In this interview, Vazquez tells Trusted Insight how Mass General Brigham's investment team responded to the unique challenges posed by the COVID-19 pandemic, how her team gains access to top-tier managers, and why she thinks mentorship is key to enhancing diversity and inclusion in institutional investment.
Vazquez was named to Trusted Insight's 2020 Top Institutional Investing Rising Stars.
Trusted Insight: Tell us about the investment office at Mass General Brigham and what your role there entails.
Lisa Vazquez: The Mass General Brigham Investment Office oversees all investment activity for Mass General Brigham (formerly Partners HealthCare). Mass General Brigham is a not-for-profit health care system founded by Brigham and Women’s Hospital and Massachusetts General Hospital—the teaching affiliates of Harvard Medical School as well as two of the nation’s leading academic medical centers.
We manage over $22 billion in assets, making us one of the largest endowments in the country. The pools of capital include endowment and pension assets. Our investment team is led by John Barker, our Chief Investment Officer, and six portfolio managers. Under normal circumstances, our 20-person team sits in Boston and spends lots of time on airplanes, but lately we spend most of our time on Zoom due to the COVID-19 pandemic.
Trusted Insight: How is the team structured?
Lisa Vazquez: We’ve historically specialized by asset class, but over time we've adopted more of a generalist model. Now the senior investment team is loosely divided into publics and privates, and our analysts work across all asset classes. It’s been great because it means that every illiquid investment has to compete for the same allocation dollars, regardless of whether it’s credit, venture capital, distressed, buyout, or real estate.
Trusted Insight: How did your team react to the COVID-19 pandemic, particularly considering that you’re an investment team at a hospital system? How have you negotiated the market turbulence, in the first place, and have you discussed anything in terms of rebalancing the portfolio as we look ahead to economic uncertainty?
Lisa Vazquez: Even in our most draconian models, we never imagined a period of investment market turbulence at the same time as a sustained global health pandemic impacting hospital operations. It was a challenging shift for our office because we haven’t historically funded a significant portion of the hospital's operations the way university endowments do. We’re used to having advance notice for drawdowns, which typically fund major capital projects. In the beginning of the pandemic, we were laser-focused on building reserves in case we needed to support hospital operations. Next we took a step back and looked at our entire portfolio. We’d already been working to concentrate with fewer managers in privates. We did have to make some hard decisions around re-ups. The market disruption allowed us to grow with some core managers that we had been wanting to concentrate with, which should be positive for the portfolio in the long run.
"Biotech has become a high-conviction area of focus for our team."
Trusted Insight: Is your venture portfolio focused on health care or on industry-related enterprises?
Lisa Vazquez: The short answer is that we manage a global diversified portfolio. Many people assume that we are health care focused and that’s not the case.
Biotech has become a high-conviction area of focus for our team based on its investment merits. Our thesis centers on the pace of innovation in biotech and advances in science and genomic medicine, coupled with supportive regulatory policies. These factors have been fueling investor interest, M&A activity, R&D, and a pipeline of potentially novel medicines and therapies.
Because of the nature of our institution, we often benefit from differentiated access to biotech managers.
Trusted Insight: What proportion of your private portfolio is in venture, and how are you geographically allocated?
Lisa Vazquez: Venture is about a third of private exposure. We’re benefiting from decisions made many years ago to develop longstanding relationships with top VC managers that are impossible for new LPs to access now. More recently we’ve added to that roster with a few new relationships, some of whom have spun out of larger firms.
Most of our venture capital is in North America and secondarily, Asia. We’re fortunate to have great exposure in both regions.
"It’s easier to take the leap into a new geography when you have a high-conviction U.S. venture firm putting boots on the ground there."
Trusted Insight: How did you go about sourcing and doing diligence on managers for your investments in China?
Lisa Vazquez: We believe we’re partnered with the best managers globally, and we pay attention to their signals. They will help us identify the most attractive geographies, sectors, and trends. We initially broadened our portfolio into China on the venture side when some of our trusted VC relationships developed funds to focus on that geographic region. It’s easier to take the leap into a new geography when you have a high-conviction U.S. venture firm putting boots on the ground there. After that, it was a matter of putting ourselves into the information flow— following the best deals in the region and looking at who seems to be coming into financing rounds with well-respected investors in our portfolio, and building out from there.
Trusted Insight: Aside from China, are there any other geographic regions that have been exciting to you, or where you've hoped to deepen some of your exposure?
Lisa Vazquez: I think it will be interesting to see what happens in European venture. It's an area we haven’t actively pursued, basically figuring that if it becomes more interesting, then some of our global venture managers will start spending more time there. We're beginning to get that signal. So that's one area we'll at least keep an eye on.
We have exposure in India and increasingly Southeast Asia. I always feel like India is ready to turn the corner and really take off economically. We're still just kind of waiting for that to happen. We are grateful to be with managers who have made money there, and who have competitive risk-adjusted returns. I think a lot of limited partners have become fatigued with waiting, especially those who expected their trajectory as a region to be more like China’s. I think Southeast Asia is increasingly more attractive and several of our managers are deploying more capital there.
Trusted Insight: As a health care investor, do you have any ESG or non-return criteria that affect your selections?
Lisa Vazquez: We don't invest in tobacco or firearms due to our mission as a health care institution. Another thing we care about a lot is diversity, not only because it’s fair, but because it can lead to better investment returns. There are really tangible ways we can benefit from a manager’s racial, ethnic, and gender diversity. We see huge success in groups like All Raise, where female VCs and entrepreneurs have created a powerful network. It’s a definable edge.
Trusted Insight: Some of your peers in private equity are worried there’s too much capital deployed. You’ve been navigating private assets for a long time. What's something that you can tell us about the future of private equity?
Lisa Vazquez: Private equity is raising capital at a record pace, which has been fueled by limited partners chasing returns that have exceeded those in public equity for many years. There is definitely a growing concern that there is too much capital chasing too few deals in PE. That’s clearly driven up entry multiples, and in many cases caused GPs to take on too much leverage to achieve attractive returns. Some GPs took on more operational complexity in their portfolio to keep multiples low, and we’ll see across this cycle who has the expertise and bandwidth to handle that.
That’s where our job on the LP side of manager selection is interesting. We have to select GPs that have an edge—differentiated access to deal flow, deep sector specific expertise, or ability to add value through portfolio operations.
Philosophically, Mass General Brigham doesn’t back private managers unless we see ourselves partnering with them for many funds in the future because every fund commitment takes up a precious spot in our portfolio. I believe most LPs are doing similar desktop performance analysis but the most thoughtful investors are analyzing team dynamics and other factors that could make a team successful over the next decade and beyond. I enjoy figuring out the psychology of what makes a team tick, how decisions are actually made, the firm’s approach to recruiting and mentoring, what motivates people, who's competing to be the firm’s successor, and who could be upset if they don't get it. Those are the things that potentially derail top firms. At the end of the day, we're backing people and teams.
There is so much LP capital chasing private equity fund investments. Access to fund allocation from top managers is a key component of a successful investment program.
"We’re leading participants in the Pfizer, Moderna, JNJ, and BCG trials for COVID-19 therapies. We put investment returns to good use."
Trusted Insight: When you're trying to gain access to managers, what’s your pitch? How do you sell Mass General Brigham as an LP that your target managers should want to work with?
Lisa Vazquez: One thing—and I think it's probably the most obvious—is our institution’s mission and reputation. No matter how successful someone is, their world stops when they or the people they love are sick. We are Harvard’s teaching hospitals. We’re at the forefront of medical innovation and patient care. We were the first to use anesthesia for surgery. We did the first organ transplant. The first heart transplant. We did the first successful face transplant, the first FDA approved treatment for Alzheimer's. We’re currently leading 600 studies focused on COVID-19. We’re leading participants in the Pfizer, Moderna, JNJ, and BCG trials for COVID-19 therapies. We put investment returns to good use.
Second, depending on the GP’s sector focus, we try to be a strategic partner to our GPs from our experiences in health care and biotech.
The final thing is our commitment to a two-way partnership and respect for our managers’ time. That means reading everything you can from your managers’ quarterly letters, blogs, and websites, and getting to know them without having them cater to you. When we get an hour of someone's time, we try to ask the incremental questions that will help us maintain our conviction and nourish the relationship.
In March and April 2020, in the beginning stages of the COVID pandemic, that meant not trying to get our private equity managers on the phone one-on-one, to tell us what's going on with the portfolio or predict capital calls. They didn’t know that yet, and we would have been a distraction. For us, being a good partner meant forwarding an article about our work on the front lines and saying, "Hey, this is the work we're able to do because of you and we really appreciate that your work on our behalf." That's something that people remember over the long term.
Trusted Insight: What else can you tell us about Mass General Brigham?
Lisa Vazquez: Long before I joined, my team created a culture that is collaborative and intellectually honest. We are passionate about creating the best risk-adjusted returns for our hospital and everything we do goes back to that shared goal. When we come to a discussion, whether it be about the market or a specific manager, investment professionals at every seniority level are responsible for having our opinions heard. And by the time we leave that room and we've come to a decision, we're all responsible for backing and supporting that decision. I think that cultural element is really special. It feels good to be part of a team where everyone is rowing in the same direction.
Trusted Insight: Is there anything else you’d like to share about your experience in investment?
Lisa Vazquez: I think we have the most interesting job in the world and I still can’t believe I landed here. I’m still grateful to Allen & Company and Citigroup for taking a chance on me almost 20 years ago. I was not raised in an affluent town or around people who come from the investment world. This is a difficult industry to break into. My first job as a kid was delivering newspapers in the trailer park near my house. Many of my Wall Street peers had fancy investment internships in high school because they had connections in the industry. That put me at a huge disadvantage right out of the gate. I didn't have anyone to ask a lot of basic things: “What's the difference between fixed income and equities? What do I wear to a job interview and how do I act?” I would love to be able to help junior people from diverse backgrounds figure those things out.
I think that if we want to get to the heart of why there isn't more diversity in the industry, that’s one place to start. Our team hires and mentors a Girls Who Invest intern every summer and I’m impressed with how that organization is contributing to diversity in the industry. Our industry has come a long way, but there’s still much more to be done.
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