Frank Ahimaz joined the Museum of Modern Art as chief investment officer in 2008. His primary role is to analyze market dislocations and to manage MoMA’s investment portfolio totaling $839 million as of Jun. 30, 2016.
Prior to MoMA, Ahimaz spent more than 15 years on Wall Street. He was a director at Citigroup focusing on retail and consumer sectors, a co-founder of Dover Management, an asset alternative fund, and worked at Chemical Venture Partners, Merrill Lynch Global Private Equity, Goldman Sachs and Morgan Stanley in both private equity and investment banking. Like himself, MoMA's investment team consists of mostly Wall Street veterans. In this interview, Ahimaz reveals his team's clear-cut investment strategy and how he applies skills from the asset management side to foundation investing.
Ahimaz was recently named on Trusted Insight’s 2017 Top 30 Foundation Chief Investment Officers. He graciously spoke with us on May 11, 2017.
Trusted Insight: What's your strategy between actively-managed funds and index funds?
Frank Ahimaz: For us, index funds are a place holder. My team comes straight from Wall Street with a high degree of experience. Our argument has always been: in an index fund, you're just taking beta exposure. To achieve beta exposure, one would ultimately just change asset allocation. That however doesn’t meet the goal of our institution, which is to generate significant alpha.
Trusted Insight: How is your investment team structured? How do you make decisions as a team?
Frank Ahimaz: Everyone is a generalist. We believe generalists allow us to enhance the cohesiveness of the team. They also allow for a cross-perspective understanding of all investments. For example, if you are looking at a levered loan investment, because many levered loans are used to finance private equity companies, you should look at the levered loans at the same time as evaluating the health of your private equity investments.
Another example would be deal underwriting. A credit investor may think about underwriting a deal completely differently from the way a private equity investor may. Indeed, the “truth” may very well be somewhere in the middle.
Trusted Insight: You joined MoMA in October 2008. How was MoMA’s portfolio invested back then? How has your strategy changed since?
Frank Ahimaz: We've been both strategic and opportunistic. Prior to coming to MoMA, if you had asked me, as an investor, would I have ever invested in government-related products, short of government bonds, my answer would have been probably no. However, after the financial crisis, the government came up with some creative programs.
Trusted Insight: What’s the most challenging part of investing during crises like 2008?
Frank Ahimaz: We are slightly different from other endowments. If our private equity exposure is lowered by 2 percent, we don’t automatically go back and rebalance. If we see something more interesting that may have a better risk-return profile, for example, we may invest in that instead.
Trusted Insight: What’s your strategy in emerging markets?
Frank Ahimaz: We pulled out of emerging markets four years ago, although we didn’t have a significant presence in emerging markets anyway.
When you consider macroeconomic factors in emerging markets, many countries don’t have capital markets that are mature enough to support the issuance of billions of dollars’ worth of credit or equity. So, they try and do it in the U.S or European markets. Additionally, due to significant fluctuations in some of the currencies in those markets, the conversion of returns to U.S. dollars can cause a notable loss in the value of those returns.
So, we decided that the risk-reward of investing in emerging markets then was not worthwhile for us.
Trusted Insight: What do you look for in asset managers? Does your previous Wall Street experience play a role in making manager selection decisions?
Frank Ahimaz: I look for managers that have a significant amount of their own assets in their fund. These types of managers are difficult to find. So, we utilize our connections. The network is extremely important, and I encourage all our team members to utilize that at various levels. For example, if you're an analyst, I’d encourage you to build networks with other analysts and associates and straight on up the ladder.
Trusted Insight: What’s it like to work with MoMA’s Investment Committee?
Frank Ahimaz: Our Investment Committee is amazing and supportive. In fact, presenting ideas to our Investment Committee is very similar to working with our managers. We have all our investment theses, premises, expected risks and questions laid out. Our board is excellent to work with.
I myself also sit on an investment committee for another cultural organization, which is fun for me because I get to see the other side of the table.
Trusted Insight: Where do you see opportunities in the current environment?
Frank Ahimaz: I'm still very much a U.S.-focused investor right now. I think there are a lot of areas around the world that still need stabilization. Who would have thought something like Brexit could happen? This is a set of agreements that was in place for more than 40 years. I think it's going to take years before we understand the impact this and many other decisions will have on the global economy.
We have one important rule for our team: To keep our eyes on the ball and not be distracted by non-investment things.
Trusted Insight: You studied aeronautical and astronautical engineering in college. What initially prompted you to enter finance?
Frank Ahimaz: In aerospace engineering, I worked on projects like determining what went wrong with a space shuttle and how to repair it. At that point I was working on a very small component of the shuttle, many times just a nut and bolt. I would take leads from the head manager. Sometimes I wondered: When do I get to build a space shuttle myself? The answer was potentially decades.
Fortunately, MIT was a very positive environment where you have many choices in majors. I started taking a lot of finance courses, learned about foreign exchange markets, option pricing and, finally, I stumbled upon mergers and acquisitions. And it was mergers and acquisitions that I liked the most.
I landed my first finance job at Morgan Stanley’s M&A Department. The reason why it attracted me was that it was a highly quantitative department, where I got to do a lot of modeling. Then, I migrated my way to private equity.
By the time 2008 rolled around, the world had changed. So, I took a step back and went home to the University of Chicago, which is where I'm from. There I met a professor who introduced me to the Chief Investment Officer at the University of Chicago. Since I told him my life was in New York (and Chicago is about 20 degrees colder), he introduced me a few CIOs he knew in New York City, and that’s how I landed a job at MoMA.
Trusted Insight: What do you like most about investing for a private endowment?
Frank Ahimaz: Knowing that our investments help support the fantastic programs that MoMA runs is a highly gratifying experience. It’s very different from being back on Wall Street. It’s great!