David Greenberg is chief investment officer of the Los Angeles headquartered The California Endowment, a position to which he was appointed in May 2021.
He is responsible for the $4.4 billion endowment’s investments, overseeing a staff of eight. Greenberg joined the endowment’s staff in 2010 and was previously its deputy CIO. Before joining the endowment, Greenberg worked at the University of Southern California as a senior leader overseeing the university endowment’s hedge fund investments.
With over a year under his belt now in his new role, Alternatives Watch asked Greenberg to share a few of his thoughts on his role, his outlook on the current investment environment, and on his views of alternative asserts.
AW: What is The California Endowment?
Greenberg: The California Endowment is a $4.4 billion private foundation created in the mid-1990s as part of the conversion of Blue Shield of California from a non-profit to a for-profit, publicly traded entity. The mission is to support community health throughout the state of California, with a focus on the social determinants of health, including significant health, social, and a racial equity component.
AW: What is the biggest change or difference to which you have adjusted in your role as CIO of The California Endowment versus your previous role as deputy CIO?
Greenberg: The biggest change relates to the amount of time I now dedicate to organizational management. As deputy CIO, my primary focus was on investment matters and managing the portfolio. As CIO, I am part of the organization’s executive team which spans across all functions. As an organization that believes it is important for the investment team to be fully integrated within the wider organization, a material amount of my time is spent tending to wider organizational matters.
AW: As CIO of a $4.4 billion institution, what is your biggest investment concern for the fund in the current, volatile macroeconomic environment?
Greenberg: It’s an honor to manage assets that fund such worthy causes, but it also carries a significant obligation. A lot is riding on the asset value of the endowment as both grant spending and the company’s operating budget are a function of the amount of assets. My main concern right now is around protecting capital if this volatile environment continues. With many risks and interest rate-sensitive assets in drawdown at the same time, it is especially important to maintain focus on non-correlated strategies, such as certain hedge fund strategies, commodities, and real estate. I am concerned about the duration of the Russian invasion of Ukraine, as the longer it drags on, the greater the potential for sustained higher volatility.
AW: How would you rank your priority objectives this year as CIO of the endowment?
Greenberg: When I was first appointed to the CIO position, there were a couple of areas I knew I had to address. The first relates to breaking out of a very siloed way of thinking about asset allocation. The goal is to move to a more generalist model where opportunities compete against one another, no matter the asset class, which should result in better opportunities making it into the portfolio. Part of this includes redefining how we view our benchmarks, which have always been incorporated at the asset class level. Moving to fewer, broader public benchmarks reflective of a risk profile aligned with our targeted returns positions the opportunity set to drive returns, as opposed to the old way of letting asset allocation be the driver. The goal is to change the mindset of the team towards an absolute-return perspective from a relative one.
Another priority is to upgrade managers in areas that I don’t feel are as strong as they could be. As a foundation pursuing a worthy cause, we are in a unique position to gain access to managers that may be capacity constrained. In the past, we didn’t do a good enough job to leverage this strength. This is particularly true in venture capital and private equity where I feel that we could have done a better.
AW: How would you describe your investment outlook/philosophy concerning alternative assets?
Greenberg: Alternatives will always play a large role within our portfolio. It’s a matter of understanding the role each plays within the overall portfolio. Venture capital and private equity are crucial to achieving our return objectives as we believe they will outperform liquid equities over the long-term and we also believe that we have an advantage in sourcing managers. Hedge funds are attractive, but we are selective with strategy selection depending on the environment. For instance, we believe we are in a sustained period of heightened volatility, so we are allocating to liquid global macro and relative value strategies. This serves dual purposes, first as a generator of downside protection, and second as a liquidity source. We have not done much in private credit but will look at opportunistic situations. My overall outlook is positive on alternatives, but excess returns should be expected to be lower due to the sheer amount of capital flowing into them.
AW: What new alternative assets, if any, do you think may have attractive prospects, i.e., Cryptocurrencies, infrastructure, or alternative energy perhaps?
Greenberg: The crypto/blockchain space is interesting and we have made some allocations. We view the space as more of an extension of technology than a new asset class. Investments are primarily in venture capital with a focus on web3 and token infrastructure. We have not stepped into Infrastructure in any big way as it is a difficult space due to the significant amount of capital required. We are keeping an eye on public incentives in alternative energy, which would make it a more attractive opportunity, but we have not done anything yet.
AW: What was the last book that you read? And how did it grab you?
Greenberg: To be honest, with this new role and two young children I have not had any time to complete any books over the past year! What I have on my nightstand right now is a book called This is How They Tell Me the World Ends, written by Nicole Perlroth, which is about cyber-attacks. I believe that cybercrime and cyber warfare are enormous threats but do not get the attention they deserve as threats occur in the background.
