2019 Industry Innovation Awards


W.K. Kellogg Foundation

Joel Wittenberg, Chief Investment Officer
Joel Wittenberg
Art by Nigel Buchanan

Joel Wittenberg, chief investment officer of the W.K. Kellogg Foundation, credits a long-tenured, strong investment team as one of the keys to the foundation’s success.

“If I had to state how all of this gets done, it really all comes back to the team I’ve put together,” he says.

The team has been together for nine years, just one year shy of Wittenberg’s own tenure as the foundation’s CIO. Having a team that’s worked together for many years reflects his view of focusing on the long term, which he says is a strength for an institutional investor. The W.K. Kellogg Foundation was established in 1930 and has $8 billion in total assets, with a little more than half in Kellogg Company stock and the rest in a diversified portfolio.

“Every investment we make is for the long term. We don’t make short-term investments; we don’t trade the portfolio. That’s just a recipe for disaster,” he says. Instead, the team makes adjustments once or twice a year in the portfolio’s structure, but only based on long-term opportunities. 

Decisions are made as a team after much discussion. For example, he says, when a team member identifies a potential investment manager, the foundation requires at least two team members to meet with that manager.

“The person who’s championing that manager then has to come back to present that manager to the team. We’ll go through a formal due diligence process with the team, and the champion has to explain why they liked that manager and get buy in. It’s a very robust process,” Wittenberg says.

The performance rankings of the preponderance of their managers are in the top two quartiles, he says, and these managers also have a history of managing the downside. Achieving high returns is important, but so is not losing money.

“I’ve been in these markets for so long and have gone through so many of these bear markets. The key to winning is losing less in the bad markets. If you can just do that, you come out far ahead over time, with lower volatility,” Wittenberg says.

He has a value process for investing, reviewing the “simple stuff” such as cash flow and buying assets from a bottom-up perspective and knowing those assets better than anyone else. The team doesn’t take a top-down view of predicting the market.

Having a diverse investment team is just as important to the foundation’s success, Wittenberg says. “We go out and recruit the best people we can. And what we ended up with is a team with African Americans, Latinos, Native American, Jewish, Muslim—a great team of people with diverse backgrounds,” he says. “This is one of our competitive advantages and makes our work more fun.”

Those diverse backgrounds not only offer different perspectives, but the composition also reflects the communities the foundation serves, he says. The foundation’s founder, Will Keith Kellogg, wanted to improve the well-being of children, and part of that is going into communities of color. “As a foundation, we bring a racial equity lens to every aspect of our work,” Wittenberg says.

Having a longer-term view means being patient. The foundation had success with its venture capital portfolio, but the team realized there are greater benefits to being very early investors. Wittenberg says the foundation teamed with Trusted Insight to develop a group of newer managers starting out, who they hope will lead the great funds of the future. “By working with Trusted Insight, they help us do the due diligence, make the introductions, and help us identify those firms,” he says.

The team is also preparing for changes in the market cycle by focusing on managers and private equity funds who will be able to implement a distressed portfolio for when the time comes. “We don’t try to predict when things are going to happen, but what we know is that at some point there will be distress again and higher defaults in the market,” he says.

The team has created a process to allow it to invest when the time comes, identifying indicators that might signal the time is near, such as looking at ratios of defaulted securities in the market and following the spreads on corporate bonds in the below-investment-grade sector.

Wittenberg says the W.K. Kellogg Foundation is also looking into artificial intelligence and machine learning in investing and that it is identifying how it will use the technology. “This is a game changer, and we’re trying to take advantage of that, whether it’s in our public equities, our venture capital, our private equity. We think it will be the key to success over the next 10 years,” he says.

The foundation has also devoted $100 million of its endowment for mission investments, with its goal to drive capital to communities of color, Wittenberg says. “Children are at the heart of everything we do at the Kellogg Foundation,” he says. “But for children to thrive, their families need to be able to work and their communities have to be equitable places for opportunity.” The mission investments team has reported to Wittenberg for the past nine years, and he says he feels as if the foundation now has the formula for success. “In order for mission investments to work, you have to focus on mission as well as investment returns, and that’s been a huge struggle for the mission-related investment industry. It’s not an either/or, it’s both,” he says.

Some of those investments include Urban Partner Bank’s Entrepreneurs of Color Fund, which assists with financing to revitalize economically depressed communities in Detroit, and Revolution Foods, which serves healthy school lunches daily to low-income children.

The foundation hired Cynthia Muller, who Wittenberg says has been involved with mission-related investments for nearly her entire career, as director of mission investments. “Working with her and having her team work in our group has allowed us to really drive the combination of three things. One is financial returns, two is mission returns, and three is ecosystem returns,” he says.

An example of an ecosystem return would be investing in a company that is hiring people full-time and giving them benefits, likely a step up from being contract employees, he says. “Think about the stability in these families–that creates the ability to buy homes, the ability for their children to go to a single school. This ecosystem benefit is in addition to the original mission investment. The mission investment was doing something, let’s say educating children. But there’s this ecosystem benefit coming off that which we can quantify. That’s an additional return that goes into the investment,” he says.

Debbie Carlson

Foundation Finalists

  1. The Sloan Foundation
    Elizabeth Hewitt
  2. West Virginia University Foundation
    Rick Kraich
  3. Kauffman Foundation
    Lisa Murray
  4. James Irvine Foundation
    Tim Recker
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