For Rosalind "Roz" Hewsenian, it would seem there are no due diligence-free zones.
Over a career that's included a 20-year stint with Wilshire Associates (now Wilshire Advisors) and, more recently, 13 years as CIO of the $8.2 billion Leona M. And Harry B. Helmsley Charitable Trust in New York, the industry veteran has taken a no-stone-left-unturned approach to sizing up money management firms.
"One of the best insights into a money manager I ever got," recalled Ms. Hewsenian in a recent interview, "was in the ladies' room," querying an administrative assistant of the firm she bumped into there.
"She was completely unguarded and I found out a lot," said Ms. Hewsenian, who's been vetting managers for more than four decades.
Looking at CEOs and chairmen of the board is an obvious place to start when assessing a money manager, but engaging employees in a conversation, "asking them how they're doing, what's on their minds, you learn things," just by being present, she said.
Going that extra mile could continue to come in handy after Ms. Hewsenian fulfills a pledge she made in 1979 — when she joined General Foods for her first job out of business school — to retire on Dec. 31, 2023, following what will be more than four decades in the workforce.
"My post-retirement plan is to serve on boards (where) I can bring to bear all that I've learned about management in the last 45 years … the hard way, through grit and experience," she said.
At present, Ms. Hewsenian serves on the board of OCIO firm Partners Capital Investment Group and "I'm under serious consideration for a second and I'd like a third," she said, adding that would be about all she could handle without "shortchanging anyone."
"I think that I have a lot to offer in that regard, primarily in the people management department (because) let's face it, most corporations don't fail because they don't have a great product … it's typically management and execution issues that cause companies to fail ... so you learn how to manage the people issues."
In order to do so, "a good board person will have a good relationship not only with the CEO" but with all of the senior people at the firm, which allows you to triangulate information — getting a sense of the challenges facing the company and how to overcome them, Ms. Hewsenian said.
She pointed to "soft skills" — the ability of board members to exercise their obligation to speak up at meetings in a way that's constructive and appropriate, supportive and professional — as both underappreciated and increasingly important to making boards work effectively, particularly as an ever-greater focus on diversity brings people together who are very different from each other. That is in contrast to 50 years ago when the norm was all-white boards whose members went to the same schools or belonged to the same clubs, she said.
At the end of the day, there's as much art as science to effective board work or due diligence, said Ms. Hewsenian, conceding "I've been surprised and I've made mistakes."
"You're making a judgment about the people" — with the CEO or managing partner being the most critical because they set the tone and the culture for the rest of the organization — and on that score, Ms. Hewsenian says she believes she's gotten pretty good at distinguishing between "fully formed adults" serving on a board for the right reasons and board members more concerned about themselves than their organizations.
Ms. Hewsenian said the biggest change in the industry since she joined Wilshire roughly 40 years ago has been how readily available information — a sought-after commodity earlier in her career — has become.
Today, "you can get all the information you want from almost any source so deciding what's important and the speed with which you have to make the decision" are key.
"Everything has increased in terms of momentum … so decisions that we might spend weeks working on, we might only now have a couple of days" to satisfy a business community demanding faster answers, Ms. Hewsenian said.
And that, in turn, places a premium on developing "a really good gut instinct," she said. "You'll never have the time to get to 100% analysis to get to the decision. That last 10% you've got to be able to get to on your own through your own gut," she said.
Meanwhile, as Ms. Hewsenian prepares to hand over the reins for Helmsley's investment team at the end of the year to Joshua Fenton, Helmsley's director of investments, she's facing some of the same challenges other institutional asset owners with heavy allocations to private markets have been grappling with following the sharp pullback in valuations for publicly traded stocks and bonds in 2022.
"We have a higher allocation to private capital than we'd like" due to the denominator effect, she said. The denominator effect occurs when a sharp drop in valuations for publicly traded stocks and bonds leaves more resilient private market exposures accounting for an increasing portion of total portfolio assets.
"We've been doing things to work it down," said Ms. Hewsenian, while declining to provide any details regarding asset allocation. "We've sold some things in the secondary market. We've discontinued re-ups with some of the fund managers that we … previously funded, all of which are in an effort to focus the portfolio," she said.
And the longtime CIO hinted at bigger shifts to come. The coming 15 years are likely to be different from the past 15 when it comes to inflation and interest rates, auguring "a different perspective in investment selection," she said. How much and what kinds of private market exposures institutional portfolios should have going forward needs to be reviewed and "we are considering all of that," Ms. Hewsenian said. No decisions have been made but there's clearly a need to look at investments that can withstand higher cost of capital and higher inflation, she said.
Meanwhile, Ms. Hewsenian said she sees the effects of this year's rebound by publicly traded equities — which some money management executives contend has diminished the denominator effect and its impact on inhibiting further allocations to private markets — as being to some extent diluted.
Many of Helmsley's private equity managers have chosen to hold the publicly traded stocks they obtain when they list their portfolio companies "for longer than what they had done in the past, instead of distributing it to us immediately. So we noticed that the allocation of public equity within our private capital segment has increased," she said.
