Craig Thomas is co-chief investment officer at Verger Capital Management, a Winston-Salem, N.C.-based Outsourced Chief Investment Officer (OCIO) firm that does business exclusively with not-for-profit organizations, specifically educational institutions, non-profit healthcare, and community and cultural foundations. Founded out of the Wake Forest University Office of Investments in 2014, Verger has $2.3 billion in assets under management.
Prior to Verger’s launch, Thomas spent more than 10 years performing various investment duties for Wake Forest University’s Office of Investments, where he most recently served as director of investments. Thomas now oversees all aspects of Verger’s investment process, including asset allocation, portfolio construction, manager selection, and performance reporting.
Alternatives Watch recently asked Thomas to share a few of his thoughts on his co-CIO role, a role to which he was appointed in September 2022, his outlook on the current investment environment and on alternative assets.
AW: Given the extensive investment role you’ve played with Verger since the firm’s inception, what are the salient changes in your job responsibilities now you are co-CIO?
Thomas: In my shift to Co-CIO, I will continue to oversee asset allocation, portfolio construction, and manager research for all assets managed by the firm, as well as develop and grow the investment talent at Verger. This change allows Jim [Jim Dunn, Verger’s CEO and Co-CIO] to focus more of his time on the strategic vision and long-term growth of the firm in his role as CEO.
AW: To how many institutions does Verger deliver OCIO services, and how do those services differ, if at all, from the services of an in-house CIO?
Thomas: Verger currently has nine clients including Wake Forest University, our largest client and founder. I have the unique perspective of having served as both a member of a university’s investment office, and now as a Co-CIO of an asset management firm. Through our Endowment DNA and exclusively serving non-profit endowments and foundations, our work allows our clients’ staff and boards to fulfill their roles and support the missions of their respective organizations. In addition to investment management, our high touch client service model supports back- and middle-office operations, donor development strategies, and board governance resources. I find it rewarding to serve multiple institutions that are doing critical work in their communities.
AW: One of Verger Capital Management’s core values that you are said to embody is “Be humble, be human, be helpful.” How do you manifest that core value on the job?
Thomas: We have been very intentional about articulating our values and creating a strong culture at Verger. In an industry where there are often big egos and hubris, we really lean into our belief that humility and service are at the core of what we do. We’re privileged to serve institutions that are meant to provide for students, patients, and patrons in perpetuity, and understanding this connection is at the center of our work. Personally, I embrace humility and helpfulness by maintaining an open dialogue with my team and regularly soliciting feedback from everyone, whether senior or junior. Maintaining a learning mindset and openness to different viewpoints is critical for building a strong culture. One avenue I lean into is mentoring students in our internship program. I often find that I derive a lot of value and learnings from the questions and conversations of these students.
AW: What are you doing with regard to managing risk and maintaining positive returns for your portfolios, and what in your view makes today’s markets particularly challenging?
Thomas: We believe managing risk involves constructing a diversified, all-weather portfolio that can participate when markets are performing well while also protecting capital during market downturns. The last two fiscal years have represented examples of each type of market environment, which has confirmed our belief that the best way to generate attractive long term returns is to both participate in the upside as well as protect on the downside. Factors that make today’s markets particularly challenging include slowing economic growth, expected declines in corporate earnings, heightened inflation, and an “aggressive” Federal Reserve. During a likely period of heightened volatility, an actively managed portfolio that can nimbly take advantage of market dislocations is imperative.
AW: Since its inception, Verger has expanded its team, experience, and relationships in private markets. Is the firm’s expansion in that side of the business ongoing? And if so, what are your aspirations therein?
Thomas: Private investments such as venture capital, buyout, real estate, and natural resources are an important component of our portfolio. I’m proud of how we’ve constructed and grown this part of our portfolio over the years, and we continue to leverage the team’s talents to find unique opportunities in this space. Given our focus on active managers, it is critical to have investment professionals who have the network, relationships, and experience to partner with the top managers, both in illiquid (private) and liquid strategies. While we aren’t actively seeking to fill a particular role, we anticipate adding to the team in the coming year and remain open to meeting talented investment professionals as our firm grows.
AW: What is your expectation for alternative investments in the years to come?
Thomas: We continue to believe that alternative investments can provide attractive diversification benefits to a portfolio, both enhancing return (e.g., venture capital) as well reducing risk (e.g., hedge strategies). However, given the large variance of returns in alternative strategies, manager selection is very important. As discussed above, it is essential to have an investment team with the experience and track record to research, diligence, and select the top managers.
AW: What was the last book you read and what did you glean from it?
Thomas: I recently read Talking to Strangers by Malcolm Gladwell. His “default to truth” concept, in which he used Bernie Madoff as one example, is an important concept as we and other allocators have conversations with, and conduct diligence on, prospective investment managers.
