Joel Wittenberg is the chief investment officer and vice president of W.K. Kellogg Foundation. He has managed the foundation's $8 billion assets since September 2009. Prior to joining the foundation, Wittenberg served as vice president and treasurer of Kellogg Company with more than 15 years experience in global treasury, financial and commodity risk management and pension functions. 

Mr. Wittenberg was recently named to Trusted Insight’s list of the Top 30 Chief Investment Officers at Foundations. He graciously spoke with Trusted Insight on Nov. 11. The following interview has been edited and condensed for clarity.

Trusted Insight: Tell me about the W.K. Kellogg Foundation, and how you came to be a part of it?

Joel Wittenberg: The foundation was started by cereal pioneer W.K. Kellogg. He cared deeply for children, and he made the decision that as a steward of the great resources generated by the company, he was going to invest those resources to invest in people.

We focus on education, health and the economic security of families, with racial equity and healing and community engagement approaches underlying all of our work. The Kellogg Trust has more than $8 billion dollars of assets, which are solely committed to supporting the work of the foundation. A little over half of the trust is invested in Kellogg common stock and the rest in diversified assets.

I came to the foundation after serving as corporate treasurer at Kellogg Company for nine years. I had also previously worked extensively on pension fund investments and in the bond market in my career.  So it was a very natural fit for me when the position became available, I jumped at the opportunity.

Trusted Insight: Is working at Kellogg Company very different from at the foundation?

Joel Wittenberg: Yes, it’s very different, and Mr. Kellogg designed it to be that way. He wanted the foundation and the company to operate separately from one another.  The company is focused on making great products and growing the business. The foundation works alongside communities to advance the best interests of vulnerable children, because we believe healthy kids, educated kids and secure families hold the keys to a brilliant future. While we live in the same city, and are located just two blocks from each other in Battle Creek, Mich., we are totally separate entities.  In my work now, I’m focused on growing the investments in order to best support and advance our mission.

Trusted Insight: So how does the nature of the foundation (the fact that you seek to earn at inflation plus 5%), drive your investment strategies?

Joel Wittenberg: We invest across all asset classes in the diversified portion of our portfolio. We classify our assets around various risk exposures, liquidity, deflation and inflation, with the largest portion in capital appreciation assets. Our hedge funds are separated into lower and higher volatility allocations. Running across our entire portfolio is a cash flow and value bias.

Trusted Insight: How about venture capital?

Joel Wittenberg: There is an allocation for venture capital within our private equity allocation. Private equity investments are across growth equity, buyouts, distressed investments and mezzanine and venture capital.

Trusted Insight: What are you looking for when deciding to invest in a particular manager? Take venture capital, for example. There are many unicorns. How do you tell which one has more potential?

Joel Wittenberg: That’s the big question. For the bulk of our mandates, we want to identify managers who invest on a bottom-up, security-by-security basis, using a value philosophy.  

Our portfolio has reasonably priced assets with solid cash flows or a clear path to future predictable cash flows. We believe that if we buy good assets at good prices, based on bottom-up evaluation, our portfolio will capture upside returns and protect our assets in declines regardless of what the markets are doing.  We are long-term investors, so we can take advantage of short-term inefficiencies and complex securities that others may not be willing to do the work to figure out.  In addition, as long-term investors, we can take advantage of situations where shorter-term investors and forced sellers are exiting.

Trusted Insight: Can you tell me more about your personal investment philosophy?

Joel Wittenberg: That ties back to bottom-up value investing. Over my career, I’ve compounded assets by using a value-investing philosophy. Investing on a bottom-up basis in strong cash flows results in better downside protection. If we win in the declines, we will compound returns ahead of our benchmarks with lower volatility.

I have lived the benefit of value investing. Let me give you an example. The pension fund I was running in the late 1990’s dot-com era was invested in a great portfolio of cash flows, while the dot-com investors were invested in pieces of worthless paper. While the portfolio lagged the tech stocks, we did pretty well. But the real benefit came later. In the subsequent bear market from 2000-2002, our assets actually appreciated while the markets were in sharp declines. Obviously this doesn’t always happen, as we learned in 2008, but it shows how value investing can compound over time with lower volatility. In 2008, our assets certainly fell, but by a lot less than the benchmarks.  We can win by losing less. The key to doing this right is in keeping the foundation’s board of trustees educated on this philosophy. They need to understand that, at times, the portfolio may perform very differently than the markets.

Trusted Insight: Can you tell me about your investment team? How did you build it?

Joel Wittenberg: We have a team of 11 people, including two focused on our mission-driven investments portfolio.  The diversified portfolio investment team has remained unchanged during my tenure. The key to success is to set a plan and stick to it. The stability of our team gives us the ability to stick to the plan. We are all generalists, which allows us to look across asset classes together to find the best ideas at the most attractive valuations.

Trusted Insight: How does the investment strategy enhance or reflect the foundation’s mission? Any exciting projects that you recently launched?

Joel Wittenberg: We have two specific ways to enhance the foundation’s mission through our investments work. First, we allocated $100 million dollars to emerging minority and women-owned investment management firms. We are trying to identify firms that are starting out -- people who have a solid track record and may have come from other firms and are now managing assets. So we’ve got African American-owned firms, Latino-owned firms, Asian American-owned firms and female-owned firms. These are all firms that are just starting out. It’s a very exciting portfolio with these new managers.

In addition, we have another $100 million dollars dedicated to mission-driven investments. These investments are aligned with our mission to strengthen and create conditions that propel vulnerable children to achieve success as individuals and as contributors to the larger community and society. Investments in food, health, well-being of children, housing, job creation, education and so on.

Trusted Insight: The investment portfolio of emerging managers sounds really interesting. How did you come up with this idea?

Joel Wittenberg: That’s a great question. We haven’t found any other investors approaching this like we are. A big part of our mission is advancing racial equity and racial healing. My team and I are very dedicated to the foundation’s work, and we wanted to play an active role in supporting it. We wanted to identify firms that were just starting out and where the name recognition of the Kellogg Foundation could help them grow in their own businesses. We’re long-term investors, and when we find the right team, we stick with them.  Obviously, emerging firms have more business risk, so Progress Capital has become a valuable partner in helping us with these mandates and monitoring the success of the firms. As with all of our managers, we expect to generate returns above their indices.  We hope to use this program to identify managers who can eventually take on a larger mandate when we have an opportunity. So far, we have one manager who has received a larger mandate and another who is on the verge of a larger allocation.

Trusted Insight: What’s the #1 lesson you’ve learned during your career as an institutional investor?

Joel Wittenberg: My key rule is to focus on value investing.  As a former corporate treasurer, I learned to always be aware of, and focus on, the cash flow. Cash doesn’t lie. This gives us the best downside protection in the tough environments. In addition, we look for inefficiencies to exploit, and we find managers who don’t overpay for assets. Finally, our investment edge as a foundation is our long-term focus. We can be in the market to take advantage of inefficiencies and become a source of liquidity for forced sellers.

Trusted Insight: What have I failed to ask you that I should know about you or your foundation?

Joel Wittenberg: Thanks for asking. One thing I want everyone to know is how much I admire my team and all the programming and support people across the Kellogg Foundation, as well as our grantees. Our work is really difficult, and they deliver for the children and families who need support every day with an incredible passion. They are making a difference. The investment team works just as hard to make sure we are building a portfolio that can support their work and continues to grow.  It’s a big responsibility, but we love what we do.

To learn more about the investors powering the world's top foundations, check out Trusted Insight's list of The Top 30 Chief Investment Officers At Foundations.