It’s rare that a pool of money takes on a personality, but in the case of this $852 million fund it is true—the University of Arizona Foundation has a character of its own.
In no small part this is down to CIO Craig Barker, the one-man operation in charge of the foundation. Barker is keen to open his door to anyone who wants to know more about his fund and its strategy. His “radical transparency” involves making details of all the foundation’s mandates available to donors, beneficiaries, and current and potential managers on its website.
When Barker says all information is available, he means all.
“When we meet with managers, whether current or prospective, we think it’s a much better discussion when they can see exactly how we’re positioned, who we’re working with, and how they might fit into our portfolio,” Barker says. “We have found this to be a unique approach—I haven’t had a meeting with a manager where they weren’t shocked that I shared this information with them.”
Fund managers are eager to get involved with Barker, not least because of the conviction with which the CIO backs those he deems work best for the portfolio.
Barker recalls attending a conference in Phoenix, Arizona run by NMS Management, an organization with a mission to educate and support endowment and foundation investors. Howard Marks, founder of Oaktree Capital, was on stage and he had put his audience to the test: How much conviction do they have in their best ideas?
“He asked people to raise a hand if they had 2% with a single manager,” Barker remembers. “Then 5% with a single manager. When he got to 10% there were very few hands up in the room—one of them was ours.” Backing a small number of managers with more than 10% of the total portfolio has allowed Barker to establish long-term effective strategic partnerships, proving such relationships are not limited to the biggest asset owners.“Early on we recognized that, as we were going to grow, we needed to partner with top firms and make meaningful investments with them,” Barker says. A relationship with GMO, started in September 2003, has grown to account for 15% of the portfolio. Research Affiliates and Dimensional Fund Advisors also both run more than 10% of the foundation’s assets.
Smaller positions have paid off, too. The fund’s sub-$1 billion size enabled Barker and his consultant Fund Evaluation Group to identify a specialist Brazilian equity manager last year. The investment committee approved the move in September 2015, and by October 1 this year, the purchase had gained 59% as Brazil began its recovery.
While Barker is proud of this investment, it’s the long-term mandates he is more enthusiastic about. The CIO highlights a “mean reversion” allocation of 4% of the fund, split between GMO and Whitebox Advisors. “Mean reversion is the key to the whole investment world,” Barker explains. “Over time, things will revert to mean—but they don’t do so immediately. These managers can look quite wrong for a period, but we have this allocation to enable these folks take bets and be patient while they come to fruition.”
- American Red Cross (Greg Williamson)
- Gordon and Betty Moore Foundation (Denise Strack)
- Kresge Foundation (Robert Manilla)
- WK Kellogg Foundation (Joel Wittenberg)
- UJA-Federation of New York (Colin Ambrose)