Archive for the ‘Newsletter’ Category

Jon Hirtle and the OCIO Juggernaut

12 / 01 / 2020
by Charles Skorina | Comments are closed

OCIO Growth Tops 15.8 Percent in 2020

Our latest Outsourced Chief Investment Officer report features a list of 94 OCIO firms, each with updated contact information and AUM numbers. It’s the most comprehensive and accurate available.

We also have a deep-dive interview with Jon Hirtle, a pivotal leader in the industry he helped create.

We invite both institutions and high-net-worth families to check out our list – below and on our website – and call a few of the firms if you’re in the market for money-management help.

It may not be as exciting as Tinder, but it could still be the start of a beautiful new relationship!

Observations on a Plague Year

2020 was a strange and tumultuous year.

But, after trudging through a cruel pandemic, rancorous politics, and vertiginous markets, there still seems to be some hope left in the world.

In the OCIO industry, for example, managers have amassed an additional $379 billion AUM over the last twelve months, topping out at a record $2.756 Trillion as of 30 June 2020.

That’s a year-over-year growth of 15.8 percent!

A few firms sold themselves to larger players in 2020. Athena Capital Advisors joined Franklin Templeton, Focus Financial Partners acquired CornerStone Partners, and private equity investors CC Capital and Motive Partners teamed up to buy Wilshire Associates.

We've been charting the growth of the OCIO industry for over a decade in our annual OCIO reports and the heirs of Hirtle, big and small, seem (mostly) to have flourished.

Jon Hirtle of Hirtle Callaghan hatched the concept of an “independent investment office” managing family and institutional money over thirty years ago.

The idea was conceptually simple, but not necessarily easy to execute – or to market: take the proven success of sophisticated multi-billion-dollar investment offices and deliver those same benefits to smaller institutions and high-net-worth families at fees they could afford.

Four decades later we see not only independent firms like Hirtle Callaghan and Alan Biller and Associates, but also giants like JPMorgan, Blackrock, Vanguard, and AON; and boutiques like Edgehill and Disciplina. It’s a big, wonderfully diverse industry and, as we’ve seen, still growing briskly.

Jon Hirtle and the OCIO Juggernaut

Mr. Hirtle was born in a small town outside of Pittsburgh. He had a very American boyhood; working with horses, learning to fish, camping with the Boy Scouts, and playing football.

At fifteen he and a classmate hiked several hundred miles on the Appalachian Trail – by themselves. The following summer he landed a job in Wyoming after typing (remember typing?) 100 letters to all the ranches advertising in the back of Outdoor Life magazine.

That first summer in Wyoming he dug ditches, built fence, rode broncs (the fun part according to Jon) and fell in love with the west.

As a Penn State undergrad he studied pre-veterinary medicine, walked onto the football team, appeared in musicals, joined a fraternity and, most importantly, met Debby, his wife of over 40 years and counting.

After graduation, Jon joined the Marines where he earned honors in officer training, led troops overseas, trained recruits at Parris Island and finally, returned to Penn State to recruit more candidates for officer training and earn an MBA.

After the Marine Corps he headed for Wall Street and Goldman Sachs.

And that’s where the story of OCIO begins.

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Kim Lew, Columbia Endowment’s next CEO, Shattering the Glass Ceiling

09 / 08 / 2020
by Charles Skorina | Comments are closed

African-American investment professionals. . . better late than never!

Last week Columbia University announced that Ms. Kim Y. Lew, chief investment officer and thirteen-year veteran of the Carnegie Corporation, will join Columbia’s $10.9 billion Investment Management Company as CEO on November 2nd.

She won’t have far to move. Her new office is located about eight blocks south and three blocks east of her present location in mid-town Manhattan.

This hire is a big deal and the search committee -- Columbia University’s board of directors, President Lee C. Bollinger, and EVP of finance Anne Sullivan -- shattered several glass ceilings when they welcomed Ms. Lew on board.

Gender is a formidable barrier for females in finance. On our latest list of the top one hundred endowment chief investment officers pre-Ms. Lew, there are only sixteen women.

[This is pre-Kim Lew and Brooke Jones, both moves announced last week.  Ms. Jones was Kim Lew’s investment director and will move to Bryn Mawr College as CIO next month. Dekia Scott, 19 years at Southern Company, was promoted to CIO in June]

Fortunately, Columbia’s search committee was more interested in talent and ability than race, gender, or religion when they selected Ms. Lew.

[Our full interview with Ms. Lew is just below]

We see a lot of boilerplate in the nonprofit world about how “we don’t discriminate.”

But, truth be told, if you are a woman, or more pointedly, an African-American woman in asset management, you face gale-force headwinds as you scale the institutional precipice.

How bad is it?

For over thirty years we have followed the careers of several thousand investment heads at Wall Street investment and money center banks, hedge funds, insurance companies, and nonprofits.

Within our global database we have about six-hundred-fifty chief investment officers at endowments, foundations, hospitals, public pensions, associations, and charities. . . yet we can find only fifteen African-American CIOs among them, a minuscule two percent, of which, with the recent promotions of Ms. Jones, and Scott, seven are female.

The dismal reality is that an African-American woman working in institutional investment management has a better chance of storming her way across the Korean DMZ than becoming a chief investment officer at a major American endowment or foundation.





Kim Y. Lew, CEO (Oct 2020), Columbia U Investment Mgmt. Co.

Brooke Jones, CIO (Oct 2020), Bryn Mawr College

Charmel Maynard, CIO/Treasurer, U of Miami, FL

Frank Bello, CIO Howard U

Robert "Danny" Flanigan Jr., CIO/Treasurer, Spelman College



Joseph Boateng, CIO, Casey Family Programs

Rukaiyah Adams, CIO, Meyer Memorial Trust

Nickol Hackett, CIO, Joyce Foundation

Bola Olusanya, CIO, The Nature Conservancy



Dekia M. Scott, CIO, Southern Company

Bryan Lewis, CIO, US Steel



Mansco Perry III, ExecDir/CIO, MN State Board of Investments

Angela Miller-May, CIO, Chicago Teachers’ Pension Fund

Cheryl Alston, CIO, Employees Retirement Fund City of Dallas

Alex Done, CIO, Bureau of Asset Management, NYC retirement system


Source: Charles Skorina & Company

[Our apologies if we have missed anyone. Please email me if you’re not on the list]

Kelli Washington, managing director of investments at the Cleveland Clinic, wrote an excellent op-ed piece for ai-CIO magazine about what it’s like to be an African-American woman in finance.

And Vicki Fuller, former CIO at the New York Commons, was kind enough to share her views on being female and African-American on Wall Street and at the Commons in our interview two years ago.

We should mention that Columbia is not the only eminent New York institution to give women and minorities a fair shot.

The honorable Thomas P. DiNapoli, state comptroller, has led the charge for years, promoting Raudline Etienne, then Vicki Fuller, and now Anastasia Titarchuk to the top investment position at the $207bn New York Commons.

But, as we see from the data, these are rare exceptions.

When I interview women in the investment industry and ask how they first became interested in investment finance, it’s almost always because early on they had a role model.

Someone in the family or a family friend, someone they met in high school or college who worked in finance and took the time to explain what they did and why they liked the job.

Let’s hope the entire investment community will follow Columbia’s example and hire, develop, and promote more role models like the intrepid band of women (and men) cited in this piece.

Ms. Kim Y. Lew, a Bronx Story

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Endowment Returns 2019: 100 Benchmarks to Remember

08 / 05 / 2020
by Charles Skorina | Comments are closed

Most nonprofit funds - endowments, foundations, health systems, etc. - close their books for the fiscal year on June 30 and release preliminary performance results soon thereafter.

Timing is everything

For the last decade, public and private market investments have moved pretty much in sync, rising and falling like two riders on a tandem bike.

Before the COVID-19 crisis - or "the great cull" as my Australian friends call it - those preliminary investment returns reported to boards and the press were reasonably accurate reflections of the portfolio's trendline for the previous twelve-months.

Not this year.

Here's the problem.  Public market results are computed and consolidated by investment custodians and reported to their clients usually within a month of the fiscal close, but private market valuations take much longer.

There is at least a three-month lag before the private market investments are valued, marked, and reported to their investors who, in turn, consolidate the data into their financial reports.

Most investment teams will not know their June 30th private investment performance until September 30th or later.  In some cases, much later.

As a result, the fiscal year-end performance data released to the media later this fall by endowments, foundations and other diversified, multi-asset funds won’t tell us much.

The statements will reflect June 30th public market marks (up nicely) but March 31st private market valuations (down and dated), a recipe for confusion.

Furthermore, adding March lows to the spring rally could make for unhappy boards and donors.  And heaven forbid the time spent explaining to reporters why performance really wasn’t so bad.

So here's the conundrum.  Should investment offices flush the news right away?  Get it all out there and enjoy a better 2021?

Or should they hold off until every last mark is settled?  Be slow rather than sorry?

We'll see.

But for the record, most family offices and nonprofit investors have done ok this year.

So, kudos to the chief investment officers and staffs.

[See our one and five-year performance chart for 2019 below, listing one hundred endowments.  We publish it as a reference and reminder of what returns in a normal year looked like.]

It's a cold cruel world

Lamentably, the schools, health systems, museums, and cultural institutions the CIOs work for are in deep trouble.

Tuition, government aid, donor gifts, room and board revenue, and visitor and patient revenue have all collapsed.

Staff and pay cuts have hit many of the well-known institutions we work with and more are in the works.

The Pay Study we published a few weeks ago on one hundred chief investment officers incorporated the most recent comprehensive public data available, December 2017.

But we expect pay cuts as high as twenty percent from our baseline comp for some investment teams as institutional budgets implode.

We're in the Mergers and Acquisitions Business

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Pay and Chief Investment Officers: Good Money while It Lasts

06 / 20 / 2020
by Charles Skorina | Comments are closed

In this letter, we highlight the compensation of one hundred chief investment officers at US university endowments.

Endowment investment chiefs are the ultimate long-term, strategic investors.

They have an infinite investment horizon, a global playing field, and can invest in anything anywhere - within the broad policy limits set by their institution.

Their performance is a bellwether for what’s prudent and possible.

We recruit these executives for a living and avidly follow all institutional investment heads managing assets over $1 billion (and many with less), tracking their performance and pay, and scrutinizing their abilities.

Foundations, family offices, and Wall Street firms also employ top investment professionals, but it's difficult to extract meaningful data on compensation or performance from opaque sources.  So, we go with what we can get.

When it comes to pay, size matters

Nonprofit investors wear many hats but have essentially one metric by which they are judged; long-term performance.  However, that does not seem to be the metric for how they are paid.

We ran some correlations using our archival data-sets to see how pay correlates to AUM, tenure, and five-year performance.

As shown below, the correlation coefficient for AUM to comp is 0.69, which is moderately high.  But, tenure and performance don't appear to have much impact on CIO pay.

There are some outliers, like Paula Volent at Bowdoin, a consistent top performer and deservedly well paid, managing an endowment with less than $2bn AUM.  But, in most cases, size trumps all other metrics.

Comp-vs- AUM:   0.69

Comp-vs-Tenure: 0.31

Comp-vs-5yr Rtn: 0.27

In the larger corporate world CEO pay is an object of great interest and controversy for obvious reasons.  But the relationship of size to compensation looks just like what we see in our set of endowment CIO data.

Kevin Hallock at Cornell University is one of the go-to experts in this field.  He’s chair of their department of Labor Economics and director of their Institute for Compensation Studies.  In papers with his students and colleagues he’s studied CEO pay for many years.

He says: It doesn’t matter whether company size is measured as assets, market value, sales revenue or number of employees — bigger firms pay more … way more.”

“We can isolate the impact of all kinds of other characteristics (e.g., industry, return on assets, profitability, research and development expense, etc.) and even use complicated statistical techniques to remove the influence of “unmeasurable” characteristics, and the size-to-pay link remains intact.

The bottom line.  Be it Wall Street, Main Street or nonprofit institutions – the bigger the assets, the better your chances at making more money.

It's that simple.

And now, on with the show

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A Dazzling Decade with Trouble Ahead

12 / 12 / 2019
by Charles Skorina | Comments are closed

It's hard to make predictions - especially about the future.

Robert Storm Petersen, Danish cartoonist, writer, humorist

London calling

Reporter Chris Flood at the Financial Times ran an article a few weeks ago that parsed our latest endowment performance report and pounced on the fact that that none of the sixty funds we featured performed as well  as Vanguard's VFIAX, a large-cap U.S. equity fund, over the last 10 years.

Our newsletter gave an early peek at endowment investment performance for fiscal 2019, including a ranking by 10-year returns.

The VFIAX returned 14.7 percent net of fees for the decade while the top 10-year endowment investor on our list was Paula Volent at Bowdoin College, who racked up an excellent 12.0 percent.

Mr. Flood's observation makes a good story-hook but, comparing diversified endowment or foundation portfolios to the VFIAX - or to any similar pure-play equity index makes little sense in the real world.

Retrospectively (looking backwards from 2019), placing all your chips on a cheap equity-only index fund looks like genius, but prospectively (forwards from 2009) it would have been insane for any prudent institutional investor.

Endowments and foundations are long-term global investors with horizons extending out fifty, a hundred years and more, and the trustees and CIOs build portfolios to last for generations.

The job of CIO at an endowment or any financial institution is not to beat the VFIAX, but to meet the objectives set by the board who view capital preservation and steady cash flows as paramount.

The sages speak: Omaha vs. New Haven

In our letter we quoted an anonymous board member who was ready to throw up his hands and index his institution’s endowment, thereby avoiding a lot of fees.

We know this board chair and he’s an able and experienced financial exec. 

But some bigger and more eminent investors have also taken positions both for and against a passive strategy.

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