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Roz Hewsenian: Gladly Would She Learn, and Gladly Teach

Rosalind Hewsenian • 20 July 2020

Hewsenian's approach to investing has harnessed a lot from her teaching days

Dealing with many of those in the investment world is a lot like teaching special ed students, according to Rosalind Hewsenian, CIO of the $6.2 billion Helmsley Charitable Trust. She ought to know. Hewsenian began her career teaching learned-challenged special ed students before going on to become a high-level investment manager, plan sponsor, investment consultant, and now CIO. In dealing with the investment community, Hewsenian says, “The biggest benefit of having been a teacher is I automatically think of how to break down a discussion or argument into its components parts in order to get the point across. When you’re working with disabled children you have to work at a level and pace that they can deal with.” And – with her tongue perhaps only partially in cheek – she suggests the same may be true with investors. Her persuasion strategy is, “to take information, carve it up into small bites and feed it out sequentially. You need to get a lot of small yeses, or you can get a big no,” Hewsenian says. 

Hewsenian has relied on her pedagogical skills in shaping a distinctive approach to investing at the Helmsley Charitable Trust, an institution whose assets arrived in a different fashion than most foundations and whose portfolio also looks different than many of its peers.

RozWhen Leona Helmsley died in August 2007, the bulk of the Helmsley fortune went to the Leona M. and Harry B. Helmsley Charitable Trust, creating what would become one of the world’s largest foundations, with a focus on supporting medical research and healthcare projects. Many foundations start life with the gift of a diversified portfolio of stocks and bonds, but the Helmsley fortune was in real estate and included trophy properties like the Empire State Building and that could not exactly be sold in overnight.

So from 2008 through 2014, buildings would periodically be sold and sizable dollops of cash would show up on the foundation’s doorstep. The Empire State Building and the Park Lane Hotel, for example, brought in a billion and a half dollars.

In putting this money to work, Hewsenian’s touchstone has been liquidity. Perhaps it’s because Hewsenian joined the foundation just after a landmark financial crisis, and she saw other foundations that had made multi-year grant commitments and were suddenly scrounging around for cash to fund them. In contrast to pension funds and college endowments where new money flows in, with foundations, “The money you have is the money you have,” she says. Foundations typically plan to exist in perpetuity, yet by law they have to give away 5% of their assets in grants each year, and that’s based on trailing assets values, “which exacerbates the pinch when there’s a downturn,” she says, so “the lesson is, you need to limit large cash shortfalls.”      

She adds, “It became clear to me that the real risk to manage is not volatility; I needed to manage liquidity. So, our asset allocation is very different from everybody else.” Instead of organizing the portfolio by asset classes, she thinks in terms of liquidity tiers defined by “how fast we can get the money.” The spectrum runs from “safe” assets like investment grade bonds (immediately liquid); to “liquid assets,” such as public equities (saleable within 60 days); “semi-liquid,” such as hedge funds (up to two years), and “illiquid,” such as private equity (which can take more than two years). 

Despite the concern about liquidity, Hewsenian also believes private markets offer an attractive liquidity premium for long term investors like foundations. As the foundation has grown, illiquid private market investments have come to comprise about 35% of the portfolio. Hewsenian’s theory is, “if you’ve got enough cash to operate for two years, which is the average length of time of the worst bear market, then you can take on more liquidity risk and get paid for it.” And not incidentally, having plenty of cash facilitates capitalizing on investment opportunities that may come along.

Meanwhile, the foundation has about 44% of its assets in public equities and hedge funds, and 21% in fixed income. Hewsenian is not a fan of investment grade bonds: “We’re looking to make our money elsewhere,” she says adding, “We view bonds simply as a tool for managing liquidity, nothing else.” But she needs bonds because “our goal is not to have the highest rate of return but a consistent rate of return.” 

Beyond the usual asset classes, she’s had several brainstorms. For example, she’s chosen to invest in spinoffs from successful hedge funds, figuring the startups are likely to combine tested ideas with renewed energy; she’s allocated to Life Settlements, the controversial purchases of life insurance policies from prospective beneficiaries; and when she couldn’t get into good Silicon Valley venture capital funds, she made a pilgrimage to Israel, finding attractive VCs before many others discovered “startup nation.” The money is all managed externally, but overseen by a dozen Helmsley investment staff members. The goal is an annual return of 7%.

As a result of concern about market levels combined with some timely asset sales, the foundation started this year with some 23% of its assets in investment grade bonds and cash, “so when the crisis hit, we didn’t lose as much money as some of our peers,” Hewsenian says. “We were sitting on more than enough bonds and cash to dampen the volatility. She adds, “We started to put money to work after the sell-off – not dramatically” -- but we bought some equity ETFs and some small cap stocks. We also put some money with a fixed income manager to capitalize on lower bond prices.” Overall, she says of these moves, “It’s good we did it because the markets rallied, and we’re close to our all-time high in January 2020.” But she says, “We are sitting on liquidity because we think there’s going to be another leg down.” 

While Hewsenian is confident that the broad contours of the current asset allocation are sound, she’s looking for some new themes within them. But “we haven’t settled on anything yet,” she says.

As she ponders these lofty issues, in some respects Hewsenian, the former schoolmarm turned Wall Street titan, has moved far from her roots – and in some ways not so much. Her office – in The Helmsley Building, of course, on Park Avenue – is only a mile or two from where she was born in Queens. She’s the granddaughter of Armenian immigrants who left during their time of troubles with Turkey between 1915 and 1920. Like many women of her generation who were the first in their family to go to college, she majored in elementary education and got a job as a special ed teacher in the New York state.

“I loved teaching,” she said, but this was during the city’s financial crisis in the 1970s, and every summer it would not be clear until August whether or not she would have a job in September. She decided, “this is not a way to live your life,” and went back to school, earning an MBA at Pace University, and then she got a job in finance at the Maxwell House Coffee division of General Foods (now Kraft Heinz).

From there she went to Pepsico, where she worked on the pension fund and developed a taste for investing. One of the managers she had hired, Dimensional Fund Advisors hired her, and she moved to Santa Monica. DFA had offices in the same building as Wilshire Associates, which recruited her in 1985. She would stay for 21 years. “I loved it,” she says, noting that explaining things to clients, particular when they are investment amateurs like the civil servants dominating CalPERS board, is a lot like executing a lesson plan, “so I found a way of teaching and actually making money at it.”

She would become the consulting division’s highest revenue producer and a member of the firm’s board of directors, but she left Wilshire in August 2006. At that point, she gave several talks at various asset managers including Old Mutual, the South African financial services firm that had acquired a fleet of U.S. asset managers. They promptly invited her to replace Francis Finlay, the retiring CEO of Clay Finlay. She joined Clay Finlay as CEO on November 7, 2007, a day when the market sold off 400 points, foreshadowing a difficult time for investors, and three years later the firm shut down.

Meanwhile, Linda Strumpf, the former CIO of the Ford Foundation was advising the newly endowed Helmsley Foundation, and she brought Hewsenian to the attention of the foundation’s board. She started out in 2010 as deputy CIO under Strumpf, and succeeded her in 2012. The Helmsley trustees, who included two of Leona Helmsley’s grandchildren and her personal lawyer, were investment neophytes, so once again Hewsenian had to use her teacher’s voice.

Given her wide-ranging experience, Hewsenian says she knows where all the investment community’s bodies are buried. She’s often been one of the first women in each of her jobs. And while she’s a firm believer in diversity and inclusion, she is less inclined to advocate relying on special diversity programs and more likely to counsel women that the way to enlarge their role is to work harder and be smarter than everyone else. “I let my competence speak louder than my words ever could,” she says.

Although Hewsenian is a walking bundle of strong opinions, she combines a sharp tongue with a subtle sense of humor. When she was given a “lifetime achievement award,” for example, her response was to ask: “Am I dying?” Hewsenian lives in Stamford, Connecticut with her husband. She enjoys entertaining at home and laments that COVID-19 has put that on hold. Another favorite pastime is music: “My sister and her spouse and my husband and I started getting tickets to all the concerts we couldn’t afford when we were younger.” They’ve been to see the likes of Billy Joel, Elton John, The Four Seasons, Phil Collins, and Three Dog Night. Few of those who’ve heard one of her learned discourses on the finer points of asset allocation or her impassioned argument on behalf of liquidity would guess Roz Hewsenian is a closet rock and roll groupie. 

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