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Access here alternative investment news about Andrew W. Mellon Foundation On Balancing Quantitative Rigor, Qualitative Judgment | Monica Spencer, Senior Portfolio Manager | Q&A
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Andrew W. Mellon Foundation On Balancing Quantitative Rigor, Qualitative Judgment | Monica Spencer, Senior Portfolio Manager | Q&A

by trusted insight posted 2months ago 957 views

Monica Spencer serves at the Andrew W. Mellon Foundation as a senior portfolio manager. Spencer joined the foundation in 2006 and works with the chief investment officer to manage the investment portfolio, with a focus on private equity assets, including buyouts, growth equity, and venture capital, and she shares responsibility for the diversified strategies portfolio. 

In this interview, she discusses her role working closely with their new CIO; why she believes asset allocators may be more diverse than asset managers; and why balance quantitative rigor with a qualitative sense is an important balance at Mellon.

Monica Spencer was named on Trusted Insight's 2019 Top 30 Foundations Investing In Diversity.

Trusted Insight: How does your new CIO Scott Taylor’s previous experience at a pension fund translate to the Foundation’s portfolio?

Monica Spencer: Well, it's early days. Scott joined us in September, and there's a lot we share in terms of his experience as an allocator, albeit at a much larger pool of assets, that is immediately transferrable. But there is also a fair amount of complementarity in his experience: We've made a couple of process changes. We've introduced some new managers to him, and he's introduced some new managers to us, and that has been great. We’ve enjoyed the opportunity to compare notes and try to share best practices from our experience and from his experience at CPP.

We also have a new president at the Foundation, Elizabeth Alexander, who embodies a lot of the work Mellon has been doing over a long period of time and who shares the values of the institution. She has hit the ground running since being appointed last March, and so it's been a busy year.

Trusted Insight: What’s your outlook on the PE, VC landscape? Considering the push being made by institutional investors into the asset classes.

Monica Spencer: While that is an interesting question, I don't try to prognosticate for the whole asset class. For the Foundation -- which has had a significant allocation to private equity for a long time -- over the long term, our managers have outperformed. We believe that is driven by their ability to effect change at the companies that they invest in, which allows them to outperform public market investments.
 

"An interesting phenomenon is that the asset owners, or allocators, may be more diverse than the managers in our portfolios."


We are looking, on an exception basis, for managers who have the skill set to change the economics of their underlying portfolio companies. We believe that that is sustainable over the long term, and that's what we seek when we do diligence on managers. We don't anticipate any change to our approach.

Trusted Insight: What can foundations do to lift encourage and promote diversity from an operational and investment office standpoint?

Monica Spencer: In terms of manager diversity, we have taken initiatives in our investment portfolio that are consistent with the mission of the Foundation and the initiatives in our grant-making activities. We try to foster conversations with our managers to understand how they are including women and underrepresented minorities in their partnerships, in their investment decision-making, in their portfolios. What support and mentorship are they giving to those diverse populations inside of their own organizations? How does the investment firm need to evolve to make sure they are including those folks, many of whom are new, in their regular activities, and then how can we help? That's a conversation that we're having in the venture capital arena, but across our investment portfolio more broadly.
 

"There are few women and people of color at the leadership level in asset managers, and particularly in alternatives... We have an opportunity to call that out."


An interesting phenomenon is that the asset owners, or allocators, may be more diverse than the managers in our portfolios. There are prominent women and people of color at the highest ranks in the investment community, particularly at endowments and foundations. At the same time, there are few women and people of color at the leadership level in asset managers, and particularly in alternatives. So we have an opportunity to call that out, to point out to established managers that there is a segment of the population that is not represented in their leadership. What can we do together to make more progress?

What we've done in our investing area has been to foster dialogue. With all of our investing partners, we try to ask questions to say, "What does your team look like? What does the pipeline of people in your organization look like? What have been the barriers to including more women and underrepresented minorities in your firm? What strategies have worked effectively, and how can we help?" We're trying to have a dialogue both with established managers, to help them include employees that are more representative of the broader population, and at the same time, trying to build an independent network of investors and managers in the ecosystem to ensure that we're not overlooking populations that should have a seat at the table.

Trusted Insight: Has your time with Merrill Lynch helped shape your investment philosophy for your current role?

Monica Spencer: Absolutely. I was there a long time, and I learned a ton over the course of my career at Merrill. A lot of it had to do with the quantitative, data-driven rigor of the analyses that you were doing. The really important part of the job was making sure that you had the numbers right, and that continues to be an important part of our job here at the Foundation. We try to make data-driven decisions and seek to be rigorous in the way that we evaluate managers.
 

"I don’t believe there's a substitute for quantitative rigor. The better the training you can get on analytics, the more valuable it is."


At the same time, I also learned the value of the qualitative side and understanding the people you were working with and their goals and motivations, particularly your clients’ goals and motivations. Being able to balance quantitative rigor with a qualitative sense for the people and the human decisions that people make was an important balance when I was at Merrill and that I rely on every day in my job here. Yes, we're using a ton of data and performance information to evaluate managers’ track records and to understand how they delivered their track record. Balancing that quantitative rigor with our qualitative judgment is an important component of what we do.

Trusted Insight: What lesson would you share with the next generation of institutional investors?

Monica Spencer: I don’t believe there's a substitute for quantitative rigor. The better the training you can get on analytics, the more valuable it is. I definitely would advise newer investors to pursue that, but at the same time, to trust your natural curiosity. One of the great things about investing is that the job rewards natural curiosity. You definitely want to pursue a path that's going to get you rigorous training. You also want to keep your ears open for what’s going on in the economy and environment, because you never know where those things could lead you.

View our full catalog of interviews here

Here's the full list of Trusted Insight's Top 30 Foundations Investing In Diversity.