Since September 2015, Trusted Insight has interviewed dozens of chief investment officers from every institution type at investment offices across the world. We asked the CIOs for the secret to success and what junior investors should know to one day hold ultimate investment authority at a multi-billion-dollar institution.
Among the diverse answers, six themes appeared. The following article is a compilation of some of their best responses. Presenting the valuable lessons that helped ambitious investors ascend to the role of chief investment officer:
Tip #1: Study The Past
Scott Davis, chief investment officer, Indiana Public Retirement System: "I think the number one thing was to read as much as possible and become a student of history. I think recency bias is a very difficult thing to overcome in investments, in particular." Read Trusted Insight's Nov. 22, 2016 interview with Scott Davis.
Kathryn Crecelius, former chief investment officer, Johns Hopkins University: "No matter how much experience you have, no matter how much you’ve seen, markets are always different. That’s what makes this job endlessly stimulating and endlessly fun. That’s also what’s difficult. I am very much, not surprisingly given my background, a believer in learning the lessons of the past and studying the past to try and understand markets and patterns. It’s also really important to remember that while it's true that “this time it’s different” are the four most dangerous words in the English language, sometimes it genuinely is different. Trying to figure out what is different now and what is a trap and appears different is sort of the goal of what you aim for as CIO." Read Trusted Insight's Oct. 23, 2015 interview with Katheryn Crecelius.
Tip #2: Never Stop Learning
Rob Roy, vice president, chief investment officer, Adventist Health System: “We have so much to learn in this industry, from math to psychology to history to company politics to storytelling. Just never stop learning and growing. Everyone around you will benefit from your humble pursuit of knowledge, especially those whom your institution is designed to serve.” Read Trusted Insight's May 23, 2016 interview with Rob Roy.
Larry Kochard, chief investment officer and CEO, University of Virginia Investment Management Company: "It's so easy to become this herd and say, 'Okay, everyone's doing it this way, so we're just going to do it that way.' Being able to get the right lessons from best-in-class without getting sucked into being part of a herd. Understanding that nuance is really difficult to do because some people put up their blinders and say, 'I don't really care what anyone else is doing. I'm smart enough, I can figure this out.' They're not constantly learning.
"You need to be, sort of, in constant learning mode, assume that there's something you can learn from anyone in the business. Also understanding that it's so easy to get sucked into group-think. Then morphing into the herd mentality and the downside of being part of the crowd. Understand that there's this nuance that there's benefits and costs to both of those." Read Trusted Insight's Mar. 18, 2016 interview and Feb. 24, 2017 interview with Larry Kochard.
Tip #3: Find A Mentor
Girard Miller, former chief investment officer, Orange County Employees Retirement System: "Find yourself a mentor. It doesn't have to be your boss. Find somebody who's a lot smarter than you and a lot wiser. Learn what you can from them. And for those who’ve climbed the ladder already, master the arts of mentoring and sagacity." Read Trusted Insight's Jan. 21, 2016 interview with Girard Miller.
Kim Lew, chief investment officer, Carnegie Corporation: "The biggest benefits to my career and my ability to be a good investor had to do with great sponsorship and great mentorship from talented investors. That made all the difference in the world. I think there should be increased emphasis on making sure you choose good places with talented people." Read Trusted Insight's Oct. 27, 2015 interview with Kim Lew.
Tip #4: Gain Broad Experience
Scott Wilson, chief investment officer, Grinnell College Endowment: "Having some work experience -- either on the sell side or buy side in a specific asset class, whether that's fixed income, public markets, private investing or even some consulting work -- is good before you get on the allocator side. It brings a good perspective and a healthy sense of skepticism that you need when you're looking at thousands of potential investment opportunities all over the world and trying to narrow that down.
"A great database of potential investments doesn’t really exist in this industry. There is no magic funnel that helps you narrow your pipeline down from all of the available investment opportunities to the small handful of things that you'd really like to invest in. So having some outside expertise before you land in one of these roles is a very healthy thing." Read Trusted Insight's Feb. 13, 2017 interview with Scott Wilson.
Erik Lundberg, chief investment officer, University of Michigan: "Find a way to get a broad base of experiences early on, rather than just focusing on one area. If you want to be a CIO, you need to know something about all the asset classes. That's what we do with the investment analysts at the university; when they come in, we rotate them around into different asset classes over the years. They get a broad base of experiences. Later, when they end up having to focus most of their time on one asset class, they also have an ability to relate to what's going on in all other asset classes." Read Trusted Insight's Mar. 2, 2016 interview with Erik Lundberg.
Tip #5: Be A Pioneer
Andrew Eberhart, chief investment officer, a Prestigious Single-Family Office: "I think it's the willingness, in fact the desire, to invest outside the traditional opportunity sets.
"You can have a satisfactory career in the institutional and family office world by investing within established frameworks, but if you intend to add value, you have to seek out truly unique opportunities and embrace the notion of calculated risk taking.
"For me, that includes investing in new managers and asset classes and in having an open mind about opportunities that at first glance may not seem attractive. You can't get a better-than-average result if you're doing the same thing as everyone else. You’ll also have to turn over a lot of rocks to get one or two good ideas, but that discovery process exposes you to a steady stream of smart, accomplished people who will enrich your own thinking –and often leave you inspired. It is truly a fascinating profession to be in." Read Trusted Insight's Nov. 20, 2015 interview with Andrew Eberhart.
Stuart Mason, associate vice president and chief investment officer, University of Minnesota: "To be successful in the job, you really need to be open, flexible and aggressively pursue newer opportunities or niche opportunities before the opportunity gets arbitraged or reduced to something that's much less interesting. There’s lots of good data available these days, dig deep and gain conviction, then find appropriate strategies.
I think traveling globally early in one's career to gain perspective beyond the borders of U.S. investing is also important. Spend time in China, India and Brazil. These are booming economies where you are going to encounter really interesting investment opportunities. You need to understand what's going on the ground sooner rather than later if you're going to be able to diversify the portfolio beyond the borders of just a Russell 3,000 Index Fund." Read Trusted Insight's Mar. 8, 2016 interview with Stuart Mason.
Tip #6: Love What You Do
Philip Rotner, chief investment officer, Boston Children's Hospital: “One of the key elements that people should ask themselves are: do they philosophically align with the mission of the organization? I think that's a powerful piece. If you feel in alignment with your mission, you're going to feel strong about it. You're going to really feel ownership. You're going to really want to make it work well. You're going to enjoy going to work because you're going to see the benefits of your work reflected in the organization.
"I'm not sure you can always say that with every job, but if you can say it, I think it's powerful. It's critical that there's more to their job than just coming in and crunching numbers, that they see the power in the philosophical alignment of their beliefs and the organization's beliefs.” Read Trusted Insight's Jan. 17, 2017 interview with Philip Rotner.
Jeremy Wolfson, chief investment officer, Los Angeles Water and Power Employees' Retirement Plan: "A lot of the time, students will ask me what's the secret to success. Probably a lot of leaders have said this, but I truly believe it can be summed up in one word: passion. Be passionate about what you do. Love what you do. Don't chase the money. If all you care about is the money, there is a good chance you will not be successful … You're going to spend more time at work than you probably are anywhere else, so really love what you do. And it can be anything, it doesn't have to be a career in finance." Read Trusted Insight's Jan. 19, 2016 interview with Jeremy Wolfson.
Among the diverse answers, six themes appeared. The following article is a compilation of some of their best responses. Presenting the valuable lessons that helped ambitious investors ascend to the role of chief investment officer:
Tip #1: Study The Past
Scott Davis, chief investment officer, Indiana Public Retirement System: "I think the number one thing was to read as much as possible and become a student of history. I think recency bias is a very difficult thing to overcome in investments, in particular." Read Trusted Insight's Nov. 22, 2016 interview with Scott Davis.
Kathryn Crecelius, former chief investment officer, Johns Hopkins University: "No matter how much experience you have, no matter how much you’ve seen, markets are always different. That’s what makes this job endlessly stimulating and endlessly fun. That’s also what’s difficult. I am very much, not surprisingly given my background, a believer in learning the lessons of the past and studying the past to try and understand markets and patterns. It’s also really important to remember that while it's true that “this time it’s different” are the four most dangerous words in the English language, sometimes it genuinely is different. Trying to figure out what is different now and what is a trap and appears different is sort of the goal of what you aim for as CIO." Read Trusted Insight's Oct. 23, 2015 interview with Katheryn Crecelius.
Tip #2: Never Stop Learning
Rob Roy, vice president, chief investment officer, Adventist Health System: “We have so much to learn in this industry, from math to psychology to history to company politics to storytelling. Just never stop learning and growing. Everyone around you will benefit from your humble pursuit of knowledge, especially those whom your institution is designed to serve.” Read Trusted Insight's May 23, 2016 interview with Rob Roy.
Larry Kochard, chief investment officer and CEO, University of Virginia Investment Management Company: "It's so easy to become this herd and say, 'Okay, everyone's doing it this way, so we're just going to do it that way.' Being able to get the right lessons from best-in-class without getting sucked into being part of a herd. Understanding that nuance is really difficult to do because some people put up their blinders and say, 'I don't really care what anyone else is doing. I'm smart enough, I can figure this out.' They're not constantly learning.
"You need to be, sort of, in constant learning mode, assume that there's something you can learn from anyone in the business. Also understanding that it's so easy to get sucked into group-think. Then morphing into the herd mentality and the downside of being part of the crowd. Understand that there's this nuance that there's benefits and costs to both of those." Read Trusted Insight's Mar. 18, 2016 interview and Feb. 24, 2017 interview with Larry Kochard.
Tip #3: Find A Mentor
Girard Miller, former chief investment officer, Orange County Employees Retirement System: "Find yourself a mentor. It doesn't have to be your boss. Find somebody who's a lot smarter than you and a lot wiser. Learn what you can from them. And for those who’ve climbed the ladder already, master the arts of mentoring and sagacity." Read Trusted Insight's Jan. 21, 2016 interview with Girard Miller.
Kim Lew, chief investment officer, Carnegie Corporation: "The biggest benefits to my career and my ability to be a good investor had to do with great sponsorship and great mentorship from talented investors. That made all the difference in the world. I think there should be increased emphasis on making sure you choose good places with talented people." Read Trusted Insight's Oct. 27, 2015 interview with Kim Lew.
Tip #4: Gain Broad Experience
Scott Wilson, chief investment officer, Grinnell College Endowment: "Having some work experience -- either on the sell side or buy side in a specific asset class, whether that's fixed income, public markets, private investing or even some consulting work -- is good before you get on the allocator side. It brings a good perspective and a healthy sense of skepticism that you need when you're looking at thousands of potential investment opportunities all over the world and trying to narrow that down.
"A great database of potential investments doesn’t really exist in this industry. There is no magic funnel that helps you narrow your pipeline down from all of the available investment opportunities to the small handful of things that you'd really like to invest in. So having some outside expertise before you land in one of these roles is a very healthy thing." Read Trusted Insight's Feb. 13, 2017 interview with Scott Wilson.
Erik Lundberg, chief investment officer, University of Michigan: "Find a way to get a broad base of experiences early on, rather than just focusing on one area. If you want to be a CIO, you need to know something about all the asset classes. That's what we do with the investment analysts at the university; when they come in, we rotate them around into different asset classes over the years. They get a broad base of experiences. Later, when they end up having to focus most of their time on one asset class, they also have an ability to relate to what's going on in all other asset classes." Read Trusted Insight's Mar. 2, 2016 interview with Erik Lundberg.
Tip #5: Be A Pioneer
Andrew Eberhart, chief investment officer, a Prestigious Single-Family Office: "I think it's the willingness, in fact the desire, to invest outside the traditional opportunity sets.
"You can have a satisfactory career in the institutional and family office world by investing within established frameworks, but if you intend to add value, you have to seek out truly unique opportunities and embrace the notion of calculated risk taking.
"For me, that includes investing in new managers and asset classes and in having an open mind about opportunities that at first glance may not seem attractive. You can't get a better-than-average result if you're doing the same thing as everyone else. You’ll also have to turn over a lot of rocks to get one or two good ideas, but that discovery process exposes you to a steady stream of smart, accomplished people who will enrich your own thinking –and often leave you inspired. It is truly a fascinating profession to be in." Read Trusted Insight's Nov. 20, 2015 interview with Andrew Eberhart.
Stuart Mason, associate vice president and chief investment officer, University of Minnesota: "To be successful in the job, you really need to be open, flexible and aggressively pursue newer opportunities or niche opportunities before the opportunity gets arbitraged or reduced to something that's much less interesting. There’s lots of good data available these days, dig deep and gain conviction, then find appropriate strategies.
I think traveling globally early in one's career to gain perspective beyond the borders of U.S. investing is also important. Spend time in China, India and Brazil. These are booming economies where you are going to encounter really interesting investment opportunities. You need to understand what's going on the ground sooner rather than later if you're going to be able to diversify the portfolio beyond the borders of just a Russell 3,000 Index Fund." Read Trusted Insight's Mar. 8, 2016 interview with Stuart Mason.
Tip #6: Love What You Do
Philip Rotner, chief investment officer, Boston Children's Hospital: “One of the key elements that people should ask themselves are: do they philosophically align with the mission of the organization? I think that's a powerful piece. If you feel in alignment with your mission, you're going to feel strong about it. You're going to really feel ownership. You're going to really want to make it work well. You're going to enjoy going to work because you're going to see the benefits of your work reflected in the organization.
"I'm not sure you can always say that with every job, but if you can say it, I think it's powerful. It's critical that there's more to their job than just coming in and crunching numbers, that they see the power in the philosophical alignment of their beliefs and the organization's beliefs.” Read Trusted Insight's Jan. 17, 2017 interview with Philip Rotner.
Jeremy Wolfson, chief investment officer, Los Angeles Water and Power Employees' Retirement Plan: "A lot of the time, students will ask me what's the secret to success. Probably a lot of leaders have said this, but I truly believe it can be summed up in one word: passion. Be passionate about what you do. Love what you do. Don't chase the money. If all you care about is the money, there is a good chance you will not be successful … You're going to spend more time at work than you probably are anywhere else, so really love what you do. And it can be anything, it doesn't have to be a career in finance." Read Trusted Insight's Jan. 19, 2016 interview with Jeremy Wolfson.