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Robert Wood Johnson Foundation Is Building A 'Culture Of Health' While Generating Investment Returns | Brian O'Neil, Chief Investment Officer | Q&A

by trusted insight posted 1week ago 860 views

Brian O'Neil is the chief investment officer of The Robert Wood Johnson Foundation, the nation’s largest philanthropy dedicated solely to health. He has served the foundation since 2003 and is responsible for the $11 billion investment portfolio. Previously, he was the CIO and held other positions at AXA Equitable for 22 years.

In this interview, he discusses his journey at the organization and how the investment office has evolved under his leadership; the foundation's accomplishments in the public health area since 1972; and why they are a strong supporter of SEO, a program committed to building diverse and inclusive organizations.

Brian O'Neil was recently named on Trusted Insight's 2019 Top 30 Foundations Investing In Diversity. This interview has been edited and condensed.

Trusted Insight: You’ve been at the Robert Wood Johnson Foundation since 2003. How has the organization evolved from both an operation and investment office standpoint?

Brian O'Neil: The Robert Wood Johnson Foundation holds assets of around $8 billion when I joined and by 2007 we grew to $10.5 billion. In the midst of the financial crisis, we saw a number that started with seven. Since then we’ve come back and we're currently over $11 billion. Every year during that time we've paid out 5% of our assets. The Foundation is now 46 years old, has made $12 billion of grants, and still has $11 billion in assets from the original grant of a $1.5 billion.

My predecessor had begun the process of diversifying away from Johnson & Johnson stock, but it was still over 60% of assets when I arrived. There was a mandate from the board of trustees to strongly diversify. We set a target of 40%, then we set a target of 25%, then a target of 10%. When we reached 10% there was a pause and the board decided they wanted to keep a 10% position. That's since been changed into a specific number of shares to commemorate the links between the foundation and Johnson & Johnson company, whose CEO was our donor. We continue that link by having some trustees who are retired J&J executives.
 

"The Foundation is now 46 years old, has made $12 billion of grants, and still has $11 billion in assets from the original grant of a $1.5 billion."



Over the years, the foundation has done a number of things in the public health area. The anti-tobacco programs had been a big activity, and we were then focusing on health insurance, trying to expand coverage to as many people as possible. That continues to be an emphasis, but we added what has ultimately become a very large variety of approaches to deal with childhood obesity. Childhood obesity is one issue that in 2005 was not necessarily widely recognized as a problem. Since then we've done a lot to raise the awareness of this and have taken a number of steps to try to reduce it. Some things including healthy food in schools, after-school activities for kids, healthy and safe neighborhoods, etc.

In that time, we really have seen a slowing in childhood obesity rates. The focus on childhood obesity highlighted the fact that many health problems are not isolated, but are embedded in society. Today, the biggest health issues are because of people's behavior rather than external things like diseases. We're talking now about building a culture of health that would recognize health and health opportunities in every phase of our lives, and to try to build a healthier society by raising the awareness of health in everything that we do.

Trusted Insight: The RWJF is a pioneer in this field, and we would like to understand how you are tackling equality initiatives. What is RWJF doing differently?

Brian O'Neil: We have always had a number of what we used to call Human Capital programs. Human capital programs were about identifying promising young people and helping them build their careers at a time when the help was extremely useful to them. That's been true for medical researchers, medical students, nursing students, and the broader healthcare workforce. Within that there's always been an emphasis on underrepresented groups such as women and minorities, to really focus on giving them opportunities that they may not have had in the past. That's the heritage of the foundation in terms of human capital.
 

"We try to help organizations that we think are doing worthwhile things to grow and to do a better job. We identified one, SEO, that is doing a terrific job of identifying college students who'd like to have Wall Street analyst jobs when they graduate."


The big moment for me was in 2012 when we celebrated our 40th anniversary. We looked back on all the things that we'd done. We had a tremendous number of alums of the human capital program coming back and say, "Thank you so much, you helped me get into medical school. You helped me get into nursing school. You helped me with my research." They've gone on to have great careers. Recognizing that this approach to an industry can really be very valuable, and that was kind of what my “aha” moment to say, "We can and should do this with investments."

In 2013, we started an emerging manager program, because we saw that as very much like funding promising researchers. Finding emerging funds, new managers with not a lot of money under management where our investment in their fund could really be transformational. In terms of tangible outcomes, one thing that we were looking for was investment results. The second thing that we were looking for was building successful firms where we could invest more. If the manager is small you really can't invest that much in them, but if they get big then you can. Thirdly, we hope to develop a long-term alumni network of people who have gone on to do great things. So far we've only made one follow-on investment with a firm. We'll have some more in the future, and in a way, six years is too soon to have many alumni who have built great reputations and are playing a leadership role.

As a foundation, we have a very long-term horizon. We can do things that won't pay off immediately knowing that we will be around to enjoy that legacy and maybe even to have an alumni network years into the future. Another thing is what we're now calling our pipeline programs. We try to help organizations that we think are doing worthwhile things to grow and to do a better job. We identified one, SEO, that is doing a terrific job of identifying college students who'd like to have Wall Street analyst jobs when they graduate. They give them the training and all the various hard skills and soft skills that are needed to succeed in those most competitive and challenging jobs that are frequently the first step to great careers in investment and finance.
 

"The emerging manager program is a very good thing and I'm really proud of that. We may do some impact investing as we have done so in the past."


We got to know SEO by having an intern program with them, an internship program that's now in its 6th year. We've already got alums there that are now on Wall Street. We recognized that what they were doing was really valuable, so we made them a grant. We now see that there are a couple of other organizations that do what SEO does and we're right in the middle of deciding to have a true pipeline program with multiple organizations and multiple year grants to really try to build a more diverse workforce in the investment management business.

Trusted Insight: Ford Foundation recently announced its target of $1 billion to mission-related investments. Does RWJF also have a target?

Brian O'Neil: These are not investments in the way that you and I would use the word investment and the way that the Ford Foundation has used it. We are supporting SEO financially. We gave them a $2.5 million grant so that they can do more of what they do and do a better job at it. That's actually our business, making grants to not for profits that are doing valuable things. The emerging manager program is a very good thing and I'm really proud of that. We may do some impact investing as we have done so in the past.
 

"We have so much flexibility, so much scope to find great investments and great organizations. You really can do whatever makes sense with the smallest number of constraints that I've ever seen."

 

This is a different way for a foundation to participate in making a more diverse workforce, and it's something that is unlike an emerging manager program or impact investments. It's exactly what we do with our normal activities. We make grants. I would like to see SEO joined by a couple of other similar organizations, and that's something that we as a foundation can do much more readily than other organizations because we are a pool of money that is meant to be used to give grants to worthwhile organizations.

Trusted Insight: As a large proponent of equality initiative, how have you seen venture managers promote this within their organization? What do you think could be done better?

Brian O'Neil: Many organizations say that we can't find enough qualified candidates and there's probably some truth to that. That's why we think these pipeline programs are really important. The other thing is that most investment organizations do not have regular hiring processes.
 

"People have come and raided us for chief investment hires, because they know they can find really good people here."


What works really well for SEO is that Wall Street firms hire hundreds of individuals every year. It's a very organized, very structured hiring program with even a very well set out timeline. SEO will place 100 students a year into these Wall Street analyst jobs because there's a lot of those jobs and they're all open at the same time. If you pick you average low to medium-sized investment management organizations, they don't hire anybody on a regular schedule. They hire somebody when they need them. It's much tougher to find a candidate that's not in the places you usually look if hiring is episodic and periodic, and it's really driven more by your specific organization's needs by any sort of availability where you can say ahead of time. That is an issue.

The organizations have to look within and ask themselves if this is important to them. If it is, then they'd go after it like any other issue that was important to them. If they said our next fund has got to be $1 billion, what would they do to get that fund to a billion? If we've got to raise the percentage of women and minorities in this firm they should attack it the same way.

Trusted Insight: There are several firms who are hiring female or minority partners for the sake of diversity (as this has become a limelight issue). What is your opinion on this?

Brian O'Neil: I don't think there's only one reason to do this. First of all, you could start very easily with retention. If you have individuals that are doing a good job, but they don't feel able to stay in your organization, that's a loss that you should really be trying to do something about. The most important things that successful investment organizations should be asking is "What will it take for us to succeed? What is our definition of success going to be? How will we know when we're there?"

Every firm needs motivated employees, people who love being there, who want to work there and do a great job. They should also say, "We want to have a workforce that has as much diversity as we possibly can." It has to be built into your definition of success. I think the “why” is less important than the decision to go after it with the same level of intensity that you'd go after other business objectives. We should focus on the choice to make that an objective, and then the success at achieving that objective.

Trusted Insight: What initially attracted you to investing through the lens of a foundation and what’s kept you grounded for nearly two decades now?

Brian O'Neil: I feel extremely fortunate to be in this role at the Robert Wood Johnson Foundation because it’s a very fascinating job. We have so much flexibility, so much scope to find great investments and great organizations. You really can do whatever makes sense with the smallest number of constraints that I've ever seen. You get to really exercise your professional skills in the context of supporting the goals of this great organization. A big part of it is understanding what the foundation does, how it does it, what it is, and how we support that. Everyone that comes here to work feels that's an important part of their motivation.

The colleagues that I've had, both on the investment team and in the foundation as a whole, are really special. They're a very capable group. People have come and raided us for chief investment hires, because they know they can find really good people here. What we're trying to do and why we're trying to do it gives us a real shared set of values that really helps us making difficult decisions and working together well. I expand that to my colleagues in the foundation as a whole. We have MDs, we have public health professionals and others that make it a really great collection of people that I enjoy spending time with. It's the professional challenge, the support of the mission, and working with my colleagues that have kept me grounded.

Trusted Insight: What career advice would you give the next generation of investors that want to join an organization such as the RWJF?

Brian O'Neil: The first thing I'd say is to be very curious, and this is more about just how to be a good investor. Be really open to learning. That means that wherever you are you'll be moving forward and you'll be getting better. The job here gives you exposure to really capable individuals on our team, plus the leadership of the investment organizations that we work with. It’s not something you get if you work at those very same organizations at the lowest level.

We probably pay less than the other job choices, but then again we give the satisfaction of supporting the Robert Wood Johnson Foundation, which I think is priceless. In addition, you're building a tremendous amount of career capital. The people that work here in our analyst program end up in a lot of really great places afterward because they've learned a ton. Lastly, we have fun. I believe having fun on the job is really important, and we certainly do.

View the full list of 2019 Top 30 Foundations Investing In Diversity.