Trusted Insight asked more than a dozen chief investment officers at foundations, family offices, pensions and university endowments one question: What is the most important lesson you’ve learned during your career as an institutional investor? Here’s five of our favorite answers:
Kim Lew, co-chief investment officer at Carnegie Corporation, a $3.4 billion foundation, said:
The number one thing I would tell people: choose a good team. You will get the best experience with a good team -- a team of quality people who are going to invest time in developing you and making sure you are learning the lessons.
The biggest benefits to my career and my ability to be a good investor had to do with great sponsorship and great mentorship from talented investors. That made all the difference in the world. I think there should be increased emphasis on making sure you choose good places with talented people.
I would advise people to be intellectually curious and be continuously looking for new and interesting things, because it’s awfully hard to say what the next great thing is going to be. If you have a broad block of knowledge, which is to my point about having diverse teams where people have different strengths, it is important. It is hard to predict which thing is going to take off at any moment and being able to translate what you’ve learned in one area into another is important. It goes back to having good teams and having a good base of support. Full interview here.
Kathryn J. Crecelius, chief investment officer at The Johns Hopkins University's $4 billion endowment, said:
No matter how much experience you have, no matter how much you’ve seen, markets are always different. That’s what makes this job endlessly stimulating and endlessly fun. That’s also what’s difficult.
I am very much, not surprisingly given my background, a believer in learning the lessons of the past and studying the past to try and understand markets and patterns. It’s also really important to remember that while it's true that “this time it’s different” are the four most dangerous words in the English language, sometimes it genuinely is different. Trying to figure out what is different now and what is a trap and appears different is sort of the goal of what you aim for as CIO. Full interview here.
Meredith Jenkins, co-chief investment officer at Carnegie Corporation, a $3.4 billion foundation, said:
The importance of getting a broad experience. This is changing, but when I started in the industry, at the junior levels it was much more silo-ed. I did private equity. You would do private equity or real assets or public equity or whatever.
Having the opportunity to go to Hong Kong and be in a position where I needed to look across the portfolio to work with everyone and think about opportunities be it public, private or real estate, was some of the most valuable experience of my career. To the extent that people can search out opportunities for that or ask for them and figure out ways to get them, I would recommend that. Full interview here.
Theodore Kokas, chief investment officer at Roch Capital, a single-family office, said:
The single rule that has served me best through my career has been: When in doubt, do what feels most uncomfortable.
That comes to play numerous times. Holding on to a positon when the market moves against you, where you feel the fundamentals simply aren't being reflected in the marketplace. Having that strength of conviction to hold when the markets are down. The simplest thing to do is blow out a position and get back in at a later date.
As a manager allocator, one of my best investments was in 2009 when a hedge fund was down about 30% from the peak. I recognized after talking to them that the challenges they were facing were environmental, as opposed to some fundamental flaw in their investment process. I ended up buying them on the low, even though it was a really difficult decision to put money in a fund that was down 30%. We did and it was the best performing hedge fund we had over the next three years. It's around having the courage in your convictions and having the discipline to stick with the thesis. Until you recognize something structural has changed in the thesis, sticking with it when the markets are moving against you is really challenging. Full interview here.
Charles Kennedy, chief investment officer at Carnegie Mellon University’s $1.6 billion endowment, said:
Some of the folks in the industry have been very kind to me and have shared their insights with me. The one thing that I would point to: when you are under short-term pressure for executing due diligence processes, finding managers and sourcing funds, something that often falls on the backburner is governance, but its importance should be emphasized.
Pay attention to the investment policy statement and use that as a living document. Get people to agree, not in the heat of the moment, but in the calmness of a calm market, to a sound long-term strategy and to a governance structure that best supports that long-term strategy.
Memorialize that in your investment policy statement and then pull that out and make it a living document. "Here’s what we agreed to regarding how to run the program, how to make decisions, how to benchmark, how to look at opportunities. This document controls how we think about and process investment ideas. So when you’re in the storms of a choppy market, you’re not tempted to look at things that are going to take you off course. Or in a bullish market, you are not tempted to chase the bright, shiny things that can distract people from pursuing a long-term strategy. Full interview here.
To learn more about the chief investment officers and directors that run the world's premier institutions, check out Trusted Insight's ranked lists of top institutional investors.
Kim Lew, co-chief investment officer at Carnegie Corporation, a $3.4 billion foundation, said:
The number one thing I would tell people: choose a good team. You will get the best experience with a good team -- a team of quality people who are going to invest time in developing you and making sure you are learning the lessons.
The biggest benefits to my career and my ability to be a good investor had to do with great sponsorship and great mentorship from talented investors. That made all the difference in the world. I think there should be increased emphasis on making sure you choose good places with talented people.
I would advise people to be intellectually curious and be continuously looking for new and interesting things, because it’s awfully hard to say what the next great thing is going to be. If you have a broad block of knowledge, which is to my point about having diverse teams where people have different strengths, it is important. It is hard to predict which thing is going to take off at any moment and being able to translate what you’ve learned in one area into another is important. It goes back to having good teams and having a good base of support. Full interview here.
Kathryn J. Crecelius, chief investment officer at The Johns Hopkins University's $4 billion endowment, said:
No matter how much experience you have, no matter how much you’ve seen, markets are always different. That’s what makes this job endlessly stimulating and endlessly fun. That’s also what’s difficult.
I am very much, not surprisingly given my background, a believer in learning the lessons of the past and studying the past to try and understand markets and patterns. It’s also really important to remember that while it's true that “this time it’s different” are the four most dangerous words in the English language, sometimes it genuinely is different. Trying to figure out what is different now and what is a trap and appears different is sort of the goal of what you aim for as CIO. Full interview here.
Meredith Jenkins, co-chief investment officer at Carnegie Corporation, a $3.4 billion foundation, said:
The importance of getting a broad experience. This is changing, but when I started in the industry, at the junior levels it was much more silo-ed. I did private equity. You would do private equity or real assets or public equity or whatever.
Having the opportunity to go to Hong Kong and be in a position where I needed to look across the portfolio to work with everyone and think about opportunities be it public, private or real estate, was some of the most valuable experience of my career. To the extent that people can search out opportunities for that or ask for them and figure out ways to get them, I would recommend that. Full interview here.
Theodore Kokas, chief investment officer at Roch Capital, a single-family office, said:
The single rule that has served me best through my career has been: When in doubt, do what feels most uncomfortable.
That comes to play numerous times. Holding on to a positon when the market moves against you, where you feel the fundamentals simply aren't being reflected in the marketplace. Having that strength of conviction to hold when the markets are down. The simplest thing to do is blow out a position and get back in at a later date.
As a manager allocator, one of my best investments was in 2009 when a hedge fund was down about 30% from the peak. I recognized after talking to them that the challenges they were facing were environmental, as opposed to some fundamental flaw in their investment process. I ended up buying them on the low, even though it was a really difficult decision to put money in a fund that was down 30%. We did and it was the best performing hedge fund we had over the next three years. It's around having the courage in your convictions and having the discipline to stick with the thesis. Until you recognize something structural has changed in the thesis, sticking with it when the markets are moving against you is really challenging. Full interview here.
Charles Kennedy, chief investment officer at Carnegie Mellon University’s $1.6 billion endowment, said:
Some of the folks in the industry have been very kind to me and have shared their insights with me. The one thing that I would point to: when you are under short-term pressure for executing due diligence processes, finding managers and sourcing funds, something that often falls on the backburner is governance, but its importance should be emphasized.
Pay attention to the investment policy statement and use that as a living document. Get people to agree, not in the heat of the moment, but in the calmness of a calm market, to a sound long-term strategy and to a governance structure that best supports that long-term strategy.
Memorialize that in your investment policy statement and then pull that out and make it a living document. "Here’s what we agreed to regarding how to run the program, how to make decisions, how to benchmark, how to look at opportunities. This document controls how we think about and process investment ideas. So when you’re in the storms of a choppy market, you’re not tempted to look at things that are going to take you off course. Or in a bullish market, you are not tempted to chase the bright, shiny things that can distract people from pursuing a long-term strategy. Full interview here.
To learn more about the chief investment officers and directors that run the world's premier institutions, check out Trusted Insight's ranked lists of top institutional investors.