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Exclusive Q&A: Mark Rich, Director Of Investments At Kimbell Art Foundation

by trusted insight posted 5years ago 7863 views
Mark Rich is the director of investments at Kimbell Art Foundation, the investment arm of Kimbell Art Museum in Fort Worth, Texas. Rich manages the foundation's $385 million investment portfolio across various asset classes.

Rich joined Kimbell Art Foundation in 2010 as an investment manager and quickly rose to the position of investment director. At age 29 at the time, Rich was truly a rising star in the gray hair-dominated investing world. 

Prior to finance, Rich spent five years in public accounting as an auditor with a record of excellence. He has won multiple industry awards, including the AICPA Young CPA of the Year Award in 2014. Rich holds a master’s degree in Accounting and a bachelor’s degree in Accounting and Finance from Abilene Christian University.

Mr. Rich was recently named on Trusted Insight’s Top 30 Rising Stars At Foundations. He graciously spoke with Trusted Insight on March 23, 2016. The following interview has been edited and condensed for clarity.

Trusted Insight: You came from an accounting background and have won many awards in that field. You're obviously a very dedicated CPA. What attracted you to the world of foundation investing?

Mark Rich: I enjoyed my work in accounting, and when I was looking at leaving public accounting, I was primarily focused on accounting positions. The foundation position happened to open up, and I was connected with it. I originally didn't think of shifting a career to investments, but after I took the job here, I started doing more and more with the investment portfolio. Very quickly, I got my CFA within two years of starting at the foundation.

I started out working about 50/50 in accounting and finance at the foundation, but now I'm closer to 80/20 finance heavy versus the accounting. I didn't necessarily look for an investment career, but now that I found it, I really enjoy the work I do and certainly that it's with a foundation that's looking to contribute to the betterment of society.

TI: Do you think your deep background in accounting has informed your investment philosophy?

MR: Yes, starting in public accounting gave me the base to understand businesses. I primarily audited public oil and gas companies and that gave me a very deep knowledge in the oil and gas space, which is very beneficial to the portfolio here at the Kimbell Art Foundation as well as understanding investment in public companies. Seeing it from the accounting side is a very informative first-hand experience.

Sometimes when you're an auditor, you have to ask the questions that you aren't comfortable with asking, but after a little while, you learn that they're the appropriate questions to ask, even if they are not easy to ask.
TI: You were very young (under 30) when you became the director of investments at Kimbell Foundation. It seems a huge responsibility. How did you pull it off?

MR: I was 29 when I was given the actual title director of investments. I started out as a controller investment manager, and after I got the CFA, we re-evaluated and said what I was doing was more akin to a director of investments.

What's been great at the foundation is that the way I look at the investment world matches up how the foundation looks at the investments and being able to bring additional insight and additional skill set to the foundation. I think that's what was recognized, that I was able to provide some more institutional level of looking at the investments.

I don't really see it so much as additional pressure so much, as Kimbell has done very well over the past 15 years in investments. So it's really more about maintaining that as well as finding new and different ways of looking at the investment environment today.

TI: Can you give me an example of “additional insight?”

MR: One of the things that I think has been beneficial is looking at the investments from a non-traditional approach and asking questions. The audit background really allowed me to take that inquisitive mind of "Why are we doing this? Why don't we look at this investment from this perspective?" to the foundation. Really, the audit background forces you to ask a lot of questions. Sometimes when you're an auditor, you have to ask the questions that you aren't comfortable with asking, but after a little while, you learn that they're the appropriate questions to ask, even if they are not easy to ask.

Another thing that I think is unique is the way we started looking at our private equity investments most recently and turning what the managers were bringing to us and saying "Why are they getting to dictate the way we're evaluating their performance?" We started implementing a new way of evaluating their performance.

That allowed us to understand how they were actually creating value or if they were even creating any value. That has really informed our future decisions about investments. We had once said, “Well, these are off the table because of X, Y or Z.” Now, we're looking at them differently and saying, “Actually that manager is not doing what we thought they were doing. This manager, who we didn't think was doing what we wanted him to do, is actually doing something differentiated and valuable, and we should be willing to pay for. That has helped us in looking at future investments.

TI: Can you tell me a little bit about the portfolio? What assets are you investing in?

MR: We have a significant holding in oil and gas assets. These assets were acquired in the late 90s when oil was very cheap and their assets have grown in value over time significantly. The board has really been on the tip of a spear in that investment area. That's worked out very well for the Kimbell. I joke that it's “oil for oil (paintings)” as we are a museum.

We are less heavy in hedge funds today than we were when I first came on. Some of that's a tell of the times as much as anything. We are a little heavier in private equity and oil and gas assets. I started in 2010. The assets have gone up and then dropped back down a little bit in the past couple of years. We still believe that the oil and gas assets, for the long term, are very good investments for us.

TI: How was your return in 2015?

MR: Last year we didn't do as well because of the oil and gas. We had a return of -13%. But we focus on far more than a one-year number. Our 10-year rate of return is 9.5%. That's something that we're quite happy with. Our five-year return is 5.5%, which is probably low relative to peers, but again, that's been significantly influenced by the past two years in our oil holdings, which have been very volatile.

TI: Tell me a little bit about your investment team. Is that a big or small team, given your AUM?

MR: We have two investment professionals on staff. We don't use a consultant. It works for us and what we do. We know our limitations and we know where we have niches and where we can provide value. We focus on those areas.

TI: Suppose you are looking for a new portfolio manager for your team, what qualities would you look for in a candidate?

MR: I'd be looking for people who are inquisitive -- who don't accept the first answer as the only answer or the right answer, but will continue to dig to try to understand something more fully -- people who want to learn more.

TI: Would you prefer a generalist or a specialist?

MR: Generally for a foundation our size, someone who has a more general understanding is more desirable, but at the same time, some could call me more specialized in oil and gas, so does that make me a specialist? Well, I manage all the asset classes of the foundation, but I do have a deep knowledge in one of our largest asset classes. At some level, you may have to have some specialization and sometimes it's about finding the right fit for that specialization.

TI: What career advice would you give to those more junior professionals in the industry?

MR: I always jokingly say, “Get a CPA.” I say that because I know of people who are CIOs at institutions and a lot of them happen to be CPAs. I don't know if that's because I'm running around in crowds that are more heavily CPA, or if that's just because that's what I am and so I see it more often. It might be my bias, but I do know that having that accounting background has served me well and informed the way I look at the investment world.

I had a friend who was asking me, "How do I get a job like yours?" I was like, "Well, I got the job because I was as much of an accountant as I could do the finance side of it." Being able to have that was beneficial. 

TI: Have you identified any trends that are shaping the foundation industry differently in 2016 and beyond?

MR: I'm interested to see how the hedge fund industry responds to the past couple of years and what trend happens there -- If they will continue to put out the same type of products that haven't necessarily been working in the past couple of years, or if they are trying to do something different.

Learn more about Top 30 Rising Stars At Foundations on Trusted Insight.