The Exchanges

Q Alan, I'd love to pull the thread on what Kim said about identifying talent. Any nuggets of wisdom that you've come to learn in how you were able to identify such talented people?

A My first job out of college was assistant director of admissions at Hamilton College, and I interviewed tons of kids in high school, and Hamilton College is exactly in the center of New York State, so it's really far from everywhere, and we had a lot of talented kids from the Adirondacks who probably had never Traveled more than 25 miles from home, who lived in a tiny rural town, and we called them North Country Nuggets, because they were these really talented kids who just hadn't had that opportunity to flourish the way a kid from New York City or Boston or somewhere. So I really learned to appreciate people who had a lot of inherent smarts, and you knew they were on the ball, and with a little bit of encouragement, they would just Explode.

AI assessment note: “I really learned to appreciate people who had a lot of inherent smarts”

Q So this is kind of the troubling part of the conversation, because it turns out that none of you are still at Carnegie today. So this incredible training round, this great camaraderie you all have, but then naturally one by one, Lisa told her story, you're not there. So Ellen, I want to ask you, After a dozen years, you left. What was the thought process at the time?

A So I was at Yale for 12 years and seven months, and I was at Carnegie for 12 years and seven months. With Carnegie, we got the portfolio through the financial crisis really well, and I had a great team to succeed me. That is the greatest thing that any CIO can do, is to have bench strength for people that can take over seamlessly. So I just felt that the time was right, and I was ready to try something different, and I didn't know at the time what it was, but I thought, you know what, I'm not going to commute for a year. I'm going to Tend my garden and walk my dogs and play tennis and figure out what my next chapter is, knowing that Carnegie was just in a great place. And it did work out very well.

AI assessment note: “I just felt that the time was right, and I was ready to try something different”

Q So Ellen, ultimately the buck is going to stop with you as the CIO. How do you balance wanting to impart your experience and judgment on a manager selection decision compared to allowing the team to have rope and have their impact on the portfolio that ultimately you're responsible for?

A I think that is the key question for every CIO, because at least my philosophy is that I'm ultimately responsible for what's in the portfolio. The buck stops with me, but you've got great people. You want to empower them. You want to let them run and let them know that they have a lot of autonomy and authority. So I guess the way I handled it was if somebody Came to me and said, I really like this manager. I would try to meet with them early so that you don't go do a lot of work for no good purpose so that there are no surprises. I think by the time something got to a memo stage, there were very few things that didn't get through at that point because we all knew the portfolio. We all knew that manager and the rationale for putting it in the portfolio. But yeah, it's a real tension. And I don't think it ever quite goes away.

AI assessment note: “I would try to meet with them early so that you don't go do a lot of work”

Q Ellen, let's start with you. So 25 years ago, you leave Yale. You come to Carnegie, first CIO at Carnegie. What was your vision of what you wanted to build?

A So first of all, I have to say it was an incredible opportunity to come into and manage a pool of assets that were 1.6 billion dollars, and they had never had an investment team. And I think at the time, foundations were a lot sleepier than endowments. Most of them did not have professional staffs. And I can't say that I had a vision where I came from. And There was the way of doing things at the Yale Investment Office. There are a lot of managers in the portfolio that, frankly, Yale would never have invested with. It was a great opportunity for me to learn about all new kinds of strategies and managers, and it was also a great opportunity to work for an institution with a great mission. Carnegie Corporation, its legacy is Its mission to strengthen democracy, support education. You really felt that. I was all by myself. Meredith didn't come along until the summer, and I really had to figure out what to do. My mantra was, what am I not gonna do? Because you can't do everything. And that's really how I started to triage.

AI assessment note: “I can't say that I had a vision where I came from.”

Q How did you tease out who those people were in the professional context?

A I think we all know that it's a very nuanced process, and you spend a lot of time with people not in the office, and I think one of the downsides today interviewing and vetting managers is that you come to the manager's office, you're walked into a conference room, sitting by yourself, they come into that conference room, they control the environment totally, and Back then it was a lot more fluid, and we tried to spend time with people on the road, in their office, going to visit properties, having dinner with them, so you can see how they behave after they've had a couple of cocktails, or how they treat the waitstaff, or just all those nuanced things. But I think at the end of the day, it's their passion, and it's really understanding in your heart if you think they're going to do the right thing for you. When the chips are down, that to me is the gold standard.

AI assessment note: “we tried to spend time with people on the road, in their office, going to visit properties”

Q I'd love to dive into what this environment was like when things settled down. So Ellen, as you thought about running this team, What was the structure of your week or your quarter or your year?

A So I think every CIO is driven by their investment committee schedule and trying to fit everything in between the investment committee meetings. When you have a really small team, I think it does foster communication. I really believe in a specialist model where individuals do lead a particular asset class because I think that the network that you bring, the sourcing capability, The relationships within a hedge fund community, or a venture community, or the real estate community really matter in terms of the quality of your sourcing. But having said that, all these assets and strategies inform each other, and we do want to think about these relative opportunities and how we can learn from each other. But having a small team meant that we could sit down together. And I will say that I evolved as a manager and a leader Both endowment and foundation staffs are academic. They're very flat. People are working very independently, going off, traveling, doing their own thing. And I don't think really managing organizations is a skill set that many CIOs thought about back then. I think our industry is very undeveloped in that way. It was maybe in 2009 that I hired an executive coach. I had never had any training in managing people and leading, and I did it, but I don't think I was necessarily as effective as I could be. This coach, she just totally kicked my ass, and it was very intense…

AI assessment note: “every CIO is driven by their investment committee schedule and trying to fit everything in”

Q So if we go from the manager selection side to thinking about the portfolios, how did you discuss those incremental changes over time as a team?

A I think you know that when you have a living and breathing portfolio, it changes very little on the margin. And when we made asset allocation changes, they were typically increments of two and a half percent one way or another. In some ways, asset allocation is over glamorized. If you're an investor with a long time horizon, you're going to have a portfolio that's dominated by equities one way or another. And it can be public equity. It can be private equity. It can be hedge funds. You're going to have a little fixed income for your safety and anchor to win words. I think this is heresy to a lot of people, but I just think it's not that complicated. And you're picking managers that are going to make great risk adjusted returns. You don't worry about volatility of any single manager, because when you put them all together, guess what? The volatility is pretty low. A lot of it has to do with what we can execute well, and so we had great real estate expertise.

AI assessment note: “when we made asset allocation changes, they were typically increments of two and a half percent”

Q When you get off to a good start in those early years, whether it's lucky, move to the right place at the right time, what does that do for your ability to grow into the objectives that you want for the portfolio?

A When I started, I'd say both Vartan Gregorian, our president, and I wanted to grow the team slowly. It's disruptive to hire investment professionals at an elemasonary institution. When you're the high paid help, you're a new group. I think we agreed to go slowly. Vartan was incredibly supportive, however. He had been a university president at Brown. He had been the provost at Penn. And so he had a unique appreciation, unlike I think a lot of other foundation presidents, of the importance of stewarding your financial assets. He really got it. But it's funny, he wasn't interested in it. So one day I asked Vartan, how interested are you in investments? And he looked at me and he said, I'm not interested. But then he said something that was so critical. He said, But Ellen, I will go to every single investment committee because I want the board to know this is important. And so he did do that, and he supported us tremendously as we evolved fairly slowly building the team, really thinking through how we were going to grow and what kind of skill sets we wanted to bring on board.

AI assessment note: “both Vartan Gregorian, our president, and I wanted to grow the team slowly”