2018 Industry Innovation Awards

Foundation

Helmsley Charitable Trust

Rosalind Hewsenian, Chief Investment Officer
Art by John Jay Cabuay

After the financial crisis, when the Helmsley Charitable Trust was just beginning, Rosalind Hewsenian spoke with other foundation CIOs to see what lessons were learned from their darkest hours.

“I looked at their experiences and decided the biggest risk I needed to manage was liquidity, not volatility,” Hewsenian told CIO. Upon a market correction, a reserve of liquidity would give the foundation the resources to make its grant payments and take advantage of new market opportunities. As a result, instead of allocating to equities, debt, real estate, and alternative investments, the $6 billion Helmsley Charitable Trust allocates to safe, liquid, semi-liquid, and Illiquid assets. The decision gives the foundation more flexibility and the ability to take advantage of short-term opportunities.

Her novel approach led others to take notice. When her team presented the different asset allocation, investor and co-chairman of Oak Tree Capital, Howard Marks (who earned billions by investing heavily at the depths of the financial crisis), was serving on the investment committee. Upon hearing the trust’s allocation, he was inspired to use it as the subject of his next “Memo to Clients in 2015.”

Hewsenian’s background holds the perfect trinity for understanding the markets: she spent years each as a consultant, manager, and allocator. Before Helmsley, she was CEO of the global equity firm Clay Finlay, and spent decades as a senior investment consultant serving government pension funds (such as the California Public Employees’ Retirement System) at Wilshire Associates, where she also served on Wilshire’s board of directors and as an equity principal of the firm. She was manager of pensions at PepsiCo and worked for money management fund Dimensional Fund Advisors after earning her MBA from Pace University.

In directing the investment strategy, she’s also been known to watch whether emerging leaders from larger firms form their own independent hedge funds. She believes the spin-outs often have fewer capacity constraints and subsequently, more acute execution, than the multi-billion-dollar hedge funds.

The Helmsley Charitable Trust began its active grant making in 2008, after the passing of Leona Helmsley, (who left nearly all of Helmsley’s estate from her and husband Harry’s real estate empire to the trust.)

As tactical executions in the current markets become more crucial, Hewsenian believes that allocating to asset classes in order to ride the beta wave is not as prudent as it once was.

When building her platform, she provided broad directives to her staff of generalists. ­“The assignment I gave them was we need an investment that has low or no correlation to the capital markets—because the economy and markets are in the late state of expansion.”

Their investment decisions also needed to achieve the foundation’s overarching performance objective of 7%. Since the team is comprised of generalists, they were free to explore where they wanted.

The 12-member investment team returned with the suggestion to invest in Life Settlements: purchasing the life insurance policies of people who no longer need them and wish to have the money for some other purpose. “I asked my foundation colleagues what they thought and they were very concerned with reputation risk. We spent more than a year researching the area, determined reputation risk could easily be managed along with other risks, and we got our Investment Committee to approve a significant allocation,” Hewsenian said. The trust allocated $120 million to Life Settlements, which are due to be much less volatile than the capital markets and provide a steady stream of cash.

When she first started as deputy CIO at Helmsley in 2010, she wanted to start investing in venture capital (VC). The only problem was, Silicon Valley had little capacity for new limited partnerships.

Contrary to the view of many, the investment team went to Israel. When they first flew to the country in 2010, round-trip business class flights were only $3,000 “and there was no one else there,” recalls Hewsenian. They were able to get in on the ground floor of the resurgence of Israeli VC. “Now round-trip flights cost $10,000 because everyone and their brother is there,” she said. “Unlike China, we get better valuations, rule of law, bona fide accounting, and the best and brightest tech minds coming out of the Israeli Defense Forces, which is a source of much R&D, along with their top-flight institutions of higher learning: Weitzman Institute, Technion, Ben Gurion, and Bar Ilam.”

It corresponds to the foundation’s mission as well, which has also committed over $240 million to projects and organizations in Israel that help to catalyze Israel’s contributions in scientific, technological, and medical research. (The foundation also brought electronic medical records to rural regions and helped to provide reliable datasets for epidemiological studies, aiding disease prevention in the southern region.)

The investments in Israel’s hard science and original research paid off. “Now our invested capital valuations are going through the roof,” says the CIO, who refers to Israel as the “Innovation Nation.”

“Based on our success in Israel, we found GPs in Silicon Valley willing to make room for us going forward,” Hewsenian said.

By Christine Giordano

Foundation Finalists

  1. MacArthur Foundation
    Susan Manske
  2. University of Florida Foundation
    William Reeser
  3. Gordon and Betty Moore Foundation
    Danise Strack
  4. W.K. Kellog Foundation
    Joel Wittenberg
  5. The Eli and Edythe Broad Foundation
    K.C. Krieger
  • Rosalind Hewsenian
    Foundation
  • Anne Dinneen
    Endowment
  • Susan Ridlen
    Corporate Defined Benefit Pension Plan Below $15 Billion
  • Harshal Chaudhari
    Corporate Defined Benefit Pension Plan Above $15 Billion
  • Sam Masoudi
    Public Defined Benefit Plan Below $15 Billion
  • Jonathan Grabel
    Public Defined Benefit Plan Between $15 Billion and $100 Billion
  • Chris Ailman
    Public Defined Benefit Plan Above $100 Billion
  • Anthony Waskiewicz
    Healthcare Organization
  • Robert
    Defined Contribution Plan
  • Paul Ballard
    Sovereign Wealth Fund
  • Dan Chu
    ESG
  • David Holmgren
    Collaboration
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