Class of 2017 Forty Under Forty

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Carlos Rangel Director of Investments, W.K. Kellogg Foundation
(Battle Creek, MI) 39
Carlos Rangel
(Art by Marcellus Hall)

Carlos has the patience and curiosity of a seasoned investor. He knows markets and can go toe-to-toe with managers.

How have you been a change agent at your organization? What have you done that you’re particularly proud of?

I am incredibly proud of the team culture that we have built to support the Foundation’s mission. As a private philanthropy, the W.K. Kellogg Foundation is committed to ensuring all children, families, and communities—regardless of race or income—have opportunities to reach their full potential.

As a small team of generalists, we have enhanced our effectiveness by focusing on improving our decision-making process, investment philosophy by asset class, ability to collaborate, and our operational capabilities. Given our team-oriented culture, every success is shared.

Within our team approach, I was a strong advocate for starting a co-investment program. The program has grown into a multi-asset class, global effort that enables us to improve our net-of-fee portfolio returns. Our co-investments benefit from the deal flow generated from being one of the largest US private foundations, the generalist model to evaluate opportunities unconstrained by allocation buckets, a nimble decision-making process, and a strict investment discipline.

One of our first investments showcases the potential benefits. We upsized a high conviction idea under attractive terms and already monetized it. The manager benefited from a stronger client relationship that led us to seeding a new strategy. The close relationship also inspired this manager to find its own way of making a difference in the communities the foundation serves.

What is the asset class or investment that keeps you up at night, and why?

On a long-term view, the auto industry. The sector is ripe for disruption. Given the size of the industry, there could be a number of investment opportunities from the long and short side.

What methodologies have you adopted within your institution?

I led an effort to implement risk management tools and processes. These tools let us look at the entire portfolio in a standardized way for the first time. Risk considerations have added a new dimension to our awareness with a quantifiable impact on our decision making.

Where do you fall in the passive vs. active debate?

Our internal experience supports a bias towards active management, but it is an arms race to deliver excess returns net of fees consistently. The average investor without access to the top active managers is likely better off investing passively. Passive investing still reflects a view of the world given the construction of passive benchmarks that overweight the largest names. You cannot just set it and forget it if you are investing passively.

What are some changes you’d like to see the institutional investing community make in 10 years?

The space and our society would benefit from increased diversity, equity and inclusion.  There is a strong business case for it.

Who is a manager you don’t currently work with whose brain you’d like to pick?

Zhang Lei from Hillhouse Capital.

Ideally, where would that meeting take place?

David Swensen’s office … you did say ideally.

What is the software investment tool that helps you most?

The Undo button. Backstop and BarraOne.

What would improve the relationship between you and managers?

For the most part, we have excellent partnerships. Transparency and occasional unjustifiable fees and/or terms tend to be the issues that come up.

Why did you choose your current path?

I’ve always been fascinated by the capitalists that shape our world. There is no better job to see them in action while channeling some of that ability on behalf of philanthropy.