When Joel Wittenberg was named Chief Investment Officer of W.K. Kellogg Foundation, he faced an immediate challenge: How could he attract great talent to Battle Creek, Michigan in order to build a superb investment team? As he notes, “The road to success is all about having the right team.” Nearly a decade later, the results are in. His innovative approach to building an investment team has proven to be a success, not only in generating positive returns but in holding to the foundation’s mission as it relates to their hiring practices and investments.
Wittenberg’s first decision was to create a team of generalists, running counter to the trend of building a “superstar model,” which has become the industry standard for recruiting top talent with very specific areas of expertise. He found that the idea of being a generalist attracted a diverse group of intelligent individuals that were driven by knowledge. These candidates exhibited a strong interest in multiple areas of investing, and proactively educated themselves about new industries in which they did not have any background.
This was the beginning of creating a competitive advantage within the investment community based on the principles of diversity and equality, both of which are core pillars of the W.K. Kellogg Foundation’s mission.
Wittenberg is proud that he has built a diverse team––75% of his team are people of color or underrepresented groups –– who enjoy working together because they spend the time to appreciate and understand their differences, consistent with the work of the Kellogg Foundation. There has been zero turnover at the leadership level of the diversified assets investment team in nine years. They are all reaching the maximum potential of their talent. As he notes, “All of my directors will eventually be CIOs.”
But Wittenberg’s proudest moment was when the team voted down one of his proposed investment strategies. This is an example of how he has built a culture that encourages everyone to have frank conversations and if necessary openly challenge an idea regardless of where the idea comes from. In this culture, every director on the team has equal say in the foundation’s investment decisions.
A Diverse Team of Generalists
As one of W.K. Kellogg Foundation’s core pillars, racial equity and racial healing are paramount in the foundation’s mission. It is gratifying that the investment team serves as a direct reflection of this principle, serving as a proof point for the foundation’s DNA. In fact, the combination of this diversity with the generalist structure has helped to limit the unconscious bias that plagues many investment firms with homogeneous staffing structures. Wittenberg says that having team members with diverse backgrounds has led to more unique perspectives being shared during the analysis of investment opportunities––a true competitive advantage.
The foundation has also benefited from this structure because the team has been able to identify opportunities that other investors may have missed because, as generalists, they don’t feel obligated to invest in specific industries or types of investments solely based on their expertise or past experiences. The foundation’s portfolio includes a unique mix of investments across real estate, hedge funds, distressed securities, technology and others.
Additionally, since 2008 the foundation has managed a $100 million Mission Related Investment (MRI) fund that specifically identifies US-based investments that align within their mission. This includes companies that are looking to solve issues, such as racial inequality, lack of education and limited access to healthy foods. A particularly interesting investment strategy has been identifying artificial intelligence platforms that are geared towards diverse communities. Since the mostly Caucasian investment community and corporations have focused more on the technologies that benefit the Caucasian consumers, this was a different approach that the Kellogg MRI team is convinced will prove successful––an insight that may not have been identified if their team wasn’t so diverse, comprising so many different perspectives.
A Collaborative Five-Step Process
In order to build this team and culture, Wittenberg needed to create a process for vetting investments that gave everyone in the room the ability to review and discuss the same opportunities. As such, he created a straightforward process for introducing and vetting investments, as follows:
- Initial proposal – A member of the team will propose an idea for investment in any sector with a manager they’ve identified.
- Initial due diligence and formal proposal – The “sponsor” who proposed the idea completes an initial round of due diligence and creates a formal proposal that is circulated to the team.
- Initial Vote – The team comes together to review, discuss and challenge the proposal. When the discussion is over, they vote. Every vote counts equally. Wittenberg does not believe that a CIO should dictate investment strategy; it’s a team effort.
- Deeper dive of due diligence – If the investment passes, two members of the team conduct a second round of due diligence and hones the strategy, which is developed into a final presentation.
- Final Presentation and Final Vote – The final presentation is given to the whole team and provides a third opportunity for anyone to challenge or highlight details around the idea. If it passes this round, they make the investment.
This simple and straightforward five-step process has created an environment in which any member of the team can propose an idea or challenge one. They only move forward on investments if they agree as a team, but once they agree, the structure allows them to move quickly. This has led to short-term opportunities to make investments that many other organizations of a comparable size have missed. The entire team feels ownership over the investment as well.
The process has had such success that the investment team enjoys the latitude to make investments without board approval, only notifying them after the investment has taken place.
Most importantly, the team has successfully outperformed all of its benchmarks during the last nine years, and has provided returns essential to growing the important work that the W.K. Kellogg Foundation does on a daily basis to benefit our society.
By Maryling Yu, Chief Marketing Officer