Exclusive Q&A: Craig Robbins, Senior Investment Strategist, Children's Hospitals And Clinics Of Minnesota
Craig Robbins is a senior investment strategist at Children's Hospitals and Clinics of Minnesota. He works closely with the hospital's treasurer and provides investment strategy and manager research and performance analysis. In the past, he held multiple project management positions at law and consulting firms. In his earlier career, Robbins was an investment advisor at Merrill Lynch. He received an MBA from the University of Minnesota and a B.A. from Carleton College.
Children’s Minnesota has a small investment team of just two people managing a variety of portfolios within a total asset pool of $2.4 billion. The flagship portfolio has returned in excess of 10 percent annually over the past seven years, consistently exceeding goals despite overall unfavorable conditions in capital markets.
Mr. Robbins was recently named on Trusted Insight's Top 30 Hospital Investment Office Rising Stars. He graciously spoke with us on September 26, 2016. In this interview, he discusses asset allocation, the “direct investment” trend among hospitals and how he spots the best managers.
Trusted Insight: In your earlier career you held a number of positions from consulting and trading to management, mostly with professional service firms. What attracted you to a hospital investment office?
Craig Robbins: Investment offices at hospitals are still investment departments, so the trading and the portfolio management required of a hospital aren’t really that much different than a money manager or an investment office of a foundation. We are able to run the portfolio to take advantage of market opportunities and to target the best risk adjusted returns available, just as a money manager would do for his clientele.
I was intrigued by the size of investment portfolios at hospitals, Children’s hospitals in particular, the types of investments that we get exposed to and the latitude we have to structure our portfolio. I found that very compelling. There are a lot of good challenges and interesting work here.
Trusted Insight: Tell me about your investment portfolio. What asset types do you invest in?
Craig Robbins: We've got about $600 million in the hospital account, which includes our operations portfolio as well as endowment, and about $1.4 billion in union related pension assets. There’s another $400 million in defined contribution assets.
Currently we are building out our private equity portfolio. We can allocate up to 20% of our investible assets in private equity. We are nowhere close to that percentage just yet. Then we are also considering opportunistic or health care innovation investments direct, meaning direct investments in the medical innovations that could support our operational side of the business.
Trusted Insight: Is direct investing a trend among hospital investment offices?
Craig Robbins: I do believe it's a trend. However, like many trends, if you aren't on the lead or have a unique advantage, you tend to get dragged into the market and it isn't as good as an investment opportunity as you initially think. Because it's an older trend that started a number of years ago, we have to be careful that we're just not becoming another "me too" investor.
Trusted Insight: You mentioned looking to increase private equity allocation earlier. Recently some big-name private equity managers have been in the news for fraud charges. Is that something that worries your office?
Craig Robbins: We don't work with any of those managers that have been in the headlines. We find better value with more specialists or mid-size niche market players that can take advantage of their unique approach as opposed to just the generalists’ main broader-category investments.
We're also very concerned about fee structure and how the whole industry is structured. We have discussions with managers about how they're structuring their funds and if we may participate with them knowing what the fee structure is. I don't want to say that we negotiate fees because most of them don't, but often times, depending on when you get in and the size you get in, sometimes they make allowances.
Trusted Insight: Let’s talk about manager selection. When you select and interview manager, what kind of things do you look for?
Craig Robbins: We would start with specialists who have an advantage in their particular market spaces with a good track record. They don't necessarily have to be with the same firm for a number of years, but they should be able to exhibit a good understanding of their particular niche market spaces and an explanation of why they think that their approach or philosophy will have a long-term impact or above market returns for the next 5-10 years. We have a long-term time horizon. We don't do much of what we refer to as tactical trading, moving in and out. So we look for investment managers who are able to replicate a good return over a considerable length of time.
Trusted Insight: Unlike institutional investors such as endowments and pensions, investment is not the core business of a hospital. Does that affect your office's decision-making in any way?
Craig Robbins: I would say yes. Interestingly, it's not a core business to the hospital, yet on any given year our department may produce higher revenues than the larger operational part of the hospital. That isn’t particularly popular to bring up. However, I don't think the investment office gets as much credit for adding to the balance sheet as the numbers should warrant.
Trusted Insight: Where do you see the opportunities or challenges facing hospital investors in the near future?
Craig Robbins: The low interest rate environment creates a real problem for investors in all categories, hospitals included. It's just difficult when you, by mandate, have to put anywhere from 40 percent or above in fixed income, to get a solid rate of return. It's really difficult, particularly when you look at your pension liabilities, to get strong returns when you are limited by how much you can actually run up in equities.
Trusted Insight: What career advice would you give to the younger generation who aspire to enter institutional investing?
Craig Robbins: First I would say, consider the interesting opportunity of getting involved in this type of field. When you're managing $2 billion portfolio, the size of the account really makes the work very interesting. Working for a particular organization, like I work for a children's hospital, the reward is by what we're able to produce for whom we really work, which is the patients, the children. That's a big reward. Although, any time you work for a non-profit organization you can expect to be included in that non-profit compensation structure, but the outcome of helping the hospital has its own rewards.
Some organizations are very generalists, but because of the firm size you can develop specific skills by focusing on particular investment sleeves or alternatives. There are a lot of opportunities in that. What I would probably recommend to someone starting out is to find a particular investment niche, know it really well, and then you will most likely find a space on any investment team by being able to bring those specific skill sets.
To learn more about hospital investing, please view the complete list of Top 30 Hospital Investment Office Rising Stars.