Kim Lew - The Dynamics of Risk Management and Asset Allocation
Dec 29, 2023
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Kim Lew, President and CEO of the Columbia Investment Management Company, shares insights on risk management, asset allocation, and aligning endowment goals with university values. She discusses the challenges of managing a larger endowment, the concept of future-proofing investment strategies, and the importance of intellectual curiosity in the investment industry. The podcast also explores the dynamics and implications of technology and AI, highlighting responsible technology use and risk management.
Future-proofing in investment management involves considering long-term implications of market trends and allocating resources effectively.
Building a well-structured investment team with a clear strategy is essential for success in managing a private portfolio.
Columbia Investment Management focuses on risk allocation rather than asset allocation, using custom risk benchmarks to compare assets and ensuring thorough risk analysis.
Deep dives
Kim Liu's Inspirational Journey and Investment Track Record
Kim Liu, the president and CEO of the Columbia Investment Management Company, has built a remarkable investment track record at various mission-driven institutions. With an impressive focus on people and organizations, she has become the first African-American and Chinese-American woman to lead a large Ivy League endowment. Her success in managing Columbia University's $13.6 billion endowment has been vital to the institution's strength and longevity.
The Importance of Future-Proofing in Investment Management
Kim Liu emphasizes the significance of future-proofing in investment management. This involves considering the evolution of markets, industries, and big trends, and understanding their potential long-term implications. By looking ahead and working backwards, investors can make informed decisions and allocate resources effectively. Kim illustrates this concept with examples like the impact of social media, the rise of passive investing, and the implications of de-globalization.
Building a Well-Structured Investment Team at Columbia
Kim Liu recognizes the importance of building a well-structured investment team at Columbia. She believes that dedicated resources and a clear strategy are essential for success, especially in managing the private portfolio. By being discriminating with capital allocation and actively seeking opportunities, the team can construct a portfolio that aligns with their desired objectives. Kim's focus on organizational behavior and team dynamics allows for efficient decision-making and drives the overall performance of the investment team.
Balancing return objectives and sustainability in portfolio management
In managing the portfolio, the speaker emphasizes the importance of not compromising return objectives while also investing time and resources in the sustainability space. They aim to strike a balance by making it hard to invest in low-return assets and easy to invest in sustainable options. The speaker expects the sustainability component of the portfolio to grow over time, aligning with their values. Regarding risk, the speaker highlights the approach of Columbia as risk allocators rather than asset allocators. Their focus is on diversifying sources of risk and using custom risk benchmarks to compare assets. They engage in extensive risk analysis, including scenario analysis and exposure analysis, to ensure they are within acceptable risk bands.
Investing in venture and buyouts, and the importance of a diverse team
The speaker discusses the investment opportunities in private markets, specifically venture capital and buyouts. They express confidence in venture capital opportunities and believe this is an opportune time to invest, given market conditions and the concentration of talented entrepreneurs. Buyouts, however, require a resetting of expectations and a close analysis of market conditions. The speaker also emphasizes the importance of a diverse team in managing risks and making investment decisions. They believe that a diverse team helps identify biases and ensures thorough risk identification. The culture of trust and open communication allows for robust decision-making and risk management.
Today's discussion with Kim Lew, President and CEO of the Columbia Investment Management Company, traverses her unique journey from her roots in the Bronx to managing a prominent Ivy League endowment. Kim shares her insights on navigating the intricate world of investment management, particularly in risk management and asset allocation. With a career marked by pivotal roles at entities like the Ford Foundation and Carnegie Corporation, her expertise brings a nuanced understanding of the interplay between market dynamics and organizational strategy. This episode explores how adaptability, intellectual curiosity, and understanding global trends shape successful investment approaches.
Key Topics:
Kim's early career and transition to finance (2:59)
Role at Chemical Bank and career progression (5:05)
Experience at Prudential Capital and Ford Foundation (9:27)
Shift to Carnegie Corporation and Columbia Investment Management (18:07)
Challenges of managing a larger endowment (20:13)
Aligning endowment goals with university values and ESG considerations (22:08)
Comprehensive approach to risk management (26:54)
Asset allocation and balancing public vs. private markets (34:06)
The concept of future-proofing investment strategies (41:19)
Organizational behavior in asset management (48:54)
Importance of intellectual curiosity in team members (55:11)
