Seattle Children's chief investment officer Stan Ra told Institutional Investor that he has become an increasingly qualitative investor over time, noting that even the results of the quant work his team does is “an output from people’s behavior.”
As a result of this more qualitative approach, Seattle Children’s investment team has “become more comfortable with concentration,” both in the number of securities they hold and managers they work with. This shift in thinking came from looking at the equity portfolio and determining the fund held too many securities to achieve excess returns. So the team pared back the number of stocks in the portfolio and the firms that manage its assets.
Ra's team oversees $2.8 billion in assets, with 70 percent allocated to public and private equities, and the remaining 30 percent in diversifying strategies.
The institution’s CIO is focused on “finding the right partners” — making sure the team understands the people they are partnering with, what their motivations are, and whether they are also invested in the hospital’s mission. Seattle Children’s is the pediatric and adolescent academic medical center for Washington, Alaska, Montana, and Idaho.
“We want to understand the people and why they’re doing the things they’re doing,” said Ra, who is a finalist for the Allocators' Choice Awards.
Carefully Building the Team
As the organization’s first dedicated CIO, Ra was tasked with creating the investment office from scratch — and he has “done it very slowly.” The four-person team is “currently looking for a fifth” member and he wants to make sure he picks the right person.
“I’ve been really careful about hiring,” Ra said. Since he intends for the investment office “to be a small team in perpetuity, each team member has a big impact on not just the work — but the culture.” So, diversity of thought, background, and lived experience is key.
“I’m not looking to build a team of people who think like me. I look for tension in a way that’s constructive,” he said.
He cited his longest-tenured team member — Investment Director James Olsen — as best exemplifying what he’s trying to accomplish. They work well together but have different ideas about the best path forward. “We both really love investing, we both really love the work, but we’re very different people.”
To keep the portfolio strong during sustained market uncertainty, Ra has given Seattle Children’s portfolio enough liquidity to keep it flexible. “Knowing that we have liquidity … helps us get comfortable when markets are pretty volatile,” he said. “We’re not stuck in things, and being able to reposition if we want helps us sleep at night.”
While not looking for markets to get whipsawed, the Seattle Children’s CIO acknowledged that volatile conditions create opportunities — which the institution is well positioned to capitalize on. He emphasized that he isn’t advocating for increased volatility, but when it arises, it creates real opportunities for those with a long-term perspective.
“It’s been a choppy market with a lot of different things going on,” Ra said. “But if you can take a long-term horizon, you can generate long-term returns in this period. That’s what I’m excited about.”
Being on the same page with the stakeholders about duration also helps the team “act rationally when things seem irrational.”
Looking ahead, Ra admits that there are always things to worry about. But he’s confident that the portfolio’s framework — long-duration capital, stakeholder alignment, and a clear institutional mandate — lets the team take advantage of a wide array of scenarios during challenging times.
“I don’t know what the world will look like tomorrow, but having those elements as a baseline is really beneficial,” he said.
