The Elite CIO You Don’t Know

David Swensen, Scott Malpass, Seth Alexander — and Ana Marshall, the CIO of the $9.5 billion William and Flora Hewlett Foundation.

Ana Marshall, CIO of the 9.5 billion William and Flora Hewlett Foundation (Illustration by Anje Jager).

Ana Marshall, CIO of the 9.5 billion William and Flora Hewlett Foundation

(Illustration by Anje Jager).

If anyone stands to benefit from the fearsome peer competition among elite U.S. nonprofits, it’s Ana Marshall.

The chief investment officer and a vice president of the $9.5 billion William and Flora Hewlett Foundation, Marshall, along with her small team, is renowned in Silicon Valley for delivery of alpha, reliability, and an ungettable roster of asset managers. The portfolio is 100 percent actively run by investment firms that are at least 90 percent closed to new investors, Marshall estimates.

She took over as chief investment officer in mid-2013 from Laurie Hoagland — once called “the other sage of Omaha” — and has led her lean-by-design team to returns that surpass most of the Ivy League’s. Having gained 8.3 percent net of fees over the three years through December and 9.9 percent over five years, Hewlett is a force to reckon with. The fund’s performance is easily top-decile for three- and five-year returns among peers — $1 billion-plus endowments, foundations, and nonprofits that report to a major private database.

And yet Marshall is among the most vocal critics of the “crazy” returns horse race that has taken hold — and taken victims — among brand-name American university and charitable funds. Team Hewlett rolls with the best of them, including Massachusetts Institute of Technology, Princeton University, Carnegie Corp. of New York, and Columbia University.

But whereas others fetishize secrecy and the next big thing, Marshall delivers returns while staying open to working with large, well-known asset managers and keeping her eyes on her own holdings. That’s helped put her in a league of the most successful investors among endowments and foundations, including Yale University’s David Swensen, University of Notre Dame’s Scott Malpass and MIT’s Seth Alexander. Before a team trip to Asia, Marshall spoke with Senior Staff Writer Leanna Orr of Institutional Investor’s Alpha about the portfolio, her philosophy, and investing the foundation endowed by a Hewlett-Packard co-founder.


ALPHA: In investment circles the Hewlett Foundation has a reputation for being very tough to beat in long-term performance. How would you characterize the foundation’s performance?

Ana Marshall: On a three-, five-, and ten-year basis, we are always at least in the top ten of our peers.

Who do you see as your peers?

MIT, Yale, Princeton, the Packard Foundation, Notre Dame, the MacArthur Foundation, Columbia, the Ford Foundation.

The biggest names in U.S. institutional investing, then. How do you define your investment philosophy?

My investment philosophy summed up is to have really bright portfolio managers. If you construct a portfolio with a concentrated roster of highly skilled managers, and you are able to diversify your sources of beta and your sources of alpha, over time you will be able to deliver consistent, superior returns. On this investment team we don’t think of ourselves as superclever. We think our managers need to be superclever. But we just have to be really good at picking our managers.

What the board and Hewlett Foundation leadership want me to do — what they hired me to do — is to generate consistent returns that over time allow us to pay out 5 percent to 5.25 percent and maintain the value of the endowment. They want me to beat the benchmark every year within a certain level of risk. If I were to give them a 20 percent return one year, I think they’d flip. Remember that children’s story “The Tortoise and the Hare”?

Of course.

We’d like to think of ourselves as the tortoise.

Walk me through the foundation’s portfolio. What have you got, and how do you structure it?

We think of it, at the very high level, in thirds. We have a third in public equity, more or less; a third in private equity–type vehicles, including venture capital and buyout; and a third in what I call intermediate-risk assets or low-risk assets, such as distressed credit, real estate, fixed income, and absolute return. There is no specific hedge fund strategy bucket — investments in those vehicles are classified by asset class. For equities we tend to do multistrategy managers, and credit guys are in the credit bucket. The absolute return that we do have is the zero-beta kind of absolute return. And we tend not to do any long-short.

No long-short equity?

I am prejudiced, but I don’t believe that the long-short guys generate a lot of consistent alpha...

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