historical Fiduciary Background | 3 | 5 | 1 | 0 | Roz details how Linda Strumpf recruited her to Helmsley Trust and contextualizes the foundation's heightened IRS compliance awareness stemming from Leona Helmsley's historical tax prosecution. | |
| Helmsley Four-Tier Liquidity Architecture and Credit Facility Strategy | 4 | 6 | 1 | 0 | Roz breaks down Helmsley's four liquidity tiers and their strategic committed standby line of credit designed to fund grant mandates during market downturns without fire-selling assets. | |
| Opportunistic Thematic Allocation and Rejecting Traditional Style Boxes | 4 | 6 | 2 | 1 | Roz dismisses rigid style-box allocations in favor of thematic opportunistic investing, explaining how Helmsley captures structural tailwinds across healthcare and tech disruption. | |
| Fifty-Manager Concentration Limit and Private Capital Cashflow Modeling | 5 | 6 | 1 | 1 | Ted questions how portfolio risk is aggregated, prompting Roz to explain Helmsley's strict 50-manager cap, barbelled liquidity structure, and private capital cash flow forecasting models. | |
| Flat Generalist Investment Team Structure and Diligence Protocols | 4 | 5 | 0 | 0 | Roz outlines her flat team organizational design where six generalists have equal sourcing authority, and details her three-person due diligence staffing structure (sponsor, skeptic, director). | |
| Due Diligence Case Studies: Abraaj Group and Autonomy Capital | 5 | 7 | 3 | 2 | Roz shares detailed due diligence case studies, highlighting why Helmsley walked away from Abraaj Group before its collapse and diagnosing key behavioral/organizational warning signs at Autonomy Capital. | |
| CIO Oversight Dynamics, Team Trust, and Operational Technology Infrastructure | 4 | 5 | 1 | 0 | Roz discusses CIO-level relationship dynamics with fund founders, mutual trust with senior directors, and the implementation of operational data infrastructure like Backstop. | |
| Manager Accountability, Conviction Limits, and Sell Discipline Analysis | 4 | 6 | 2 | 0 | Roz explains the discipline required when considering a 51st manager, identifying deteriorating sell discipline through sub-portfolio attribution rather than accepting manager excuses. | |
| Firing Mistakes, Emerging Global Venture Hubs, and Secondaries | 5 | 6 | 3 | 1 | Ted probes the balance between cutting managers quickly versus giving them room to rebound. Roz explains spotting founder character flaws and discusses looking beyond Silicon Valley to global venture hubs. | |
| Disciplined Private Co-Investment Strategy and IRS Regulatory Limits | 4 | 6 | 1 | 0 | Roz details co-investment criteria (including the 20% IRS excess business holdings limit) and describes how she evolved Helmsley's governance process through proactive 1-page committee updates. |
Statements from this episode (30)
Pepsi previously owned North American Van Lines and Wilson Sporting Goods
“Most people don't remember this, but at one time, Pepsi owned North American Van Lines Moving Company, they owned a trucking company, they owned Burpee Seeds, they owned Wilson Sporting Goods. None of which had anything to do with snack foods and beverages.”
Dimensional Fund Advisors remains in PepsiCo's investment portfolio after 30 years
“And it's my understanding that today that manager's still in Pepsi's portfolio some 30 some odd years later.”
Consultants should never say no outright to institutional clients
“You never say no, and then figure out how to give them at least some of what they want, so that this way you show them that you've heard them, and that's 90% of what the issue is. The client wants to be heard.”
CalPERS indexed significant assets to the Wilshire 5000 upon Wilshire's recommendation
“From a cost standpoint and from a volume standpoint, CalPERS at Wilshire's recommendation has a significant portion of its assets indexed to the Wilshire 5000 stock index.”
CalPERS eliminated its hedge fund program after top funds refused fee cuts
“The best hedge funds wanted nothing to do with CalPERS because CalPERS wasn't willing to pay their fees, and Ted Eliopoulos, the chief investment officer, eliminated the hedge fund program”
Hedge funds work for $3B foundations but fail for $300B public pensions
“If you're a three billion dollar foundation, hedge funds can work for you. When you're a three hundred billion dollar governmental pension funds, not so much. Context is everything.”
Old Mutual shut down subsidiary Clay Finley to fix parent balance sheet
“Old Mutual blew a hole in its balance sheet, having nothing to do with Clay Finley, and it needed capital from wherever it could get it, and so a decision was made way high up to just shut Clay Finley down”
Style-box investing forces allocators to pass on exceptional unclassified opportunities
“And I recognize right away that the box approach to investing was a disaster. It forced you to fill a box because you had one, and then you had to pass on an investment if you didn't have a box for it. So one of the things that became clear is that opportunist…”
Charitable foundations must prioritize liquidity risk to meet IRS payout mandates
“The biggest risk we have to manage for a foundation is liquidity risk, because we have to pay out five percent of our assets every year.”
Helmsley Trust targets 20% safe, 25% illiquid, and 55% liquid or semi-liquid
“The safe assets category is at 20%. The semi-liquid is at 22%. The illiquid category is at 25%, and the balance is in the liquid category.”
Helmsley uses a standby credit line to fund grants during market downturns
“We paired it with a committed standby line of credit, and the committed standby line of credit can actually fund the grant making so that we can fund the investment side”
Many major foundations remain below their 2007 peak values due to illiquidity
“That fight for cash Left some of them still permanently impaired. Some of those foundations still have not gotten back to their 2007 high watermark.”
Fixed allocation targets force institutional allocators into lower-tier investment managers
“If I had a specific bucket with a target, I'd have to fill it, which means that not only am I investing in the best, if I can get into the best, I might have to invest in the second best and maybe even the third best to get my allocation filled.”
Helmsley Trust caps its $6B endowment portfolio at 50 investment managers
“We have a maximum of no more than 50 managers, five, zero, four, six billion dollars. That makes us very different from our peers. It also makes the situation much more manageable.”
Helmsley holds higher safe asset allocations than peer foundations like Hewlett
“Robert Wood Johnson, Hewlett Packard, if you look at what their allocations are for the equivalent of our safe assets category, it's more in the 10 to 12% range. We're higher, but we've been far more selective in the private capital range and more concentrated…”
Institutional foundations are experiencing unusually long venture capital liquidity tails
“One of the things that's happening to a lot of our peers that we've been able to watch is that they haven't been getting the money back from their venture capital managers as fast as they thought they were. So those tails are much longer.”
Giving junior associates manager sourcing authority removes biases and yields better opportunities
“My associates, my investment officers, and my directors, who are all responsible for managers, have equal opportunity for sourcing and doing due diligence, and by allowing the younger people to have the same authority to source a manager, I get
Some very inte…”
Helmsley assigns a sponsor, a skeptic, and a director to manager diligence
“We staff every manager who's undergoing a deep dive for due diligence with a sponsor, a skeptic, and a director.”
Helmsley passed on Abraaj after its founder announced an absurd $10B fund
“The tipping point came when the founder announced that he was going to raise a ten billion dollar fund. We all looked at each other, and we said, ten billion dollars in emerging markets, private equity, venture capital? The numbers don't add up. And so we just…”
The Gates Foundation uncovered the massive fraud at the Abraaj Group
“The Gates Foundation did invest with them, and they were the ones who figured out that something was wrong.”
Brilliant fund managers have significant shortcomings and require sane partners as ballast
“And this is an interesting thing about truly brilliant people. They typically have a flat side. So when I'm assessing money managers, and I've met a lot of them with huge egos and flat sides, I look for A partner. Do they recognize their own shortcoming, and d…”
Boutique fund founders frequently refuse to meet junior staff due to ego
“Especially if they're boutique-y and they're full of themselves and all this other stuff. They're not going to meet more junior people, and that's because top man syndrome still exists in this industry.”
Peer endowments carry 300 managers, leaving no time for new diligence
“So a lot of our peers have two to 300 managers, which, and staffs about the same size, which means that a substantial portion of their resources are dedicated to monitoring existing managers, which means how much time can you spend looking at new managers?”
Manager excuses for lagging holdings usually explain 110% of total fund underperformance
“The manager starts making excuses for an investment holding instead of just selling it and getting on with it. And you start looking at the investment excuses, and you do sub-portfolio attribution, and you figure out the investment excuses are really what's ac…”
Failing to terminate underperforming asset managers quickly is an allocator's biggest mistake
“Oh, and I've heard this from so many other people as well, is not firing a manager fast enough. I've gotten better at that later on in my career, but that's probably the biggest mistake.”
Hewsenian predicted in 2018 Gavin Newsom's policies would trigger Silicon Valley exodus
“The other thing that has us very excited is that we think that Silicon Valley is only going to last for so long. If for no other reason, California is becoming very business unfriendly. If Gavin Newsom wins the gubernatorial race, And he does to California wha…”
Helmsley Trust achieved a triple-digit IRR from an Israeli VC investment
“We're a big investor in Israel. Big investor. Now, nobody has seen a triple digit IRR out of VC in a long time. I've got one. Out of one of our Israel investments.”
Helmsley Trust scaled its Sequoia Capital allocation to $100 million over time
“For example, we built up our Sequoia allocation slowly over time. And now we're at those kinds of numbers.”
Helmsley avoids re-underwriting private co-investments, relying solely on underwriting the manager
“We're not re-underwriting the investment the way some of our peers have. We don't feel we can bring anything to that party. We underwrote the manager, and that's where our due diligence ends as far as the underwriting is concerned.”