Access here alternative investment news about Zoma Capital's All-In Approach To Impact Investing | CIO Melissa Cheong | Exclusive Q&A

Zoma Capital's All-In Approach To Impact Investing | CIO Melissa Cheong | Exclusive Q&A

by trusted insight posted 3years ago 2957 views

Melissa Cheong is the chief investment officer at Zoma Capital, the private family office of Ben and Lucy Ana Walton. In this interview, she discusses the Walton family's committed approach to impact investing; how Zoma is addressing many environmental and social challenges on a global scale; and why family offices are uniquely positioned to provide flexible long-term capital.

Prior to joining Zoma, she held various positions working with family offices and within the financial services sector at organizations such as Treehouse Investments, Imprint Capital, Plainfield Asset Management, Metzler Bank and Deutsche Bank. Cheong holds an MBA from Columbia Business School, New York and a B.A. in political science from the University of Chicago.

Melissa Cheong was named as one of Trusted Insight’s Top 30 Family Office Chief Investment Officers. The following interview has been edited and condensed.
Trusted Insight: You hold an MBA in finance and social enterprise, and you’ve worked at various organizations focused on impact investing and international development. How does your academic background and experience factor into the Zoma Capital portfolio? 

Melissa Cheong: I've worked with many family offices in the past 10 years, both in an advisory capacity as well as with another family office prior to Zoma. The work that I've done has always been with family offices with a value-based or mission-driven investing interest in their portfolios. In some cases managing a full portfolio with mission-aligned asset allocation frameworks or in others by creating carve-outs from the existing portfolio. In all cases, creating client-customized impact investing portfolios.

"Zoma manages a multi-asset class portfolio of investments for Ben and Lucy Ana Walton. And what we're doing is pretty unique in that it's at scale and the family is committed to an all-in approach to impact investing."

Most of my experience with family offices have been ensuring that their own personal value systems are reflected in their investment portfolios. Merging my prior background in finance with my international development and social enterprise studies really helps with this. A lot of the work that I’ve done for both internal and external clients focuses on both global and emerging-market based social impact opportunities.

Financial inclusion, energy, healthcare and education are all sectors where there are opportunities to leverage technology to advance and scale business innovations in key markets with double-bottom line results. I've always been interested in better understanding the interplay any and potential trade-offs between the financial, social and environmental results of investment portfolios.

Trusted Insight: What makes Zoma Capital unique, considering the increasing number of sophisticated investment offices?

Melissa Cheong: Zoma manages a multi-asset class portfolio of investments for Ben and Lucy Ana Walton. And what we're doing is pretty unique in that it's at scale and the family is committed to an all-in approach to impact investing. This is not like a carve-out of the overall portfolio. They want all of their assets to be put towards a values-based approach, but using the same discipline as with traditional investment analytics and performance-based criteria.

We look at opportunities where macro trends support the thematic impact areas that we're interested in. We seek to generate triple bottom line results, by using our targeted capital to advance or accelerate certain market trends and opportunities. We have a small team that supports portfolio management, pipeline development, origination and due diligence functions. Together, we oversee the existing portfolio and also work to identify other opportunities to advance our strategic priorities and objectives.

"We believe that there's an opportunity to connect wild-caught fisherman in Chile with consumers in Europe and the U.S. who have an interest in or a desire in sustainably-sourced seafood."

We also work a lot with other family offices and we actively share pipeline and deal flow. We’re finding that there are many others who have overlapping strategies or areas of interest in renewable energy and water, specifically. We haven't met as many that are as deeply invested in workforce development.

We're all different, because everyone has different areas of interests and totally different team makeups. I have seen all sorts of staffing structures and ways to leverage outside advisors and managers, depending on how active a family office wants to be in managing various portfolios. One common thread is that we all want to maintain really lean teams. In many cases, these small teams of people dig deep into specialized sectors and actively try to find ways to co-invest and do club deals.

Trusted Insight: Can you elaborate on Zoma's interest in sustainable fish businesses and aquaculture investing? 

Melissa Cheong: Well, we have three focus areas. We invest in energy, water and workforce development. The fisheries work we've done is really about job creation in coastal parts of Chile. We believe that there's an opportunity to connect wild-caught fisherman in Chile with consumers in Europe and the U.S. who have an interest in or a desire in sustainably-sourced seafood. We believe that in Chile, there’s a lot of good that can come out of supporting supply-chain practices used to manage resources more efficiently. We’re trying to help everyone in the value chain to have a longer-term outlook in relation to how the resources are managed.

That's just one example of the work we're doing in workforce development. We think about ways to support economic development and job creation in the communities that we have a personal interest in. In some cases, there's a real opportunity to achieve market rates of return.

Trusted Insight: Family offices don’t have strict mandates like endowments and foundations do. In what nuanced ways are family offices changing how institutional investors invest? 

Melissa Cheong: I think we are extremely different, in that we are taking a values-based approach to investing in our portfolio with very narrow thematic areas of focus. However, we're still trying to use the same amount of investment discipline, and we're being as discerning as we would be with more traditional investments. It just makes it even harder, because it adds a third dimension to the work. Not only are we looking for opportunities to demonstrate commercial rates of return, but we're also trying to do it in areas where the family’s values system is connected.

We're not looking for just financial performance. We're also seeking to make investments that create a social and environmental return in addition to that. It's very different and it's often quite hard, as it makes the universe of opportunities a lot smaller.

We make a lot of venture capital and private equity fund placements and we try to create strategic partnerships with specialist fund managers. This allows us to leverage their teams’ expertise, as almost an extension of our own team in certain key sectors. They'll bring us co-investments or they'll refer deals over to us, if they come across opportunities that might not a fit for them or their own mandate.

While we’re typically passive investors, we’re frequently turned to by fund managers and brought in as a co-investor, as we can often move faster and be more flexible than more traditional sources of capital. In many situations, family offices are becoming highly sought-after partners, as we have more staying power than a fund does, as we don’t have to cycle through raising third-party capital.

Trusted Insight: What’s the number one lesson that you’ve learned throughout your career?

Melissa Cheong: I'd say invest in building strong relationships and surrounding yourself with great advisors and a strong team. This kind of work is impossible to do with the benefit of only your own perspective. You really will be able to develop a better set of results if you have the opportunity to benefit from the perspective and advice of others. I think it's the collective body of experience of your peers and those around you, within your set of relationships that will allow you to most effectively improve your work. It will also allow you to generate better deal flow and opportunities that you need to be successful.

I’ve also learned that every family is different and there are no two family offices that look exactly alike. There will always be differences in investment approaches, the way that family offices are staffed and with the way, they think about portfolio construction, capital deployment and due diligence. However, I’ve found that there are a ton of benefits that come from just sharing your own experiences with other family offices and vice versa. This helps when you’re tackling both big and small day to day challenges, and just need some sort of the point of comparison as you’re working on to finding solutions.

Trusted Insight: Any final thoughts?

Melissa Cheong: I think family offices are positioned to lead the market in integrating values-based approaches to managing investments. Family offices are very uniquely positioned to play a really interesting role in providing flexible long-term capital. I view this as being a huge opportunity for myself and for my peers, as there's all of this exciting work to do.

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