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Why The James Irvine Foundation Values Cognitive Diversity In The Investment Office | Jesús Argüelles, Director of Investments | Q&A

by trusted insight posted 3weeks ago 984 views

Jesús Argüelles is the director of investments at The James Irvine Foundation, where he has served since January 2019. Previously, he was a director of funds at the Ontario Teachers' Pension Plan and a portfolio manager at CalPERS. Arguelles holds a B.S. in managerial economics from the University of California.

In this interview, he discussed the importance of team building while focusing on cognitive diversity, why he believes the best performers are those that view the world differently, and how his background in the public pension world influenced his institutional investing career.

Jesús Argüelles was named to Trusted Insight's 2021 All-Star Institutional Investors.

Trusted Insight: Tell us about The James Irvine Foundation and your role on the investment team.

Jesús Argüelles: The James Irvine Foundation is a $3-plus billion-dollar foundation, based in San Francisco, California. The Foundation was founded in 1937. Its focus is exclusively on bettering the lives of Californians, with a particular focus on empowering low-income workers to advance economically. I am a part of a six-person investment team where I lead our private market efforts.

Trusted Insight: What are the main challenges and opportunities at the Foundation’s office of investments in the last 12 months? Next 12 months?

Jesús Argüelles: There are a few things I would highlight regarding the last 12 months. First, team cohesion matters. This is obvious, but hard to maintain under stressful circumstances. The team is made up of seasoned investment professionals with diverse perspectives, experiences, and personalities. We had to adapt our communication, lean into our strengths, and be mindful of others. The second thing was the benefit of preparedness. We spent a significant amount of time preparing for a potential crisis. Of course, we had no idea it was going to be a pandemic, and this brought unexpected challenges. The work we did beforehand allowed us to focus on unforeseen challenges during the volatility. The third thing was the benefit of a high-conviction and concentrated portfolio. We were able to assess the portfolio quickly because we have fewer relationships. We had confidence that our investment partners would manage through the volatility, course correct when things didn’t go well, and ultimately deliver the performance we needed to pay the grants, including a special payout to fight racial inequities in California.

"[CIO Tim Recker] intentionally built a diverse team that brings different personalities, experiences, and backgrounds to foster cognitive diversity and drive better decision-making."


Trusted Insight: The James Irvine Foundation seeks to promote social equity and opportunities for low-income Californians. Does the investment office also focus on an approach to incorporating diversity and inclusion?

Jesús Argüelles: We think diverse perspectives can lead to outsized performance. The focus on diverse perspectives and experiences is championed by our chief investment officer, Tim Recker. He intentionally built a diverse team that brings different personalities, experiences, and backgrounds to foster cognitive diversity and drive better decision-making. We look for the same thing in our investment partners. This approach attracted me to the Foundation: I knew the CIO and the organization had a commitment to diversity of thought. I saw the principle firsthand given the team’s willingness to hire someone without an MBA and with a pension background.
 

"We believe that the best performers going forward are people who view the world differently."


We specifically start with the premise that we want the best performers. To be the best performer, you need to view the world differently. That means that you have to have a diverse outlook on opportunities. We believe that the best performers going forward are people who view the world differently. There are many tech companies that exist today because someone was willing to back a “new” or “crazy” idea. These companies were backed by partners who viewed the world differently and solved problems in nontraditional ways.

The focus on cognitive diversity acts as the foundation for how we think about our investment process, racial equity, and diversity. I'm proud to say that we've built a portfolio of cognitively diverse partners while keeping performance first.

Trusted Insight: You have an extensive background in the world of public pensions, including serving at CalPERS. How were you able to translate some of those experiences now to the foundation world?
 

"The pensions provided me with a global platform for sourcing, networking, and investment management. I observed the nuances of partnership agreements..."


Jesús Argüelles: My time at pension plans provided a strong investment foundation that honed my approach to manager selection and portfolio construction. The pensions provided me with a global platform for sourcing, networking, and investment management. I observed the nuances of partnership agreements, led restructurings, and learned how to manage LP/GP relationships. I also learned stakeholder management, risk management, and how to construct a portfolio around the organization's objectives. Most importantly, I learned to work with diverse people towards a common objective. Of course, there are differences between foundations and pensions, but the job of selecting the best managers is fundamentally the same.
 

"I encourage everyone to be an ally of someone who is different from them. I’m the product of leadership that invested in me, to bring out the best in me."

 

Trusted Insight: What are some sectors, industries, or geographies where your team is most excited to invest during the next 3-5 years?

Jesús Argüelles: Tech continues to dominate our portfolio and we expect it will continue to deliver returns as more and more of the economy transitions to tech-enabled platforms. For example, tech is helping revolutionize our food system and helps consumers buy more responsibly.

Trusted Insight: Do you have any final thoughts to add?

Jesús Argüelles: I encourage everyone to be an ally of someone who is different from them. And to do it again and again and again. Continuously look for ways to help those who are driven and talented, but who haven’t necessarily followed the ideal path. I’m the product of leadership that invested in me, to bring out the best in me. It started with an internship and I’m grateful for those who invested in me along the way.

View our full catalog of interviews here

The full list of 2021 All-Star Institutional Investors can be found here.
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