Sally Staley is the Chief Investment Officer of Case Western Reserve University’s $2 billion endowment. She joined the university's investment office in 2002 and became Chief Investment Officer in 2006. She began her financial career in international bond market research and sales with Salomon Brothers and Merrill Lynch and transitioned to investment management at the State of Wisconsin Investment Board where she established the public pension fund’s international fixed income program and managed an international bond portfolio. Sally later worked as Senior Consultant with the investment management consulting practice of PricewaterhouseCoopers. She holds a Master of International Affairs degree from Columbia University and a Bachelor of Arts degree from The College of Wooster where she currently serves as a trustee and investment committee member. She is also a board member and investment subcommittee chairperson for Great Lakes Theater and a former board member and investment committee chairperson for the Saint Luke’s Foundation of Cleveland.
Ms. Staley was recently named on Trusted Insight’s ranked list of The Top 30 Most Influential Women In University Endowments. She graciously spoke with Trusted Insight about her experience as a chief investment officer and the world of university endowment investing on September 9. The following interview has been edited and condensed.
Trusted Insight: Were you surprised to learn that you’ve been selected as one of the Top 30 Women in University Endowment Investing?
Sally Staley: Well my husband cracked that there are probably only 31 and I’m number 29! But yes, it’s nice to have the focus on women in asset management recently. What Trusted Insight is doing will be helping to move along the progress and encourage women to be in this field.
Trusted Insight: Do you know many women in endowment investing?
Sally Staley: I do, but in the large endowments I would say, the women I know are mostly CIOs. If you take it down a level or two, how many women are in the middle of their careers? I think there’s a big fall off from entry level to mid-career. Why? Are women self-selecting out? Not getting enough mentoring at the right time? Putting more attention on the issue will help identify what’s happening. Whatever industry conference I attend, I just scan the room for the proportion of men-to-women in large gatherings, and there are always a lot more men. I’ve never seen it even close to half-and-half.
Trusted Insight: Your website says that Case Western Reserve’s investment philosophy is to grow the endowment as aggressively as possible without incurring undue risks, and the goals are to sustain the endowment for generations to come, support donor intentions and advance the University’s overall mission. Please elaborate.
Sally Staley: It’s a little generic, keeps reminding us of return and risk and serving donor intentions. The headline return is not the only objective. There are so many goals. The things we’ve mentioned are the things the endowment has to achieve regarding return and reasonable risk. But what is reasonable risk? We’ve spent a lot of time thinking about that at Case Western Reserve, especially since 2008-2009. For example, when I work with [The National Association of College and University Business Officers] on conference agenda topics, I always come back to trying to help people think about what risk means to them and factor that into their investment goals.
Trusted Insight: Can you give me some examples?
Sally Staley: Well, different kinds of risk can be important at different times. One kind of risk is permanent loss of money; volatility matters most once a year or quarterly when we review what we’ve achieved. The university wants to share that with donors and policy, compensation, etc. can be based on that. One day can be very important – June 30th – the end of our fiscal year and most universities’ fiscal years. This day can be more important than any other date of the year, because we take the annual snapshot of results.
Another way to evaluate risk is: how much are you willing to deviate from your benchmark in reporting results.
Trusted Insight: What do you see as the biggest challenge to endowment investing right now?
Sally Staley: Good governance is the necessary foundation for achieving desired investment outcome. Yet governance practices seem to evolve more slowly than markets and portfolio practices. Layered onto the “slow evolution” challenge is the seeming industry shortage of experienced, fund-level governance and oversight directors/trustees for globally diversified, multi-asset portfolios.
[Another challenge is that] the endowment industry is enduring a creeping mismatch of investment time horizon and risk time horizon that is leading to suboptimal investment decisions. An endowment may be a perpetual pool of capital, but its investment time horizon should not be perpetuity if investment results are measured in three-year increments and/or its institution has one- or two-year cycles for budgets and other financial planning.
Trusted Insight: What are the biggest trends shaping endowment investing currently?
Sally Staley: As the market cycles come and go, I am continuously reminded and aware of an important lesson learned years ago on the Salomon Brothers bond trading floor: if you haven’t traded through a bear market, you haven’t learned to trade. Collectively, we (the endowment industry) were refreshed on this very important concept during the downturn of 2008 and 2009. Ever so slowly, it seems, we adapt our behavior:
Trend #1: Enlightened portfolio construction methodology. Evolving the “great manager” method of portfolio construction (i.e., all we need is a collection of “great managers” or best ideas hired one by one and assembled into a portfolio that may, or may not, achieve the investment goals set forth for it across market cycles).
Trend #2: Learning to separate alpha and beta has been helpful to everything from attribution reporting to fee negotiation and risk budgeting.
Trend #3: Better articulation of the many facets of portfolio risk. Best example is emphasis on risk-adjusted returns above headline returns.
Trend #4: Creatively adapting [limited] staff bandwidth to the [seemingly unlimited] evolution globally of new market, sectors, vehicles, products.
Trusted Insight: What aspect of your job is fulfilling that you never expected?
Sally Staley: The most fulfilling attribute of my job over many years has been the ability to run with a great idea. A great idea may be a people idea or a portfolio idea. There are so many talents and perspectives, fields of study in college, work experience in different industries that add tremendous value to an investment team. Every final investment decision begins by crafting an investment theme or thesis literally from a world of investment opportunity, performing analysis and due diligence, making a recommendation to fund or not fund and watching the idea appear as a new—and, hopefully, profitable—line item on the portfolio holdings list. Every day I apply a full spectrum of liberal arts and sciences training to every aspect of my work investing an endowment portfolio and leading an investment team.