2018 Industry Innovation Awards

Collaboration

Hartford HealthCare

David Holmgren, Chief Investment Officer
Art by John Jay Cabuay

David Holmgren, chief investment officer  of Hartford HealthCare, is known for his collaborative nature.  He is always speaking on panels, sharing on social media, and otherwise imparting his deep knowledge to others in the financial world. He is an Olympic networker, so he has no shortage of listeners.

“It’s about strengthening the community,” he says. “Think of it as a ride-share. A car sitting idle is of no use to others. There’s an efficiency in sharing.”

Holmgren says he is “happy to share my experience, particularly with rising CIOs at other hospital systems.” He helps them with matters of governance, with hiring consultants, with getting outside speakers, and of course with the myriad details of running the investing side of medical institutions. “I’ve been talking to people at two multi-billion-dollar health systems recently, helping to give them a jumpstart,” he says.

Holmgren is widely recognized for his long-term, top-quartile performance record and often is referenced as an industry expert on institutional manager selection, asset allocation, and risk function design. 

He joined Hartford HealthCare as its CIO to build a comprehensive, sustainable, best-in-class structure by efficiently combining its pension, endowment, and insurance assets. Prior to joining HHC in May 2010, he served as principal investment officer for the Connecticut State Treasury for four years and as executive vice president and senior portfolio manager at DSI/UBS Asset Management for 13 years.

The HHC pension fund and endowment portfolio, with $3.3 billion in assets, returned 12% for the fiscal year ending June 30, easily topping its benchmark of 7.4%.

Often, he partners with others to get the job done. For instance, he recently joined with another hospital organization, Mercy Health of St. Louis, to do due diligence on a new fund that Neuberger Berman intends to launch. The questions, of course, were whether to invest in the first place, and then how much. This joint-interviewing approach obviously has the benefit of bringing more expertise to bear on evaluating a possible investment—and is a testament to the trust that Holmgren has cultivated in other CIOs. “We’re willing to be a good partner,” he says.

Further, his ability to build relationships has helped HHC get in on great deals with venture capitalists, hedge fund managers, and infrastructure operators, whose funds typically are oversubscribed. Within this current year, for example, Holmgren’s reputation as a good partner helped to secure investments in the sought-after VC offerings of The Column Group in the US and GGV Capital in China.

He makes a point of avoiding passive investing, preferring an individualistic and at times contrarian approach, which he believes gives a better chance of superior returns. “The investment office must be an actor,” he says. “So no passive instruments.”

Holmgren has a sharp eye for evaluating risk. “Our fund performance is really strong,” he declares, with justice. “Because my board allows me enough rope to underperform in the short run.” As he puts it, Holmgren wants HHC’s positions to be “unique” and “non-consensus” because “running with the herd is not a winning strategy.”

One example of his outside-the-box bent is HHC’s $100 million investment in Arya, a hedge fund that asset management colossus Alliance Bernstein created. The investment of HHC seed money into this vehicle stemmed from Holmgren’s sense that he needed to quickly maneuver out of a growth orientation to a more market-neutral strategy. His best managers for that like Citadel, however, were at capacity.

Then along came this perfect opportunity due to the unwinding of Visium Asset Management—a top-performing hedge fund business that came a-cropper in 2016 because of insider trading charges at an affiliate’s fund.

Visium’s global market-neutral, long/short fund was an unnecessary casualty of this unfortunate incident. “Alliance Bernstein purchased a closed hedge fund’s investing talent,” he said. And as the asset management giant was involved “there would be no question about capitalization and back-office functions for the new venture. We had comfort in that.”

Part of his interest in this deal resulted from his widespread connections. After all, as he points out, “we don’t select products, we select people.” That philosophy is what also allowed Holmgren to move with dispatch, given the involvement of Robert Kim, Arya’s CIO, formerly of Visium. “I’ve known Bob a long time,” he said.

Which is not to say that Holmgren stinted on doing his legendary due diligence. His team interviewed eight of the fund’s 23 portfolio managers in long, exhaustive meetings.

Plain-vanilla is something HHC likes going beyond. That’s best seen in its investment in the Andean Social Infrastructure fund from Aberdeen Standard, which has sought to raised nearly $300 million for projects to improve nations that include Colombia and Peru—involving health, education, housing, transportation, and waste management. Governments in the region had agreed to stand behind the endeavor, making it less of a risk. From Holmgren’s standpoint, a big attraction was that the projects aren’t economically sensitive to the US. Plus, they are a good inflation hedge: When inflation rises, so does the value of these physical assets.

As with much of what he does, Holmgren find the reputation he has built, in tandem with the relationships he has fostered, make the incremental difference. For him, “it’s about pooling resources. There is a performance dividend from being a good partner.”

By Larry Light

Collaboration Finalists

  1. CalSTRS
    Chris Ailman
  2. Texas Teachers
    Jerry Albright
  3. UC Regents
    Jagdeep Singh Bachher
  4. CBUS
    Kristian Fok
  5. PA PSERS
    Jim Grossman
  6. HESTA
    Sonya Sawtell-Rickson
  • 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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