It’s rare that a pool of money takes on a personality,
but in the case of this $852 million fund
it is true—the University of Arizona Foundation
has a character of its own.
In no small part this is down to CIO Craig
Barker, the one-man operation in charge of
the foundation. Barker is keen to open his door
to anyone who wants to know more about his
fund and its strategy. His “radical transparency”
involves making details of all the foundation’s
mandates available to donors, beneficiaries, and
current and potential managers on its website.
When Barker says all information is available,
he means all.
“When we meet with managers, whether
current or prospective, we think it’s a much better
discussion when they can see exactly how we’re
positioned, who we’re working with, and how
they might fit into our portfolio,” Barker says.
“We have found this to be a unique approach—I
haven’t had a meeting with a manager where
they weren’t shocked that I shared this information
Fund managers are eager to get involved
with Barker, not least because of the conviction
with which the CIO backs those he deems work best for the portfolio.
Barker recalls attending a conference in Phoenix, Arizona run by NMS Management, an organization with a mission to educate and support endowment and foundation investors. Howard Marks, founder of Oaktree Capital, was on stage and he had put his audience to the test: How much conviction do they have in their best ideas?
“He asked people to raise a hand if they had 2% with a single manager,” Barker remembers. “Then 5% with a single manager. When he got to 10% there were very few hands up in the room—one of them was ours.” Backing a small number of managers with more than 10% of the total portfolio has allowed Barker to establish long-term effective strategic partnerships, proving such relationships are not limited to the biggest asset owners.“Early on we recognized that, as we were
going to grow, we needed to partner with top
firms and make meaningful investments with
them,” Barker says. A relationship with GMO,
started in September 2003, has grown to account
for 15% of the portfolio. Research Affiliates and
Dimensional Fund Advisors also both run more
than 10% of the foundation’s assets.
Smaller positions have paid off, too. The
fund’s sub-$1 billion size enabled Barker and
his consultant Fund Evaluation Group to identify
a specialist Brazilian equity manager last year.
The investment committee approved the move
in September 2015, and by October 1 this year,
the purchase had gained 59% as Brazil began
While Barker is proud of this investment,
it’s the long-term mandates he is more enthusiastic
about. The CIO highlights a “mean reversion”
allocation of 4% of the fund, split between
GMO and Whitebox Advisors. “Mean reversion
is the key to the whole investment world,” Barker
explains. “Over time, things will revert to mean—but they don't do so immediately. These managers
can look quite wrong for a period, but we have this
allocation to enable these folks take bets and be
patient while they come to fruition.”