A flippant, fearless, and fundamental countdown of big money investing.

12 10

#11 Reinvention

The Reboot

Year One of the American Red Cross portfolio reinvention.

Every asset management recruiter wanted Greg Williamson. With a select few, he would take their calls, help with their searches, but during 28 years at BP and a predecessor, Williamson never bit. He waited for the fat pitch, as recruiters say. That pitch arrived in early 2015: chief investment officer of the American Red Cross. 

The job hadn’t opened for 16 years. But CIO Tina Samson planned to retire and enjoy some of the funds she had managed for Red Cross employees since 1999. Leading search firm David Barrett Partners won the business of finding Samson’s successor—or, rather, selecting the best of the many, many people who wanted to succeed Samson, and bringing them to Red Cross leadership. 

The task: Select a new leader to take over a stable eight-member investment team, represent the brand, and ramp up middling returns on roughly $5.5 billion of defined benefit ($2 billion), defined contribution ($1 billion), endowment ($1 billion), and non-endowment ($1.5 billion) funds. The process: Exhaustive. 

 

“I did so many interviews,” remembers Red Cross CFO Brian Rhoa, a member of the investment committee. Rhoa took an accidental master class in CIO management through those interviews, hearing from the top echelon of on-the-market CIOs why they were open to leaving. Much of the time, the cause was people in his seat. “A lot of candidates would tell me their stories,” he continues. “After hearing enough of them, I kind of figured out in which segments governance tended to be really good, and where it was really bad. I was surprised to hear a lot of their challenges were with governance.” Not so at the Red Cross, where Rhoa and his fellow executives undertook an overhaul years prior, thus creating an environment where investment-office transformation was even possible.

When Rhoa signed on as CFO in 2008, the Red Cross had 4,000 bank accounts and 500 general ledgers. A wholesale strategic overhaul called One Red Cross rationalized nearly every branch of operations over many years. Each local chapter had previously managed its own assets by selecting options set by the team in Washington DC. The plan centralized investing, saving time and allowing actual strategy. Oversight of this unified investment work began transitioning to an expert board in 2008. The plan delivered: One bank account, one general ledger, one investment team—One Red Cross. 

All Rhoa needed was a CIO. 

“We looked at candidates’ long-term results in not only good years, but also the bad years,” he says. “Greg clearly stands out as someone who’s been successful relative to the market in both.” Williamson—a deeply technical former prop trader—is the sort of asset owner who creates the products he needs, rather than selecting the best one off-the-shelf. The investment committee, all finance professionals, liked that. Plus, he was nothing if not loyal.

“The one thing that you’re never sure of is how he would fit into the culture of the Red Cross.”“He has had real staying power, and he really delivered for BP,” recruiter Renee Neri, partner at Heidrick & Struggles, said last year. CIO asked six search heavyweights to name an asset owner who had structured their career “extremely well,” and Williamson alone got two mentions. “Greg has always been very discerning with what’s brought to him, and that’s why he was at BP America for so long,” said Korn Ferry’s Jane Marcus. “You might say, ‘He’s an old timer!’ and you’d be right—but that’s the point.”

After months of interviews, Rhoa felt confident that the search committee had done it; Williamson was the man for the job. Still, any new leadership hire comes with ‘fit risk,’ and perhaps more so with a CIO changing jobs for the first time since Bush Sr.’s administration. Could Williamson adapt to a new organization, in a different industry, in a new city?  

 “The one thing that you’re never sure of—especially coming from his background—is how he would fit into the culture of the Red Cross,” says Rhoa. “We like to say that in our organization, to be a leader, someone has to be both smart and nice. It was quite a jump that he made. And I’m delighted to say Greg has fit in very well.” The prominent Red Cross pin on Williamson’s iconic double-breasted suits says as much. The suits themselves indicate a radical change in leadership style for the Washington DC investment office. 

Samson: Ran the division like a nonprofit. Williamson: Says he’s “absolutely committed to building a world-class investment organization.” Samson: “Had a very low profile,” according to a CIO peer. Williamson: Attended three different conferences during this story’s month-long reporting period. Samson: Implemented a traditional endowment model. Williamson: DIY’d a dynamic, options-based asset allocation policy starring derivatives, not managers, for BP. 

Yet the leaders overlap on two key metrics, according to those who know them: long tenures and passion for the mission. 

 

Williamson succeeded Samson as CIO of the American Red Cross in May 2015. Five months later, his two most senior staffers no longer had jobs at the institution. Deputy CIO Anne Shelton had spent nearly 12 years with the Red Cross, earning a strong reputation internally. She’s now seven months into her next role, investing assets for senior-advocacy group AARP. Managing Director Edward Karppi met the same fate as Shelton, and became deputy chief of outsourced-CIO Mangham Associates. Associate Director Jordan Levine left that October as well, resigning for a higher position elsewhere. 

“It wasn’t anything personal, simply a change in the mandate and office culture that led me to bring in resources that I thought better fit our objective,” says Williamson when asked about the cuts. “The historical organization was very different than the one we’re going to build. I determined that the skill, commitment, and cultural fit of certain resources could have been improved.” 

Rhoa and the other overseers had their first stress test: backing the new hire in the dismissal of two longtime and well-liked employees. “We hired Greg to do a job, and it would be a shame if I constrained him so he couldn’t do that,” the CFO says. The governance reforms undertaken for One Red Cross delivered during the October exits. And halfway through year one of Williamson’s tenure, he began to rebuild. 

Boeing’s longtime operations head Jane Western made her own once-a-decade job move to bring the Red Cross out of the paper age. Carol Anne Lindsey, an alum of George Washington University’s endowment, became Western’s deputy. The team responsible for BP’s multi-tentacled custom database system—‘Octopus’—is at work on a new platform for the Red Cross. 

“I want to say it’s been easy—but it’s not easy. Smooth is a better word, not traumatic.”“For us, systems are absolutely critical to being an world-class investment organization,” says Williamson, a lithe man with light blue eyes (for the three people in the industry who haven’t met him). “When you don’t have the ability to store paper, you get used to operating in a digital environment,” he continues, scribbling notes by hand onto, yes, paper. He laughs. “Even I go back at the end of every day and upload my notes into our system. It’s a more collaborative and open way to operate.” 

Williamson identified his personal brand of super-technical allocator in Julio Delgado, Red Cross’ head of house-managed portfolios since 2005. Delgado traded derivative strategies before switching to the institutional side, “a strong and diverse background,” according to the fund’s other ex-trader. Williamson ended his first year by promoting Delgado to chief investment strategist—his official companion for getting deep in the securities weeds. 

The base team is in place, rounded out by BlackRock veteran Margaret D’Annunzio and former Red Cross analyst James Donohue, who returned to lead private equity after a “two-year hiatus.” But hiring is not enough.

“When you’re undergoing radical change,” Williamson says, “a change in physical space is as important as anything. We moved to an open-concept, trading-desk layout from traditional offices.” It’s an environment he’s very comfortable in, and has found encourages free idea flow. 

At 9:00 every morning, this brand-new team assembles to discuss the day ahead and any impending trades. Keeping talent means keeping people engaged. It also means paying them. Williamson says he worked with the executive team and board on a compensation structure in line with the broader organization and peer funds. His pay has yet to appear in regulatory filings. Prior CIO Samson, however, earned $513,401 total in 2014, including a $99,750 bonus and retirement benefits worth $42,384. Anne Shelton, Samson’s former deputy, took home more: $435,004 in salary and incentive pay, for an all-in package worth $526,685. True to its blood-centric business model, the Red Cross biomedical chief out-earned both investors.

 

If Williamson succeeds, the American Red Cross will extract less of its revenue from donors’ veins, and more from financial markets. The frozen 80%-funded pension plan will reach 100%, and stay there. An endowment grown well past the current $1 billion will generate stable payouts for disaster relief, food aid, and rebuilding homes lost in fires. A reputation for investment excellence will motivate major donations, as contributors see an opportunity for leveraging their philanthropy. And perhaps—if Williamson succeeds spectacularly—the Red Cross’ core business won’t be blood, but asset management. 

“We’ve discussed the idea of launching an outside management company,” says Rhoa. “We recognize that we are a world-class brand with a very high level of trust. We’re always looking at opportunities to raise revenue and grow our mission in local communities.” If the Red Cross began accepting outside capital, it would join a number of institutions that took the leap—to mixed results. 

CHIMCO—a pooled $26 billion fund for Catholic health care nonprofits—relaunched as Ascension Investment Management in 2013. Assets have grown by $3 billion since opening to external money, and CIO David Erickson confessed a little culture shock from the switch to gathering. “I admit I’m taken aback if I tell someone about us and they don’t sign right away,” Erickson said shortly after the launch. “I’m definitely getting a dose of my own medicine.” 

Scott Malpass, CIO of Notre Dame’s endowment and a role model to Williamson, considered the move, and ultimately rejected it. “It may be the right course for others,” he said in 2014. “But our fiduciary duty is to Notre Dame.” Then there are the success stories: American Airlines transformed its pension office into a management company in 1986. American Beacon Advisors managed $57 billion in 2008, when the airline sold the outsourced-CIO operation for $480 million. The asset owner-manager evolution came full circle this June, when it hired DTE Energy’s pension chief as CIO.

Red Cross Investment Manage­ment Co. remains a distant prospect, Williamson cautions. Given the capability to “generate revenue from the investment office that supports the mission—without detracting from the fiduciary and legal and regulatory responsibilities we have—it’s something that we can and will consider in the future.”

In other words, check back around Year Five. 

 

Recruiters may never get another shot with Williamson, if his career moves hold steady at one per quarter century. And he would be perfectly fine with that. The past 12 months delivered 14-hour days, six days a week for the new CIO and his senior team. Reinvention takes time. “I want to say it’s been easy—but it’s not easy,” Williamson reflects. “Smooth is a better word, not traumatic. Since arriving at the Red Cross, I’ve felt like I have more of a home and support structure for what we need to do than perhaps I did in my previous job.” Rhoa echoes their strong partnership. “Greg and I talk constantly,” he says. “My motto is happy CIO, happy CFO.” 

Foundations for this support structure were a decade in the making. The achievements of Year One testify to the outcomes of reinvention as much as to fresh starts. Without One Red Cross, there was an impossible governance structure. Without the ambitious mandate and professional board, no Williamson. Without Williamson, no investment office 2.0. Without the world-class powerhouse he plans, less capacity to prevent and alleviate human suffering.

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