Allocators Feel Stuck in the Same Roles. Recruiters and Coaches Say That Needs to Change.
Moving from a public pension fund to an endowment (or vice versa) isn’t easy. Here’s how it can go more smoothly.
For an asset allocator hunting for a new job, moving from a role at one type of institution to another can prove challenging.
Industry recruiters and executive coaches say that institutions tend to be insular when hiring — something that can lead to them missing out on talented candidates.
“I can tell you that when an endowment or foundation looks for a replacement CIO, two-thirds of the time, they want someone from another endowment or foundation,” said Charles Skorina, an institutional recruiter, by phone.
Skorina pointed to the bevy of endowment and foundation searches that took place over the past year — many of which resulted in heads of endowments swapping one institution for another. “They’re all just playing musical chairs,” he said.
One reason allocators get siloed in a certain type of fund is that investors at public pension funds, for example, tend to develop different skillsets and contacts than their peers at foundations or healthcare systems.
“By definition, they can’t do certain kinds of investing,” executive talent coach Sloan Klein said of public pension fund employees. The boards at these funds, or state legislatures, may narrowly define the types of investments allowed in their portfolios. CIOs at these funds may not have discretion to invest, instead waiting for board approval to pull the trigger on any investments.
“There are also different tax implications and there’s a higher degree of politics involved in the life of the CIO,” Klein said by phone.
This is different than how an endowment or foundation operates. These institutions tend to have greater freedom when hiring managers, and CIOs usually have discretion when investing.
According to Mike Fontaine, principal at executive talent advisory firm Third Street Partners, allocators at different types of institutions may speak about investing in totally different ways, too.
“For example, the day-to-day terms used by the investment staff at an insurance company, and the concepts they focus on (such as “book yield”), can be wildly different to that of say a defined benefit pension fund, even if there is ultimately a significant overlap of the type of investment strategies they use,” he said via email.
While it’s true that allocators may develop different skills, the challenges they face in moving from one type of fund to another is also reinforced by the way institutions conduct searches for new talent.
“They feel comfortable interviewing with somebody who already knows the way the system works and has the contacts with outside managers,” Skorina said.
That’s not to say that playing it safe is always beneficial for an institution. “What did they get?” Skorina said. “They got someone who knows all the same PE, VC people, all the managers. No surprises.”
According to Fontaine, this is an area where institutions, rather than allocators, need to change.
“We’d also view this as an area of improvement for institutions themselves in their hiring process; strong talent can pick up of these nuances over time, but you cannot teach work ethic, personality, and cultural fit,” Fontaine said.
While allocators wait for institutions to expand their horizons, there are things they can do to make themselves more marketable as job candidates.
Skorina suggests that allocators work to expand their networks by going to conferences and getting to know board members at the types of institutions they’d like to work for. Klein suggested joining an outside investment committee of a small school or foundation, which could differentiate an allocator’s experiences while they remain in their current role.
“You want to be expanding and getting diverse asset class experience,” Klein said. “You want to get experience actually pulling the trigger and making investments.”
Fontaine, meanwhile, suggests highlighting skills that transcend different institutions during the interview process.
“Creativity and a willingness to solve problems and think outside the box are some of the best qualities candidates develop that can be transferable across different allocator types,” he said.