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Exclusive Q&A: Dean Duchak, Director Of Investments, Kaiser Family Foundation

by trusted insight posted 5years ago 10733 views
Dean Duchak is director of investments at Kaiser Family Foundation. He previously worked as a financial analyst at J.P. Morgan Chase. He has a B.S. in Finance and Accounting from The McDonough School of Business. 

Dean was recently named on Trusted Insight’s ranked list of Top 30 Rising Stars At Foundations. He graciously spoke with Trusted Insight on March 24. The following interview has been edited and condensed for clarity.

Trusted Insight: You grew up in the East Coast. After completing your B.S. in Finance and Accounting, you began your career as an analyst at JP Morgan. What first attracted you to the world of foundation investing?
Dean Duchak: I think like most people who work in a foundation in an investing role, it's the nexus between being able to use my analytical ability and my interest in finance for an organization that provides a tangible social impact. I think there's a certain allure to knowing that I'm working for a place that is providing good for the American people, as opposed to just looking to make financial gains. We always like to joke here at Kaiser Family Foundation that we like to make as much money as we can, so we can give it away. I find the opportunity to work in an environment like that is very fulfilling and probably the most attractive thing about moving to work for a foundation.
TI: How has your previous career experience helped you forge a career in foundation investing?

DD: J.P. Morgan is a fantastic organization, and I couldn't have asked for anything else starting my career there. It taught me a lot of skills that I've been able to leverage in my current role and have helped me to be successful. Oftentimes, leaving school and going to work for a big bank like J.P. Morgan on Wall Street feels like you get tossed into the deep end. It creates that exponential learning curve, where you are getting up to speed as fast as possible. To this day, I really look back to my experience at J.P. Morgan as an introduction into the professional world that really helped build - for lack of a better term - a foundation for my career, and skills I can leverage as I move forward throughout my career.
TI: What did your role at J.P. Morgan involve? 

DD: It was two roles, but neither of them were investing roles. Out of school I joined what was called the Corporate Development Program in Finance. The concept is that they move you throughout different areas of the bank to give you exposure to different parts of what the bank does. 

My first role was in the global commodities group in a role that was called business management.  The sleeve in business management that I worked in was responsible for providing support to the sales team in the form of reporting and analytics, along with assistance building new initiatives.
Then the second group was in the asset management business doing counterparty credit risk. We were reviewing and approving all of the counterparties that J.P. Morgan Asset Management's funds traded with on a daily basis. That was more your traditional credit analysis and risk management.

At least for me, the stuff you learn in university is not always the most applicable for the real world. Getting the exposure to different sides of the business really opened my eyes to the real world. I think the second role in counterparty credit risk really sparked the interest for investing, understanding diligence and credit analysis, analyzing balance sheets and financial statements, and really getting a sense for how to develop those skills.
TI: What challenges have faced along the way in your career?
DD: I think there's something to be said about the importance of having a network. When I joined Kaiser Family Foundation, we relocated from Manhattan to San Francisco because we really wanted this opportunity. It was great, but we didn't know anyone in San Francisco. Those first couple of months building a network, fostering relationships, assimilating myself in the business was something that I had to work hard on. It was a challenge. I think it was one that I welcomed very much, because it really forced me to build these relationships that I now have.
Second to that, a continuously challenging aspect is time management and prioritization. Time is our most precious resource to the investment staff at Kaiser Family Foundation. There are a lot of brilliant managers around the world, who are doing really interesting things. Our mandate allows us to invest globally across asset classes, but we can't invest in everyone, so there has to be some sort of filter. Otherwise, it would be a non-stop endless loop of just running around without actually accomplishing anything. Focusing on prioritizing things that need to be done and managing our time effectively is the biggest challenge that everyone is consistently working on. It can be hard to find that right balance.
TI: Building a completely new network is a daunting challenge, but you mentioned there are upsides to that. What kind of benefit have you found from the experience of moving somewhere new?
DD: From a personal standpoint, it really forced me to break away from my family and my whole life on the East Coast. It forced me to step out and start to look for folks to have common interests with, and build a network out here. I really enjoy the finance community out here. It's an eclectic but a tight-knit group of people. There are folks that I've come to call friends as much as I'd call colleagues or industry peers.
Developing that network has allowed us to create a broad group of people we would consider friends. We can share ideas and leverage that network for a lot of different things, whether it be professional or personal. I think it's been a wonderful experience to do that, and not necessarily have that same group of people that I've known forever who I would normally just associate with otherwise.
TI: Tell me a little bit about your team at Kaiser Family Foundation. How is it structured and what the dynamic is like?
DD: The Foundation as a whole is about 150 people and the investment team is just four people within that organization. Each member of the team is considered a generalist, meaning that I do not have a specific asset class or geography that I focus on. It's more of a collaborative approach where we look at what current workload is like when stuff pops up, and dividing up work that makes the most sense.
From the team dynamic perspective, this is the best thing about working for Kaiser and working on the investment team here. Our CIO, Koonal Gandhi, is really focused on creating a flat and collaborative working environment that emphasizes communication, feedback and the expectation that people would voice their opinion in healthy debate regarding any topic. As a team, we sit in a trading desk setup, meaning that we're all about an arm's length apart in one spot. We hope and we feel that facilitates discussion and allows us to maximize efficiency.
Finally, with a team of four people, culture and fit is vital. If you don't like all the people you work with on a daily basis, you can work around that at a big organization. However, in a team of four that is consistently working together, I think it is quite the opposite. I look forward to coming to work every day. I think our team is a group of very smart people, who I'm continuously learning from. I really enjoy that dynamic about the investment staff here.
TI: Does that differ quite a lot from the Wall Street culture?

DD: Compared to J.P. Morgan, which has thousands of people working for the company across the globe, I think it's a much more familial environment here. Across the Kaiser Family Foundation more broadly, people have been here a long time. The foundation takes wonderful care of its employees. People like to work here. Since I've left JP Morgan, I've not stayed in touch with a lot of people, and that's not for any reason other than I think that's just kind of the way it works. I was only there three and a half years, so it's not like I was developing these deep relationships, but you get a little bit of a sense that there it's next person up in line just kind of fills the gap and the organization keeps on running. Here, we're a non-profit organization that has 150 people. I think that’s naturally just going to create a different dynamic and culture.
TI: You said you are a generalist, however, do you have a particular area or asset class that you favor?
DD: I think there's stuff that people always gravitate towards naturally. I think there's also an aspect of two things. One is recency bias or “what have I been looking at lately?”, and two is “what would the portfolio benefit from most?” I think one of the benefits of being a generalist is that it continually allows me to be challenged and learn different things. My wife works for a hedge fund, so I've had most exposure to hedge funds and how they operate. I always felt more comfortable with hedge funds initially, so when I first came here kind of gravitated toward that. I've spent more time over the last couple of years learning different asset classes. Having the ability to look at a hedge fund in the morning and a private equity fund in the afternoon really keeps you fresh and continuously challenged. You can supplement your knowledge in different asset classes based off of one thing you might be looking at. I think that's a really underrated benefit to the generalist model.
There's nothing in particular that I find I gravitate to especially more than the other. I'm just always looking for interesting stuff, and that comes in a variety of shapes and sizes.
TI: What do you find particularly interesting across the investment landscape?
DD: One of the benefits of being at a foundation is the long-term view that we are enabled to take. We don't have LPs. We have one pool of capital that is a permanent pool of capital, theoretically indefinite, and really investing through that view allows us to take a long-term perspective when we're looking at ideas.
One of the places that we're excited about is India, especially over the long-term. We have spent quite a bit of time there visiting and looking at managers. Right now we've been focused a little bit more on the private side in the earlier stage. I really think of the opportunity there over the next five-to-ten years is incredible. We've been spending some time there, and are quite excited about the country.
TI: Is that within any particular sector? 
DD: Given that we have committed to early stage private opportunities in India, most of that exposure will be in technology and technology-related investments. One of the groups does some non-tech deals, though on the consumer branding side. You look at the demographics and the consumer in India, and it's hard not to get excited about the long term potential. 
TI: Can you expand a little bit more on how India differs in terms its consumer demographics. How is it different to other markets?
DD: Sure. India is the second most populous country in the world with more than a billion people.  With the advent of the smartphone and the continued adoption amongst its people, internet penetration is rapidly increasing – and reaching people across the country.  Given this new mode of mobile connectivity, e-commerce, and derivatives of e-commerce (infrastructure, logistics, finance etc…) present an incredible greenfield opportunity, given the absolute scale of the country.  So in summary, it’s the scale of the country and the way by which its people are consuming.
TI: You’re a long-term investor, and that is a long-term, somewhat risky trend. How how do you balance that risk with your near-term return requirements?
DD: One of the other benefits of being in a foundation, in addition to the long-term perspective, is this idea of diversification. We recognize that early-stage bets in India are most definitely more risky than some other asset classes or other investments. Part of our job is to try to identify how we can create a risk-return profile for the portfolio as a whole that is suitable for the foundation's return targets and understanding what the risk appetite is for these funds and these opportunities. There's certainly a counterbalance that we're able to refine. Part of the key focus is to try to identify how we can construct a portfolio that maximizes that opportunity for us, but also minimizes the risk present for the entire portfolio.
TI: Does being quite a small investment office help with your flexibility in responding to some of the short-term market changes and some of these longer-term possibilities?
DD: Yes, I think so. We are a team of four and have a flexible mandate allows us to react to these things. We try to consistently hammer home that we need to be long-term focused. Short-term volatility is a very tough thing for a lot of managers, but volatility should create opportunity. If we have the ability to look a bit further on down the road and remain steadfast in that view, hopefully we should be able to take advantage of that volatility. But I think being a small team certainly allows us to be a little bit more nimble and flexible in the way that we do manage and make subtle changes to the portfolio.
TI: When you're selecting your managers, what do you take into consideration?
DD: There are a lot of very, very, very smart people manage funds and we've had the good fortune of meeting a lot of them. One of the benefits of sitting in this seat is that you get to talk to a lot of smart people who have a lot of experience. 

I could give you a list of things that I'm sure a lot of people say in terms of generating uncorrelated returns, protecting capital, and building an institutional framework in business. 

One of the things that we like to focus on is “how can our capital not just be a commodity to a manager?” We really want this to be the true definition of a partnership, and that's often what we're looking for. Not only how they can manage and make money for us (which we obviously  hope that's an outcome), but how they can be beneficial to our portfolio in other ways, and how we can be beneficial to them. Something that we like to focus on a lot is this concept of a true partnership and our capital not as a commodity, but as a relationship builder between a manager and ourselves.
TI: In practical terms, how do you manage that relationship? Do you speak to these managers on a regular basis? 
DD: I think there are a couple of things that are important. It's not being afraid to meet with managers early in their lifecycle. I mentioned the term “network” quite a few times already, but definitely as an institutional investor and a foundation specifically, you often have access to a lot of really smart people and interesting things. So it's really trying to identify early on what these people are trying to build. How can we be added to them? Being transparent and upfront with them about a variety of things, including the expectation of a two-way partnership. If they're launching a fund, about their terms, their structure, their strategy, what we would expect as an LP and really trying to just continually cultivate relationships and that hopefully leads to something. I think it's an honesty and transparency idea, and also a communication thing as well.
TI: What makes Kaiser Family Foundation stand out in comparison to your peers?
DD: This is something I feel very strongly about, and I imagine a lot of people do about the foundation that they work for. Our CEO is a brilliant man by the name of Dr. Drew Altman. On our website he wrote a President's Message that talks about the Foundation and our place in society and why we feel it's important and what we're actually doing. 

I'm going to take a few quotes from that which I think he can tell better than I can. Essentially, we are in the information, not the grant-making business, and I think that's the main thing that makes us different than most foundations. Most foundations see their principal product as grants. We are an operating organization and ours is information - from the most sophisticated policy analysis and survey research to basic facts and numbers to the highest quality health journalism to information young people could use to protect their health.  We are a professional organization, staffed by experts in health policy, public opinion and survey research, media, communications, journalism, and other areas in which we operate.  As an operating organization (operating foundation or now public charity), staff direct most of our major programs and conduct much of the work in-house.
I think there are a lot of other nuances to what we do and how we position ourselves, but I think that would be the highest level and the biggest difference between us and other organizations.
TI: Is there anyone from the investment world that you particularly look up to or who has guided you in your investment approach?
DD: Yes, fortunately for me, that is my current boss; our Chief Investment Officer, Koonal Gandhi. He is a really, really bright guy who took a chance on me when I had really no experience investing five years ago. He really has taught me about institutional investing, including the right way to frame questions, how to think about doing diligence, and taking a big picture look. He's always made himself available and continues to do so. I try to ask a lot of questions, and he's always taken the time to sit down and walk through things that I do have questions about. He's someone that I look up to very much, and feel fortunate to be able to work with on a daily basis.
TI: Is there any investment wisdom that Mr. Gandhi shared with you that you can elaborate on?
DD: One thing that he told me when I was starting in this business, and I think it's one thing that I have come to understand even more now: You spend the first three-to-five years learning 80% of what this institutional investment or foundation investing is about in terms of asset allocation and due diligence and whatnot. Then you spend the rest of your career trying to chase down that final 20%. You might not ever get there, and that's a good thing; that means you're consistently challenging yourself and growing as an investor. That's something I try to keep in mind as I work through different things that we're working on, and it's something that's always stuck with me.
TI: What career advice would you give to someone who is interested in working for a foundation in the investment team?
DD: It's hard to believe that I've been doing this for almost five years already. Something I alluded to earlier is that I've found that the access in the investment world to research, managers, conferences, and other investors is truly world-class. As an investor I get to meet with incredibly smart people who have tons of experience doing many different things. In every interaction that I have, I'm always trying to learn something new and retain something that I didn't know before. If you can approach every conversation with that idea, I think you'll continue to do well and succeed.
TI: Where do you see yourself in five year's time?

DD: I think personally for me setting goals is important, both from very specific near-term goals to broader long term ones. I think it gives you something to strive to and create a tangible set of things you're looking to accomplish. At the risk of sounding incredibly cliché, I think that it is true in my case I hope that in five years I'm still being challenged in what I'm doing - challenged from an intellectual standpoint - but also personally happy and feeling like what I'm doing matters. This role at Kaiser has certainly solidified that for me. If I can continually stay challenged myself and be happy, then I think where I'll be in five years will sort itself out, and that's what I certainly hope and believe.
TI: Outside of investments, what gets you out of bed in the mornings?

DD: That's the easiest question of this interview. That's my family. My wife and I have an 18-month-old daughter who is just the absolute best, who is a true joy. Fatherhood is something that I've enjoyed more than I could ever imagine. Spending time with her is the highlight of my day without a doubt. 
TI: How are you finding balancing fatherhood with your work?
DD: Going back to that challenges earlier, this work requires travel, and I have a responsibility to the foundation and this role. However, I try to make sure that I get home every night in time to see her before she goes to bed and try to maximize that time with her. It's hard to believe she's 18-months-old already. She's growing up quite fast. I can remember when she was just a little baby like it was yesterday. The foundation is supportive of and really takes of its employees in that sense. I can never get enough time with her, but I hopefully can continue to be there for her as she grows up and that's obviously the most important thing.
Learn more about Top 30 Rising Stars At Foundations on Trusted Insight.