Exclusive Q&A: Daniel Ricciardi, Investment Officer At The College Of The Holy Cross' $730M Endowment
Founded in 1843, the College of the Holy Cross, in Worcester, Massachusetts, is the oldest Catholic college in New England. With just under 3,000 students, the four-year liberal arts institution seeks to embody the Jesuit tradition of solidarity with the world’s suffering and disenfranchised, while educating the whole person – mind and spirit. Daniel P. Ricciardi joined the investment office of his alma mater in 2008 as an analyst and is now an investment officer, overseeing the College’s $730 million endowment as part of a three-person team.
Mr. Ricciardi was recently named on Trusted Insight’s ranked list of The Top 30 University Endowment Investors In Hedge Funds. He graciously spoke with Trusted Insight on September 23, one day before Pope Francis’ historic visit to New York City.
Trusted Insight: Are you excited about the Pope’s visit to New York?
Daniel Ricciardi: I am. He’s a Jesuit, which is really exciting for us. Jesuits have a commitment to help the world’s poor and suffering, and it’s wonderful to see the head of the church really exemplifying that.
Trusted Insight: Can you tell me a little about your background? Was being an Investment Officer for an endowment something you envisioned for yourself?
Daniel Ricciardi: I was a history major here at Holy Cross. My goal was to be a history professor, but I decided I needed to get some experience outside the academy before making the decision to pursue my PhD. (Incidentally, I now teach a class on campus in portfolio management and financial analysis to non-finance majors. I can relate to how overwhelming it can be for liberal arts students to go into finance, so my teaching style is principally translating the language of finance to the language of liberal arts.) Then when I graduated in 2006, I wanted to experience something outside the role of being a history professor, so I worked at BNY Mellon for a couple of years and discovered that I loved financial services. That was a surprise. I returned to Holy Cross in 2008 as an investment analyst.
Trusted Insight: What is it that you like about working in finance?
Daniel Ricciardi: When I used to think of working in finance I envisioned a bunch of middle-aged men poring over spreadsheets. There is a bit of that, but it’s so much more interesting than I imagined. Our industry is changing every single day. We get to talk with really intelligent people. There’s so much that’s not quantitative.
Trusted Insight: Can you tell me a little about your hedge fund investments?
Daniel Ricciardi: Most of the hedge fund money is in global equity assets. We don’t have a specific hedge fund allocation, but use hedge funds within most of our asset classes, especially in global equity. On a look through basis, about 45% of the total endowment is invested in hedge fund vehicles. It’s a unique industry and structure that serves investors and investment professionals really well. We share a long-term investment horizon. We take a very long view of things; we think it takes at least three years to let a strategy play out. I’m really thrilled with a lot of the folks on the book.
Trusted Insight: How have your hedge funds done relative to other assets classes?
Daniel Ricciardi: It’s hard to say because they are integrated within broader asset classes, but I would say that they’ve performed in line with our expectations. Given the importance of preserving the stability of endowment payout, we’re willing to give up some of the upside for the downside protection.
Trusted Insight: Is there anything you’ve found particularly surprising relative to your hedge fund investments or fund managers?
Daniel Ricciardi: The thing that surprises me the most with hedge fund managers is how in-depth they go with their research. I’m completely blown away. The amount of primary research they’re able to do and the network of people they have access to is really unique.
Trusted Insight: What do you look for when choosing a hedge fund manager?
Daniel Ricciardi: Rather than focusing on performance we’re interested in their long-term strategy, investment philosophy and firm culture. When choosing a hedge fund manager, we look to see if they are the types of people we want to work with and, just as importantly, if they are interested in working with us. Our best managers are always curious about how we see the world and view the relationship as a partnership, not as a source of funding.
There’s the caricature of the greedy hedge fund manager; a lot of hedge fund managers are really great people with a commitment to strategies and clients, interested in thinking about the work they do and how it supports the work we do as an institution.
Trusted Insight: Do you have an investment philosophy?
Daniel Ricciardi: We concentrate capital with the highest conviction names. We fund managers and let them take advantage of a wide opportunity set – invest globally – let them invest in areas where they really shine. They can spend a lot more time on the ground than a staff of three. We like to give them as much latitude as possible.
Trusted Insight: Do you have much exposure to emerging markets?
Daniel Ricciardi: Folks in the U.S. are surprised with what they’ve been able to find here [in the United States]. With the increasingly global economy, many companies are domiciled in one country, have operations, in another, etc. Even smaller ones.
Trusted Insight: Can you give an example from funds you’ve considered?
Daniel Ricciardi: Sure. One fund we looked at invests in a small, cloud-based technology company headquartered in New Zealand with talent in California and a big part of its revenue coming from developed European and emerging Asian markets.
We like our managers to seek alpha wherever inefficiencies might be, whether through analytical complexity, structural issues with markets or through taking concentrated bets. We look for managers that are not afraid of complexity, express contrarian views or have holdings very different from other larger hedge funds.
Trusted Insight: I recently attended a conference at which the speaker said that only 5% of the 11,000 hedge funds in the U.S. are any good. Do you agree?
Daniel Ricciardi: I’d say 5% is generous. It’s very difficult for funds to generate constant alpha, and even rarer for them to sustain it over the long term. It’s a very competitive space and likely to get even more so.
Trusted Insight: Do you envision any changes in the kinds of investments, or allocations you make in the future?
Daniel Ricciardi: The future direction of our program will likely be a function of how our existing program continues to mature. We started as a separate investment office in 2004. It took a number of years for us to fully build out our existing hedge fund program. We’d love to be able to continue to grow our relationships with our existing managers, but are always mindful of capacity constraints. At the same time we’re trying hard to make sure we are thoughtful about monitoring how firms evolve and cultivate talent internally. We’re also always interested in seeing how we might complement existing relationships with newer emerging firms.
Trusted Insight: What makes you feel the most proud when you think about the work you do to support Holy Cross?
Daniel Ricciardi: Our motto is “Men and women for others.” Charity really does begin at home. We’re partners in a community through student programs for urban development. Every day students volunteer at over 40 programs in the city, doing things like tutoring, helping the elderly and advocating for new immigrants. An amazing number of students post-graduation go on to do volunteer work with groups like the Peace Corps and the Jesuit Volunteer Corps.
Trusted Insight: Is there anything about yourself you’re willing to share that’s not widely known?
Daniel Ricciardi: I have a brother who is autistic, and that’s been a very important part of my life. I’m an advocate for people with disabilities. Service has always been part of my life.
Trusted Insight: Anything else?
Daniel Ricciardi: I’m a huge NPR fan. I get a lot of investment ideas from there.
To learn more about the top endowment investors in hedge funds, check out Trusted Insight's list of Top 30 University Endowment Investors in Hedge Funds.