Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Innovation Investing Conference
    • 2022 Defined Contribution East Conference
    • 2022 ESG Investing Conference
    • 2022 DC Investment Lineup Conference
    • 2022 Alternatives Investing Conference
Breadcrumb
  1. Home
  2. Print
August 23, 1999 01:00 AM

BEING CONSERVATIVE HURT: BIG EQUITY SHIFTS FOR HUGHES ENDOWMENT; NEW CHANGES PART OF 5-YEAR COMPLETE FUND RESTRUCTURING

Ricki Fulman
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    CHEVY CHASE, Md. -- The $11.9 billion Howard Hughes Medical Institute has been making major equity shifts.

    Among the changes:

    * Some $1 billion in externally managed equities were rebalanced over a three-month period. "We neutralized the large-cap portfolios away from growth. They now have a slight value tilt," said Gregg Hazlett, director of investments. He has hired one high-alpha manager who specializes in concentrated large-cap portfolios and is on the lookout for more concentrated managers who focus on both growth and value.

    * A search is under way for core EAFE and emerging markets managers. "We're always on the lookout for good managers. No area is set in stone," Mr. Hazlett said. Hughes will continue to overweight emerging markets, which are 18% of its $2.6 billion in international equities.

    * The endowment is considering hiring an external currency manager next year. It now uses an internally managed passive overlay on its international portfolios.

    * Small-cap portfolios, overweighted by the endowment for the past year, are under review. "We may keep them, add to them or change the lineup," Mr. Hazlett said.

    * Richard Pender, the new managing director of equities, has been remaking the fund's internally managed equity portfolios. He is liquidating a portfolio temporarily parked in futures, and investing the proceeds in the stock market.

    Around half of the endowment's $3.9 billion in U.S. equities are internally managed and half are externally managed. All of the international equity portfolios are run by outside managers.

    Total restructuring

    The overhaul of Hughes' equity portfolios comes as part of a complete restructuring of the fund, begun five years ago by Terry Wolfe, who resigned as chief investment officer in June. Mr. Wolfe continues as an adviser to Hughes through August.

    The executive search firm of Russell Reynolds Associates Inc., New York, has been retained to search for a replacement for Mr. Wolfe. In the interim, Mr. Pender, Ellen Safir and R. Jay Kolyer, the institute's three managing directors, are alternating as acting chief investment officer. Ms. Safir now holds the position.

    When Mr. Wolfe started, there was little diversity, he said. He bumped the allocation to international equities to its current 22% from 10%. He also raised private market investments to 13% from 7%, and added international private equity, oil and gas, and "significant real estate," he said.

    To achieve the changes, he cut back on U.S. equities. The institute's asset allocation is around 33% U.S. equities, 22% international equities, 30% fixed income and 13% private investments, with small allocations to absolute-return strategies and cash.

    Most of the $1.6 billion in private investments is invested in funds of funds.

    About 96% of the $3.5 billion fixed-income portfolio is managed internally by a five-member team, said Ms. Safir, managing director of fixed income.

    "We follow a standard core-plus strategy, which uses a broader array of asset classes than our benchmark, which is the Lehman Aggregate Bond index. It gives us broader discretion," she said. The remaining 4% of the fixed-income portfolio is divided between external high-yield and emerging markets managers.

    Performance hurt

    The fund's allocation is conservative compared with those of most endowments, which tend to invest less in fixed income. The heavy weighting in fixed income and international equities during Mr. Wolfe's tenure hurt Hughes' performance during what turned out in the United States to be a "go-go stock environment," as Mr. Wolfe described it.

    The institute can't add to its endowment by fund-raising. So if there is a downturn in the market, there would be no way to recoup losses. In addition, the institute operates under a spending formula set by the Internal Revenue Service for medical research organizations that requires 3.5% of the endowment be spent on its own employees annually. But the institute also gives grants, meaning it has been spending 5% a year during Mr. Wolfe's tenure.

    Mr. Wolfe said he is now considering several career options, which include sitting on the board of a mutual fund company or working in an advisory position in the money management industry in the Connecticut/New York area.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    OCIO, Anchor in Rough Seas
    Sponsored Content: OCIO, Anchor in Rough Seas

    Reader Poll

    May 9, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Are Factors a Thing of the Past?
    Q2 2022 Credit Outlook: Carry On
    Leverage does not equal risk
    Is there a mid-cap gap in your DC plan?
    Out of the Shadows: The Revolution in Shadow Accounting
    The pivotal role of fixed income markets in the ESG revolution
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    May 9, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Innovation Investing Conference
      • 2022 Defined Contribution East Conference
      • 2022 ESG Investing Conference
      • 2022 DC Investment Lineup Conference
      • 2022 Alternatives Investing Conference