Aron Grodinsky is the chief investment officer at The Colorado Health Foundation since March 2022. Previously, he was managing director, investment strategy at Cresset Capital Management. Prior to that, he was an executive director at Perella Weinberg Partners’ OCIO business, Agility and prior to that a senior investment officer at George Washington University, and executive director of investments at UJA-Federation of New York. Grodinsky holds an MBA from the University of Virginia and a bachelor's degree in mechanical engineering from McGill University.
In this interview, he discussed why the Colorado Health Foundation removed the idea of target allocation in its investment approach, how they are focused on identifying managers who are well-positioned to capitalize on opportunities during market turmoil, and why they are taking a closer look at crypto and digital assets more broadly.
Aron Grodinsky was named to Trusted Insight's 2022 Top Foundation Chief Investment Officers.
Trusted Insight: Tell us about The Colorado Health Foundation, what it stands for, and its investment office function.
Aron Grodinsky: CHF is a statewide philanthropic institution focused on bringing health and health equity in reach for Coloradans who have less power, privilege and income – and we prioritize communities of color. We utilize grantmaking, policy advocacy, convening, capacity building and strategic communications to achieve impact locally.
We center equity and justice in our work both in communities across the state and also internally, with a deep internal focus on implementing DEI practices within all functions and departments, including the investment office and our portfolio, where we have committed that by 2025 at least 25% of our total managed investment portfolio (MIP) will be managed by firms owned by women and/or people of color or who have women and/or people of color in key decision-making roles.
The Foundation is a private foundation, meaning we have no fundraising and accept no donations – the pool of capital from which our grants and operating expensed are derived is finite. Per IRS requirements we distribute 5% our assets each year. So the investment office’s function is to design and implement an investment strategy to generate a 5% real annualized return while balancing the tradeoffs between return seeking investments and the illiquidity and drawdown risks associated with those types of investments.
Trusted Insight: What is the Colorado Health Foundation’s asset allocation strategy?
Aron Grodinsky: One of the first things I did when I arrived was work with our consultant to conduct an asset allocation review. We looked at what impact incrementally moving the target allocation weights around might have to overall risk and return expectations. What we found was interesting; somewhat intuitive, but when backed up by rigorous analysis, you kind of go ‘duh’. What we found was that within reasonable ranges, there was no obvious target allocation that was superior to any other at a statistically significant level. More so, since none of us have a crystal ball to predict a future investment environment, any static target allocation was almost assuredly going to be inferior to the optimal allocation at any point in time. Given that, I did not want to be explicitly or implicitly managing towards an arbitrary target like “oh, I’m underweight real assets by two points, I need to go find a real assets investment to get back to target”. So, we removed the idea of a target allocation altogether and instead manage the portfolio within reasonably wide ranges for each asset class and rather, focus on what are the best opportunities to incrementally increase returns, reduce risk, enhance diversification, etc.
Trusted Insight: Many endowment and foundation LPs talk about alternative assets like PE and venture as areas they are most excited about. Is this also the case for the Foundation?
Aron Grodinsky: We have a healthy allocation to alternative assets at the Foundation. We don’t think of them as alternatives vs traditional assets, but rather look for the optimal investment structure to exploit a certain investment opportunity or get access to a diversifying return stream. It so happens that often times those opportunities exist in private or less liquid areas of the market which leads us to invest through so-called alternative investment structures or funds.
Aron Grodinsky: Are there any programs or projects unique to the Foundation? What separates the Foundation from some of its peers?
Trusted Insight: One thing that I think is somewhat interesting and unique at the Foundation is our Nonprofit Sabbatical Program, which offers nonprofit executives the opportunity to step away from professional responsibilities and take time for themselves to rejuvenate in efforts to strengthen the organizations they lead. It’s a little ‘out of the box’ from the typical grant-funding objectives of many of our peers.
Trusted Insight: How do you view the current market environment? And are there any challenges that your team has overcome in the last months?
Aron Grodinsky: The current market environment is fraught with uncertainty. I don’t need to rattle off the laundry list of macro risks we are all concerned about these days. It’s hard to have a strong conviction as to whether or when we might be at the end of a corrective phase, where inflation and interest rates will be next year, and what impact that will have on earnings and equity multiples. What I do know is that turmoil creates dislocations and dislocations create investment opportunities. So we are focused on identifying managers who are well-positioned to capitalize on those opportunities, whenever and wherever they may arise, and partnering with those managers.
Trusted Insight: Are there areas that your team is trying to better understand or get involved in? Whether it be investing in new technology or crypto-focused investments, just as examples.
Aron Grodinsky: Crypto, or digital assets more broadly, is something we are looking to get up the curve on. More to get a sense of where that market might be headed in the years to come than necessarily to invest today. You don’t need to be a first-mover but you can’t just bury your head in the sand. I don’t think now is the time to try to be heroic. It’s more of a ‘meat and potatoes’ environment – stick to the basics: up in quality and up in the capital stack. If we can get low double-digit total returns by purchasing senior secured credits with meaningful cash yields plus a pull to par, I’ll take that risk/return tradeoff.
Trusted Insight: Is there anything you’d like to add to our discussion?
Aron Grodinsky: The most important lesson I’ve learned in my career so far is to know what you don’t know, and the markets tell us every day how little we actually know! You can either enhance your understanding of what you don’t currently know through independent learning or by tapping into folks/organizations with deep subject matter expertise – but don’t pretend to understand something that you don’t, that is almost certain to end badly! I’m grateful for my ever-growing network of peers in the institutional investment industry who are a great source of knowledge, insights, idea-sharing, mentorship, and inspiration.
View our full catalog of interviews here.
The full list of 2022 Top Foundation Chief Investment Officers can be found here.
In this interview, he discussed why the Colorado Health Foundation removed the idea of target allocation in its investment approach, how they are focused on identifying managers who are well-positioned to capitalize on opportunities during market turmoil, and why they are taking a closer look at crypto and digital assets more broadly.
Aron Grodinsky was named to Trusted Insight's 2022 Top Foundation Chief Investment Officers.
Trusted Insight: Tell us about The Colorado Health Foundation, what it stands for, and its investment office function.
"We have committed that by 2025 at least 25% of our total managed investment portfolio (MIP) will be managed by firms owned by women and/or people of color or who have women and/or people of color in key decision-making roles."
Aron Grodinsky: CHF is a statewide philanthropic institution focused on bringing health and health equity in reach for Coloradans who have less power, privilege and income – and we prioritize communities of color. We utilize grantmaking, policy advocacy, convening, capacity building and strategic communications to achieve impact locally.
We center equity and justice in our work both in communities across the state and also internally, with a deep internal focus on implementing DEI practices within all functions and departments, including the investment office and our portfolio, where we have committed that by 2025 at least 25% of our total managed investment portfolio (MIP) will be managed by firms owned by women and/or people of color or who have women and/or people of color in key decision-making roles.
"We removed the idea of a target allocation altogether and instead manage the portfolio within reasonably wide ranges for each asset class and rather, focus on what are the best opportunities to incrementally increase returns, reduce risk, enhance diversification, etc."
The Foundation is a private foundation, meaning we have no fundraising and accept no donations – the pool of capital from which our grants and operating expensed are derived is finite. Per IRS requirements we distribute 5% our assets each year. So the investment office’s function is to design and implement an investment strategy to generate a 5% real annualized return while balancing the tradeoffs between return seeking investments and the illiquidity and drawdown risks associated with those types of investments.
Trusted Insight: What is the Colorado Health Foundation’s asset allocation strategy?
Aron Grodinsky: One of the first things I did when I arrived was work with our consultant to conduct an asset allocation review. We looked at what impact incrementally moving the target allocation weights around might have to overall risk and return expectations. What we found was interesting; somewhat intuitive, but when backed up by rigorous analysis, you kind of go ‘duh’. What we found was that within reasonable ranges, there was no obvious target allocation that was superior to any other at a statistically significant level. More so, since none of us have a crystal ball to predict a future investment environment, any static target allocation was almost assuredly going to be inferior to the optimal allocation at any point in time. Given that, I did not want to be explicitly or implicitly managing towards an arbitrary target like “oh, I’m underweight real assets by two points, I need to go find a real assets investment to get back to target”. So, we removed the idea of a target allocation altogether and instead manage the portfolio within reasonably wide ranges for each asset class and rather, focus on what are the best opportunities to incrementally increase returns, reduce risk, enhance diversification, etc.
Trusted Insight: Many endowment and foundation LPs talk about alternative assets like PE and venture as areas they are most excited about. Is this also the case for the Foundation?
Aron Grodinsky: We have a healthy allocation to alternative assets at the Foundation. We don’t think of them as alternatives vs traditional assets, but rather look for the optimal investment structure to exploit a certain investment opportunity or get access to a diversifying return stream. It so happens that often times those opportunities exist in private or less liquid areas of the market which leads us to invest through so-called alternative investment structures or funds.
"What I do know is that turmoil creates dislocations and dislocations create investment opportunities. So we are focused on identifying managers who are well-positioned to capitalize on those opportunities."
Aron Grodinsky: Are there any programs or projects unique to the Foundation? What separates the Foundation from some of its peers?
Trusted Insight: One thing that I think is somewhat interesting and unique at the Foundation is our Nonprofit Sabbatical Program, which offers nonprofit executives the opportunity to step away from professional responsibilities and take time for themselves to rejuvenate in efforts to strengthen the organizations they lead. It’s a little ‘out of the box’ from the typical grant-funding objectives of many of our peers.
Trusted Insight: How do you view the current market environment? And are there any challenges that your team has overcome in the last months?
Aron Grodinsky: The current market environment is fraught with uncertainty. I don’t need to rattle off the laundry list of macro risks we are all concerned about these days. It’s hard to have a strong conviction as to whether or when we might be at the end of a corrective phase, where inflation and interest rates will be next year, and what impact that will have on earnings and equity multiples. What I do know is that turmoil creates dislocations and dislocations create investment opportunities. So we are focused on identifying managers who are well-positioned to capitalize on those opportunities, whenever and wherever they may arise, and partnering with those managers.
"Crypto, or digital assets more broadly, is something we are looking to get up the curve on.. You don’t need to be a first-mover but you can’t just bury your head in the sand."
Trusted Insight: Are there areas that your team is trying to better understand or get involved in? Whether it be investing in new technology or crypto-focused investments, just as examples.
Aron Grodinsky: Crypto, or digital assets more broadly, is something we are looking to get up the curve on. More to get a sense of where that market might be headed in the years to come than necessarily to invest today. You don’t need to be a first-mover but you can’t just bury your head in the sand. I don’t think now is the time to try to be heroic. It’s more of a ‘meat and potatoes’ environment – stick to the basics: up in quality and up in the capital stack. If we can get low double-digit total returns by purchasing senior secured credits with meaningful cash yields plus a pull to par, I’ll take that risk/return tradeoff.
Trusted Insight: Is there anything you’d like to add to our discussion?
Aron Grodinsky: The most important lesson I’ve learned in my career so far is to know what you don’t know, and the markets tell us every day how little we actually know! You can either enhance your understanding of what you don’t currently know through independent learning or by tapping into folks/organizations with deep subject matter expertise – but don’t pretend to understand something that you don’t, that is almost certain to end badly! I’m grateful for my ever-growing network of peers in the institutional investment industry who are a great source of knowledge, insights, idea-sharing, mentorship, and inspiration.
View our full catalog of interviews here.
The full list of 2022 Top Foundation Chief Investment Officers can be found here.