Ed Grefenstette – Bold Allocations at The Dietrich Foundation (EP.437)
Mar 24, 2025
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Ed Grefenstette, Chief Investment Officer of The Dietrich Foundation, shares insights from his unique investment strategy centered on illiquid assets and long-term growth. He discusses how the foundation has seen its assets soar while contributing significantly to charities. Ed reflects on his investment journey and the mentorship from Bill Dietrich, while highlighting the importance of innovation in navigating geopolitical risks. He delves into the foundation's governance structure and the value of personal relationships in managing venture capital amidst market fluctuations.
The Dietrich Foundation's investment strategy is centered on bold allocations, with 90% of assets in illiquid investments like venture capital and private equity.
Governance at the Dietrich Foundation empowers the CIO with significant authority, enabling a nimble investment approach aligned with long-term philanthropic goals.
Managing geopolitical risks, particularly in emerging markets like China, requires careful diligence and a commitment to supporting local expertise for effective investments.
WCM Investment Management focuses on outperforming the markets through a distinct investment strategy that emphasizes cultural research and wide moat investing. The firm believes its West Coast location helps steer clear of Wall Street's groupthink, allowing for independent thinking and optimization of investment practices. This approach includes the integration of the concept of moat trajectory, aiming to not only identify companies with strong competitive advantages but also assess their growth potential over time. The result has been a series of concentrated portfolios that have delivered differentiated returns, underscoring WCM's commitment to challenging traditional investment paradigms.
Unique Investment Philosophy of the Dietrich Foundation
The Dietrich Foundation employs a bold strategy that allocates 90% of its assets to illiquid investments, primarily in venture capital and private equity, which has proven effective in generating exceptional returns. The foundation's governance structure allows it to take these risks by delegating significant authority to the Chief Investment Officer, which facilitates a nimble investment approach. Bill Dietrich's vision included a focus on long-term growth and a commitment to supporting charities in Western Pennsylvania while avoiding the politicization seen in some other foundations. This unique model not only allows for a concentrated investment approach but also aims to set new benchmarks for performance in the charitable sector.
Navigating Geopolitical Risks and Market Dynamics
Managing geopolitical risks and the shifting market landscape are essential considerations for the Dietrich Foundation's investment strategy, particularly in emerging markets like China. The foundation acknowledges that recent years have brought challenges, including a shift from globalization to a more mercantilist outlook, complicating investment prospects. Investing in China has required thoughtful due diligence, with Bill Dietrich emphasizing the importance of supporting local teams who know the market well. As the sentiment around China and other emerging economies evolves, the foundation remains open to reassessing its approach while remaining committed to innovation and growth in these regions.
Manager Selection and Co-Investment Strategies
In selecting investment managers, the Dietrich Foundation emphasizes integrity and self-awareness, assessing not only potential investments but also the character of the managers themselves. Their rigorous screening process includes exploring previous performance and evaluating how GPs react to both success and setbacks. Co-investment opportunities present both advantages and challenges, as the foundation evaluates potential adverse selection risks before engaging. The foundation’s strategy here is cautious but strategic, ensuring that they co-invest only when there is a strong alignment of interests and opportunities.
Preparing for Succession and Future Challenges
Succession planning is a critical focus for the Dietrich Foundation's leadership, with senior figures preparing to hand over responsibilities while ensuring the mission and investment philosophy endure. Ed Grefenstead emphasizes the need to cultivate the next generation of investment leadership that embodies the foundation's commitment to boldness and long-term performance. As the financial landscape continues to evolve, Grefenstead is committed to maintaining a strategy that balances innovative investing with the stewardship of donor intent. This foresight is critical for navigating the complexities of the investment world while ensuring the foundation remains a significant philanthropic force.
Ed Grefenstette is the CIO of The Dietrich Foundation, which supports charitable organizations in Western Pennsylvania through a truly unique investment strategy that seeks to first, last, and always grow the assets. Bill Dietrich, a successful industrialist, published historian, international investor, and innovative philanthropist, formed the foundation after selling his business for $170 million in 1997. Since then, the pool has grown 11.5x to $1.5 billion after distributing $400 million to supported charities, including contributions that make it among the largest donors every year to Carnegie Mellon University and the University of Pittsburgh. Over the last twenty years, the Dietrich Foundation's performance sits at the very top of all endowments and foundations.
Our conversation covers Ed's journey to investing and mentorship by Bill Dietrich, which led to him taking the helm at the Foundation in 2007. We discuss the Foundation's bold approach to illiquid investments, with 90% of assets invested in venture capital and private equity, its governance structure, and its thematic focus on innovation and emerging markets. Along the way, Ed shares insights into managing liquidity, constructing the portfolio, selecting managers, and navigating geopolitical risk to maintain conviction in an uncomfortably different strategy.
Ed’s approach and results will open your aperture to what’s possible in an institutional portfolio with the right goals, structure, and governance in place.
