The investment world likes stories of a talented manager discovering niche opportunities and beating benchmarks; however, in most institutions, making investment decisions is not a “one man show”, but a team effort.
Structuring an effective team that carries out a firm’s investment philosophy is key to portfolio performance. While there is no single formula for investment team building, during Trusted Insight’s interviews with institutional investors, we identified four key features of some of the most successful investment teams in the world.
The generalist approach
"We are a small team and everyone is a generalist. It forces you to be disciplined and understand the role of every manager and strategy in the context of the entire portfolio." -- Philip Griffin, Director Of Investments, Southern Methodist University
"We are all generalists, which allows us to look across asset classes together to find the best ideas at the most attractive valuations." -- Joel R. Wittenberg, CIO, W.K. Kellogg Foundation
"I want people who are going to understand all of the asset classes in which we invest, and when it came time to making a manager decision, they would be able to weigh a manager against all other opportunities...The other reason I wanted generalists was the fact that while many of our decisions have to do with manager selection, a lot of what we do and need to do is to focus on broader asset allocation questions. How do we protect ourselves against inflation? How do we protect against deflation? Is real estate an inflation hedge? ...I want people to be able to engage with those big-picture asset allocation questions and not simply the more silo-ed asset class questions. That has worked out extremely well." -- Kathryn Crecelius, Former CIO, Johns Hopkins University
"The entire team is expected to have an opinion on every investment and there are dissenting views at times. Our job is to constantly force curve the existing managers in the portfolio and we need to challenge each other’s individual view." -- Courtney Powers, Senior Director Of Marketable Alternatives, University Of Texas Investment Management Company
Diverse views and backgrounds
"Within our team, we have a lot of diversity in terms of ethnicity, gender and background. The strong focus on diversity and inclusion is something that's very central to Exelon at all levels, starting from the top of our organization at the Board. It is part of how Exelon hires, how we finance the company, how we chose our vendors and how we invest... Everyone is open in terms sharing their opinions, and our team discussions are always very interesting because of the different viewpoints. I think having that culture and diversity makes us a better investment office." -- Chrissie Chen Pariso, Senior Private Equity Manager, Exelon
"I try to have a diversified team, and I think that’s the case for foundations in general. I've seen a number of CIO appointments that are women, which is a great accomplishment. At the Foundation, half our board members are women, and when you're in science, technology and economics that's pretty impressive. It's easy to say, "Oh, I couldn't find diversity," but if you look, you can find it. I think having diversity within a team and different thoughts is a good thing for investments." -- Elizabeth Hewitt, CIO, Alfred P. Sloan Foundation
"We all challenge each other. Even if we believe in the idea. We play the devil’s advocate. What happens if... our thesis breaks, the regulatory environment changes, etc. It’s a group effort." -- Adele Gorrilla, Former CIO, Denison University
Flat structure
"We have tried to construct an investment organization that is fairly flat to make sure the best ideas are escalated quickly and to get diversification in thought. When I first started, the team had a silo mentality, and there was little collaboration amongst asset class directors/analysts to share best ideas. However, we have tried different ways to break down those barriers across the team, including opening up all manager meetings to each team member, education sessions for the entire team and analyst-only meetings to encourage discussion." -- Scott Davis, CIO, Indiana Public Retirement System
"We have a very flat organization with no silos. Everyone has a voice at the table and is encouraged to speak up. There is very healthy discussion and debate that transpires without regard for seniority. We firmly believe that it's our collective judgment that will result in superior investment decisions." -- Michael Buchman, Co-CIO, Conrad N. Hilton Foundation
"We're a team of four people, and it's a very flat group. We work together as a team without a very strong hierarchy. I look for team players from various backgrounds who throw in their point of view. The more points of view you have the better, but it requires somebody to be able to act as a good team member." -- Robert C. Lee, Deputy CIO, Employees’ Retirement System of Texas
"We're a flat organization. We do everything as a team. While one person may be leading the charge in research on a particular manager or a segment of the market, it's a very collegiate environment. We all fit in a pretty open office space. We can have a dialog throughout the day, and yet still be very focused on the work that needs to get done." -- Mauricia Geissler, CIO, Amherst College
Small and stable
"We are a very lean team internally and then we leverage our consultants as an extension of staff. It works reasonably well because we, as the lean team, can look at investments at a high level, with a big-picture view, and then dive deep as needed or in the places where we want to go more in-depth. At the same time, we have our consultants who tend to be deeper in various areas, and they can bubble opportunities up to us. It gives us a top-down, bottom-up combination that works reasonably well." -- Anne-Marie Fink, Former CIO, The Employee Retirement System Of Rhode Island
"We have tremendous longevity at the senior level here. I think the five managing directors have roughly an average tenure here of 15 years. I think that continuity of talent has really made a big difference. We're collegial, and we've known each other a long time. There's a lot of mutual respect, but also rigorous discussions about how to approach any market opportunity." -- Mark Barnard, Former Managing Director Of Private Investments, Howard Hughes Medical Institute
"The key to success is to set a plan and stick to it. The stability of our team gives us the ability to stick to the plan. We are all generalists, which allows us to look across asset classes together to find the best ideas at the most attractive valuations." -- Joel R. Wittenberg, CIO, W.K. Kellogg
Read our previous Trusted Answers series here.
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