May 14, 2018 · 1h 15m · capital-allocators
Kim Lew – The Carnegie Way (Capital Allocators, EP.52)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Kim Lew, Chief Investment Officer of the Carnegie Corporation of New York, exploring her career trajectory, institutional governance, endowment portfolio construction, and the discipline of embracing discomfort in leadership and investing.
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 18% of the talking time here. How this is scored →
Ted as informed peer 3.1 Guest teaching 1.5 Guest disagreement 0.1 Ted pushing back 0.5
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 27:14 Reframing tactical liquid alternatives
Kim firmly pushes back against the premise that liquid alternatives are an easy replacement for traditional private endowment investing, noting tactical allocation requires rare execution skill.
Hardest push from Ted ▶ 36:50 Questioning co-CIO principal-agent alignmentTed directly challenges whether splitting portfolio responsibilities between two co-CIOs created a principal-agent conflict relative to Carnegie's optimal fiduciary structure.
Biggest teaching moment ▶ 43:30 Schooling on pension fixed-income demandKim explains how serving on pension committees revealed liability-matching constraints that explain persistent long-bond demand and slower interest rate normalization.
Ted holds their own ▶ 58:00 Dissecting manager spin-out dilemmasTed demonstrates sharp industry knowledge regarding manager succession dynamics and the structural risks of staying with subscale spin-out firms.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Family Roots, Upbringing, and Choosing Wharton | 1 | 0 | 0 | 0 | Ted opens with warm biographical prompts exploring Kim's unique personal background. Kim shares the story of her immigrant parents, her upbringing in Harlem and the Bronx, and how her father guided her toward Wharton. | |
| Early Career at Chemical Bank and Overcoming Fears at Harvard Business School | 1 | 0 | 0 | 0 | Ted prompts Kim on her transition from undergraduate studies to Chemical Bank and Harvard Business School. Kim candidly explains her initial terror of public speaking and how case method forced participation. | |
| Prudential, the Big Brother Connection, and Mentorship at Ford Foundation | 2 | 1 | 0 | 0 | Kim recounts how a Big Brother connection led her to Ford Foundation and mentorship under Betty Fagan. Ted listens attentively as Kim explains Fagan's core philosophy on taking measured investment risk. | |
| Navigating the Dot-Com Crash and Sizing Private Portfolios | 3 | 1 | 0 | 0 | Ted follows Kim's timeline through the tech bubble and the management of distribution portfolios. Kim details how impending maternity leave fortuitously prompted her to liquidate nearly two billion dollars of distributed stock right before markets crashed. | |
| The Evolution of Private Equity Sourcing and LP Dynamics | 4 | 2 | 0 | 0 | Ted probes the historical shifts in private equity sourcing and power dynamics between LPs and GPs over two decades. Kim explains how foundations enjoyed significant leverage and peer collaboration before sovereign wealth and pension capital entered the arena. | |
| Contrasting Institutional Models: Ford Foundation vs. Carnegie Corporation | 5 | 3 | 1 | 2 | Ted challenges Kim on whether traditional public market replication could match alternative assets. Kim articulates a nuanced comparison between Ford Foundation's tactical siloed model and Carnegie's diversified Yale endowment model. | |
| Sponsor Message: Ridgeline Investment Management Tech | 4 | 1 | 0 | 2 | Ted raises the potential principal-agent conflicts inherent in splitting investment responsibilities between co-CIOs. Kim details how she and Meredith Jenkins created a functional, balanced co-CIO partnership with structured devil's advocacy. | |
| Administrative Division, Talent Dynamics, and Outside Board Governance | 3 | 2 | 0 | 0 | Ted asks how administrative burdens were divided and why co-CIOs need outside board governance roles. Kim explains how serving on outside pension committees informed her understanding of liability-driven investing and long-term interest rate trends. | |
| Transitioning to Sole CIO and Pursuing Idiosyncratic Alpha | 4 | 3 | 0 | 1 | Kim explains adapting the endowment model to Carnegie's distinct scale by focusing on idiosyncratic, small-fund investments in niche markets like Peru and Argentina. Ted asks about the specific educational panel topics used to anchor committee discussions. | |
| Portfolio Sizing, Team Evolution, and Macro Pattern Recognition | 4 | 2 | 0 | 0 | Ted and Kim discuss overall portfolio sizing across 120 relationships and the necessity of expanding idiosyncratic alpha. Kim highlights why modern investment teams require macro perspective and junior talent willing to break standard pattern recognition. | |
| Manager Succession, Spin-Out Due Diligence, and Farm Team Scaling | 5 | 3 | 0 | 1 | Ted drills into the tactical dilemma of backing spin-outs versus reallocating capital away from retiring vintage managers. Kim outlines the challenges of scaling up farm-team managers to full portfolio weight while managing institutional fiduciary constraints. | |
| Collaborative Risk Underwriting and the Philosophy of Greatness | 4 | 2 | 0 | 1 | Ted asks how Kim balances her high-risk rhetoric with the cautious institutional pacing of manager sizing. Kim describes Carnegie's collaborative pre-mortem risk evaluation process and shares her philosophy on choosing greatness over comfort. | |
| The 50th Birthday Challenge: Fifty Novel Experiences | 1 | 0 | 0 | 0 | Ted invites Kim to share stories from her 50th birthday challenge where she completed 50 novel experiences. Kim recounts taking open-door helicopter rides, attending galas, and touching ancient specimens at the Museum of Natural History. |
Statements from this episode (18)
Lew: Ford Foundation managed one-third of its portfolio internally in 1990s
“At the time, Ford managed a huge, a third of their book was managed internally, people picking stocks, and that's what they were hiring for.”
Lew: Ford liquidated $1.8B in tech distributions right before dot-com crash
“We literally had about 1.9 billion dollars in our distribution portfolio,
because the
Distributions were coming so fast that we literally were losing stock certificates because people were sending them in the mail.
And back then the transfer agents were not ef…”
Ford Foundation barred buyout investing due to board anti-takeover bias
“The board in prior iterations had been a lot of captains of industry who had been the victims of hostile takeovers, and so they felt that the LBO market was unsavory, so they did not allow the Ford Foundation to invest in buyouts.
But they would let them inves…”
Lew: Endowments lost sourcing leverage as manager capital options expanded
“The foundations in the dynamic community had a lot more leverage. So you had leverage with managers. That's what made them become known as the smart money because you were doing these sort of more interesting structures and strategies. Very different than it i…”
Lew: Foundations lost their reputation for capital stability after 2008
“The concept of The foundations being really steady and reliable sources of capital was prevalent, and everybody believed that. It changed after 2008 when people were not as stable of source of capital, but at the time, every buy-out fund wanted foundations in …”
Ford Foundation under Linda Strump held no hedge funds, capped PE
“Linda at the time didn't believe in hedge funds. The private equity portfolio was 10%. That was it.”
Carnegie's investment committee rejected only one investment during Lew's tenure
“In the whole time that I've been here, and as far as I know, ever, there's only been one investment that did not get through committee”
Carnegie Co-CIOs divided asset classes to maintain future solo CIO marketability
“One, we each had to be managing a full diverse portfolio so that when we went out to interview for jobs later on, We could say we had played the role of a CIO managing a cross asset class. So it wasn't a, you do publics and I do privates, or you do illiquids, …”
Carnegie Co-CIO model paired primary sponsor with asset allocation devil's advocate
“The way we structured it is, though, if you were the primary, your job was to really help the directors source and think about their strategy and support them in their work. And if you were the secondary, you were the devil's advocate. Not the devil's advocate…”
Lew: Pension long bond demand keeps interest rates lower for longer
“Oh no, that, those rates are going to be low for a long time, because that demand for that long bond is so high, and so when I'm thinking about rates rising, and people kept saying it was going to happen, it was going to happen, and I was like, it's going to h…”
Carnegie Corporation's $3.5B endowment operates with zero capital inflows
“We have zero inflows of capital. We are three and a half billion dollars, which means our check size are tiny.”
Carnegie's $10M Peruvian fund commitment highlights scale advantage over Yale
“We did a manager that had a twenty million dollar fund, and we did 10 of it. We can do that. Yale can't do that. It doesn't make sense. I mean, they could do it. They have the skills to do it, but it's not a good use of their time”
Lew: Investors cannot remain invested in Argentina over long market cycles
“And do we think that you can stay invested in Argentina over long cycles? No. We're going to have to eventually take our money out of that.”
Carnegie maintains roughly 120 external manager relationships across eight asset classes
“We have too many relationships, but we have about a 120. Roughly the way we look at it, eight asset classes. It's roughly 10 or so in each asset.”
Declining returns will force endowments toward more idiosyncratic alpha investments
“I think it's gonna have to be more if we're gonna continue to outperform, because I think returns are coming down, and if returns are gonna come down, and our five percent payout is not coming down, we're just gonna have to find different ways to create alpha,…”
Carnegie holds 4% positions in legacy managers, hesitating to scale newcomers
“These big guys that we've been with a while have four percent positions. Are we ready to give these guys four percent positions? No. So either we have to decide That we're gonna have twice as big a portfolio resource problem, or we're gonna decide that we're g…”
Lew: Scaling venture funds alters their role in an institutional portfolio
“In order to feed the beast, they've got to get bigger, and bigger. To the point where what you invested in originally is very different than what they are now, which doesn't mean they won't be highly successful, but the role in portfolio is different.”
Carnegie initially commits $5M to $10M to new venture capital managers
“The first time we invest in the venture manager, we make a five million dollar investment, we make a ten million dollar investment. It takes a while to feel comfortable giving somebody a 15 or twenty million dollar investment, but they invest over time, and so…”