Recently, Trusted Insight profiled Sam Gallo, the chief investment officer at University System of Maryland Foundation, where he is responsible for the investment portfolio totaling more than $1.3 billion. Gallo discussed the value in a background of varied work experiences and why the first step in leading a world-class institutional investment program is developing strong governance (read it here). 

He was recently named on Trusted Insight's Top 30 Endowment Chief Investment Officers. He graciously spoke with Trusted Insight on Feb. 13, 2017. This interview is split into three parts. In today’s article, Gallo shares the importance of building a solid team structure, the advantages of being affiliated with a higher education institution and why he's an advocate of well-roundedness. Stay tuned for the third and final piece in the series, which dives into his investment philosophy and implementation in current markets.

Trusted Insight: What’s the structure of your team? Do you go for a specialist or a generalist one?

Sam Gallo: We are organized as a generalist structure within broad asset class categories, allowing our staff research flexibility. Our structure incorporates directors of public and private markets, which complements a top-down view of how we bucket our assets. Then, supporting our directors are analysts and student interns. Specialization is achieved through our strategic partners and investment committee members.

Fundamentally, one of the greatest advantages of being affiliated with a higher education institution is just that, the affiliation. Some of the greatest research, ideas and innovative people are right in our backyard.

If I might digress for a minute, I would love to talk about our relationship with one of our business schools and our student interns, as they are very helpful in gathering data points for our team.

I try hard to stay close to our finance professors to understand the newest models, theories and data within the academic investment literature. One of our finance professors had once asked me about topics that were a challenge for our investment team to implement. Two years later, he reappeared in my office with a team of MBA students who literally spent years researching what I told him two years earlier, offering up data and prospective solutions. How great is that?

Then there is the intern program, the greatest hidden gem of working within higher education. I started a formalized internship program a few years ago, as it was something I believed we should establish. Our team spent a lot of time interviewing other schools and asking them about their internship programs. After much research, we built a formalized program and worked side-by-side with the business school at University of Maryland College Park to source students.

In our program, students generally arrive to our office during their sophomore year. They stay with us, receiving training from our team and working part-time until they graduate. Our interns join our manager meetings, they transcribe the meeting notes and compile macro economic and manager-specific data. They also receive in-depth training and on-the-job experience in using different software tools. After a few years, our interns are graduating with finance degrees from a great school coupled with almost three years of work experience in an analyst role. They are very fluent in the research and operating procedures of an university investment office and have a solid understanding of the factors that matter to an investment team. It is a really nice program that we developed, which benefits everyone. I am very proud of that feature of our office. Just as we embraced specialist investment committee members and strategic partnerships (with external asset managers) to increase the resources available to our team, so have we enhanced our productivity by tapping into the in-house talent within our program’s schools.

Trusted Insight: How do you think university investment offices should go about tackling the challenge that many are facing in attracting and hiring new investment analysts and portfolio managers?

Sam Gallo: I sometimes hear from peers that much of the recruitment challenge is a function of the investment office’s location. Our investment office is in a major metropolitan area, near many other large institutional investment teams, so we have been fortunate to be a destination city for many great candidates. Being located in Washington, D.C., helps us attract talent from major financial centers, as the surrounding areas (i.e., D.C., Maryland and Northern Virginia) are excellent places to live and work.

The actual job responsibilities are a selling point in recruiting professionals, as these are intellectually stimulating and amazingly rewarding jobs.

To the first point on it being an intellectually stimulating job, I can wholeheartedly say I never have the same day twice. There is nothing routine about a university investment office job, as every day markets are bringing forward new information and external managers are marketing different innovative products/strategies. It is a job that revolves around the constant discussion of embracing innovative approaches to solve portfolio complexities.

In what other job can your 9 a.m. meeting be with a small-cap hedged equity manager, your 10 a.m. be with a private wine fund, your 11 a.m. meeting be about cryptocurrencies, your noon appointment focus on royalty funds (i.e., music, movie, pharma, etc.), your 1 p.m. an address to large corporate buyouts, your 2 p.m. discussing broader range portfolio strategy with members of your investment committee, your 3 p.m. meeting be with members of your operations teams and service providers to address reporting enhancements, your 4 p.m. be a webinar with a major global bank on macro trends and their impact on asset allocation and your 5 p.m. focus on lending strategies – all the while you can’t wait to get back to work the next day as you have three real estate manager meeting in the morning to learn about changes to multi-family apartment complexes, senior living communities and industrial warehouse facilities? Of course, between meetings, one is running back to his/her desk to check markets, glance over news headlines and read a few emails. As you can see, it’s so interesting and fun, as every hour something new is cropping up.

As for my second point on these being amazingly rewarding jobs, for the person who wants to be impactful, these are the perfect positions. Most not-for-profit investment offices are usually sized with lean teams. Every member’s contribution matters, both in the present hour, as well as for years into the future. The decisions we make today impact the returns we get tomorrow. All these decisions will impact the availability of funding our endowment provides to our schools, their students and staff.

It is wonderful to go home every night knowing the work I am doing is providing scholarship opportunities, new buildings and supporting academic and administrative staff so that cutting-edge research in multiple fields of academia can persist. It is a very feel-good profession and are great jobs. They attract many good-hearted, altruistic, mission-oriented professionals.

It is important that as our industry recruits talented professionals, we highlight the stimulating nature of what we do and the impactful results directly related to our work.

Trusted Insight: Do you have any recommendations for students or recent graduates who are looking for an asset allocator position/career? Is there any way they can stand out from the crowd?

Sam Gallo: I tell my student interns all the time to do many different things during their careers.

To get into a job like mine you want to do a lot of different things. You want to see the world from multiple different vantage points as you need broad perspective.

If you want to become a CFO of a for-profit business, as challenging as that is, it is a pretty defined track for many people. You work hard for a public accounting firm for a few years and rise-up through the ranks. Then, hopefully you get plucked away by one of your clients and work in their treasury or corporate finance department, maybe as the controller. Then, hopefully a few years down the road your talents and expertise make you the logical choice, when the position opens, to become the CFO of either that business or another.

In the world of investing, it's not so clear. To get into a job like mine you want to do a lot of different things. You want to see the world from multiple different vantage points as you need broad perspective. Whenever I am career coaching a student intern or recent grad, I link our portfolio diversity to career diversity. I often ask, “If you want to work on a diverse portfolio, don’t you need a diverse career so that you can fully understand all the nuances?”

I am the model of that statement, as on the surface, my career progression is not typical or traditional. Yet, in my unconventional experiences, I picked up necessary skills that allow me to be successful in my job.

I started my career as a valuation modeler in an accounting firm. It was there that I learned about fundamental analysis, accounting versus economic realities/adjustments and developed a meticulous attention to detail. From that, I moved to a proprietary trading firm where I was a screen-based trader/portfolio manager, sourcing trade ideas and transacting about $8.3 billion daily in derivative securities. My livelihood depended on generating profit, staying calm through crisis and finding creative ways to make money. I acquired some great technical skills, but also experienced the psychological challenges facing a portfolio manager. Since I was once a portfolio manager, I got to see how these professionals tick and because of this, today, I can notice behavior signs of trouble, early.

Managing capital was a huge benefit for the rest of my career progression. In fact, I still consider it my most differentiating feature. Yes, when I was a trader, I made some healthy profits for my employer, but making money was not my most valuable lesson learned. What I valued most was learning how to preserve capital. That was an essential skill that could only be taught from experience. Losses are inevitable in any exercise of uncertainty, but there is a good way versus a bad way to lose money and having that opportunity to experience both gave me great advantages years later, in other roles.

Then, I ended up working as an investment consultant, where I was involved in extensive manager research, yet I also got to observe the different ways CIOs interacted with their boards. I witnessed successful tactics, as well as unproductive efforts by various CIOs. Ultimately, I moved on to the business operations side of investment management as a management/operations consultant, where I was building a new practice within a larger business and advising institutional programs on how to become more efficient.

In total, it was the combination of experiential learning of financial models (Arthur Andersen); trading/portfolio management (Goldenberg, Hehmeyer & Co); institutional investment research and observation of varied CIOs and boards (Ennis Knupp & Associates); and the operational/logical challenges of investment offices (PwC), that ultimately led me toward leading an investment office as its CIO (University System of Maryland Foundation). When pieced together that way, my story makes a lot of sense, as it touches on so many different skills needed to run an investment office.

I share this background, as an example of building a career that is part of a broader book of skillsets. You want a full book, not just one or two chapters.

My advice to people coming into this profession is do a lot of different things. Go work in investment consulting. See the diverse ways people structure their portfolios and listen to how various funds market themselves. Go work as an asset manager. Manage some risk capital and understand the challenges of that role. Go work at a university or pension investment office and see the challenges on the allocator side. Do all these things to build a comprehensive skill set.

If you are already in an investment office and considered the resident expert of certain strategies, rotate into other internal roles – both investment and operational. You will need them both, as readers may be surprised (but most CIOs would not be) how often I need to get involved in operational related matters so that my investment team can operate efficiently. I remember when I got into investment consulting, my first assignment was to learn about hedge fund of funds. From there, I ended up doing a lot of work in global macro and commodity strategies. Then, because I had a CPA and some controls system training from a prior job, I was asked to build the operational due diligence efforts of my firm, despite being primarily an investment guy. I welcomed that opportunity, because it was another chance to learn more about the different facets of investment management. I believe that well-roundedness makes me very strong in terms of doing my present job.

Doing a lot of different tasks and having broad experience in investing is a great path toward becoming a CIO, if you want to go that route. The job is so much bigger than studying asset allocation and doing manager research. Even if you do not want to be the CIO, challenge yourself to do a lot of different things. You will find great strength in your skills if you can bring these broad experiences together, years later.

In my case, working at a proprietary trading firm, it meant you do everything. You are the idea generator, portfolio manager, executioner and risk manager, all-in-one.

Trusted Insight: Is there anything else you would like to add?

Sam Gallo: When I reflect on my background, one of my greatest advantages that I brought to Maryland was that I was once a trader. That title means different things to different people. For some, it might mean someone hands you a trade ticket and you execute it. In my case, working at a proprietary trading firm, it meant you do everything. You are the idea generator, portfolio manager, executioner and risk manager, all-in-one. Yet, you are doing it in a very high-stress, fast paced environment. Having that all-in-one trading background is so critical to being a university CIO, managing risk and seeing all facets of the portfolio. If you ever get the opportunity to trade on a desk as one of those all-in-one traders, do it. I am confident you will learn a wealth of information.

Lastly, I want to give a shout out to my investment committee, strategic partners, my staff and our broader business-office professionals. They are a fantastic and extremely brilliant group of people. I could not perform my job without their support and efforts. It is not a one man show at Maryland, which hopefully you have gathered throughout this interview. Maryland is a very well-oiled machine of many minds coming together and developing systematic process around what we do and we are seeing positive tangible results from it.

See the full list of Top 30 Endowment Chief Investment Officers here.

View Trusted Insight's full library of Q&As here.