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Exclusive Q&A: John E. Hull, CIO At Andrew W. Mellon Foundation

by trusted insight posted 3years ago 4798 views

John E. Hull serves as the chief investment officer and financial vice president at Andrew W. Mellon Foundation, with oversight of $6.2 billion asset under management for the Foundation. Prior to joining the Foundation in 2002, Mr. Hull served asthe chief investment officer for the New York State Common Retirement Fund.  During Mr. Hull's tenure as the deputy comptroller, the assets of the Common Retirement Fund grew from approximately $24 billion to approximately $110 billion in March 2002. Mr. Hull is also a trustee for Bryn Mawr College and a guest member of the investment committee for St. Bonaventure University. 

Mr. Hull 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. 6. The following interview has been edited and condensed for clarity.

Trusted Insight: Can you tell me more about the Andrew W Mellon Foundation and how you came to be part of it?

John Hull: The Foundation was created in 1969 by the children of Andrew W. Mellon. They combined their assets together and named the Foundation after their father. So the Foundation was created in 1969 and by 1971, it had assets of six to seven hundred million dollars. I came here in April of 2002.

Trusted Insight: You have an amazing record as the chief investment officer at New York State Commerce Retirement Fund. The AUM of the fund grew from $24 billion to $110 billion under your management. How did you make that happen? What's your investment philosophy?

John Hull: Well, it was a great equity bull market for most of that period and we had significant exposure to equities, both US and non US. We also had an active real estate program and private equity program. We benefited from having the right asset allocation in a period in which equities did quite well.

Trusted Insight: What about yourself? Your own investment strategy?

John Hull: I try to be a very long-term investor at both the pension fund and even more so with the Mellon Foundation. The Foundation can take advantage of the fact that we have a very long-term horizon. With the Mellon Foundation, we can withstand a fair degree of volatility and illiquidity and therefore have a portfolio that has significant equity exposure, either direct or indirect with a focus on capital appreciation.

Trusted Insight: What made you want to leave the public pension fund and join a foundation in the private sector?

John Hull: At New York State, I worked for two state comptrollers, Ned Regan and Carl McCall. In 2002, Carl was running for governor. I thought politically it would be a difficult campaign for him. Although I really enjoyed my time at New York State, the opportunity to come to the Mellon Foundation came at a perfect time for me. It gave me a chance to continue a career I enjoyed, to move to New York City and to join a wonderful institution. Mellon has provided a great opportunity to continue to do what I like at a very collegial, but much smaller place. It has been an experience I have enjoyed immensely.

Trusted Insight: How different is it to work as a CIO at a foundation comparing to the same role at a public pension, or any other investment institutions.

John Hull: With the Mellon Foundation there is a philanthropic mission, which is different than a pension fund mission. There was also a sole trustee at New York, while at Mellon there is a Board of Trustees with significant investment expertise. At Mellon, with $6 billion in assets you can make certain investment decisions that are really impractical when you have $110-$120 billion. For example, you can invest in venture capital with a $6 billion fund. It is quite difficult to make venture capital investments with a $120 billion fund. I liked government a lot, but I have enjoyed my time at the Mellon Foundation.

Trusted Insight: Do you mean that when the AUM is smaller you enjoy more freedom in terms of investment decision-making?

John Hull: I don't know if it's more freedom, but the opportunity set is in many ways larger because you can invest in smaller opportunities. If you get an allocation of $10 million to a premier venture capital fund at the Mellon Foundation, that's worth doing. I think if you get that same allocation at a $120 billion pension fund, I'm not sure it's worth the time and effort.

I also think private equity funds and hedge funds, particularly the top tier funds, would prefer to have a client like the Mellon Foundation rather than a public pension fund. We don't have the same public scrutiny and can be a much more quiet and supportive client.

Trusted Insight: That's right. Tell me more about your portfolio. I saw from the foundation’s website that you have 24.5% of your assets through diversified strategies. Can you tell me more about this portion of your investment. What exactly do you invest in?

John Hull: It's primarily multi-strategy and credit hedge funds. We call the category diversified strategies and there is a little bit of commodity exposure, but it's primarily funds that have the ability to be in credit, or merger arb, long only, long short public equity or private equity. The managers have significant flexibility to move their assets between a variety of different strategies.

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

John Hull: In the venture area we have a number of very long relationships with partnerships that go back with Mellon into the 90s. There tends to be a consistency in the venture capital field so the partnerships we are invested with have been successful for a very long period of time and we are quite comfortable staying with those institutions. We really look to the quality of the manager and the team they have developed over a period of time, and that the strategy they have executed successfully in the past is one they can continue to execute going forward.

So I think there are several things: the integrity of the firm, the consistency of the strategy and the strength and depth of the team. In some cases it's their ability to have executed a transition from one leadership team to another generation. If they have been in business 15-20 years, we are looking to see if there is the ability and willingness to transition from one set of leaders to another. We also look to the investor base and take some comfort that there are other limited partners that look and feel like the Mellon Foundation with similar long-term investment horizons.

Trusted Insight: Like you said, you lean more towards a long term return compared to the near term?

John Hull: Yes. We are much more focused on long-term capital appreciation. We are not an investor who makes many tactical investment decisions. We tend to be very strategic and long-term.

Trusted Insight: Is there, has something to do with the nature of the foundation?

John Hull: I think it has a little bit to do with me. I'm not a very tactical person. I'm not sure anybody is terribly good at it. I think we are better off taking a very-long term view and the Foundation has a history of being able to withstand the volatility associated with having a portfolio with a higher equity exposure.

Trusted Insight: How did the foundation grow, or how did the portfolio change after you joined?

John Hull: In my 14 years the portfolio has shifted towards greater exposure to Private Equity, Real Assets, Diversified Strategies and Long/Short Equity with a corresponding decrease in Long-Only Public Equity and Fixed Income. The geographic exposure has also shifted to have less concentration in the United States.

Trusted Insight: And what’s the reason behind that strategy change?

John Hull: In general, the Foundation has become more comfortable that greater diversification and greater illiquidity should translate into better returns. Also, the opportunity set has changed considerably in the past 14 years, particularly in China and other emerging markets.

Trusted Insight: I see that you're really engaged in the higher education field. You are a trustee for Bryn Mawr College, and guest member of the investment committee for St. Bonaventure University. And the mission of the Andrew W Mellon foundation is also to promote higher education. Is that your personal mission? Is that something that drives you to this institution?

John Hull: That's a good question. The connection to Bryn Mawr is a direct result of my time at the Mellon Foundation. When I came to the Mellon Foundation, Pat McPherson had been the President of Bryn Mawr for 18 or 19 years before she came to Mellon. She asked me whether I might have some interest in serving on the investment committee as a non trustee. I quickly and happily took that role for about 12 years and last year was asked to become a trustee at the College. I have enjoyed the experience at Bryn Mawr immensely, and the connection to the Mellon Foundation makes it extra special. I think I have a deep appreciation of the challenges that many higher education institutions face today, particularly the less rich institutions, competing in an environment where academic institutions are under considerable pressure.

St. Bonaventure University is the college that my father attended – Class of 1939. Thus my connection to the University is obviously very important to me as well.

Trusted Insight: What is the number one lesson you have learned during your career as an institutional investor?

John Hull: To maintain a long-term focus. Try not to worry about day-to-day market fluctuations. I think it is something that I have come to appreciate with large pools of capital where your liabilities are long-term. You need to remain focused on the long-term, not worry too much about daily volatility and seek to invest with people that are of high quality.

Trusted Insight: Sounds good. Is there anything that I failed to ask you that I should know about you or your foundation?

John Hull: At the Mellon Foundation, we have been blessed in the time I have been here to have an extraordinary set of leaders, both as presidents of the Foundation, as chairs of the Board, and as the two chairs of the Investment Committee. They have all been incredibly gifted, high integrity, and very nice people. The Foundation has nine trustees at the moment. Everybody checks their ego at the door and it's just a very wonderful group of people to be associated with.

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.