Hilton Deputies to Split CIO Duties, No Search Planned

Hilton Buchman_Patel duo Michael Buchman & Yatin Patel, Investment Directors, Conrad N. Hilton FoundationThe Conrad N. Hilton Foundation has reassigned ex-CIO Randy Kim’s duties to two portfolio heads for the foreseeable future, spokesperson Marc Moorghen told CIO.

Kim split with the fund Friday for “personal reasons,” Moorghen said, ending an eight-year leadership tenure.

Yatin Patel, director of public equities, and Michael Buchman, director of private equity and real assets, “will co-manage the investment team and portfolio.”

“We are not looking to fill the CIO position,” the spokesperson said.

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The two former deputies joined Kim a few months into his tenure in late 2008, arriving from Barclays corporate development (Patel) and real estate finance (Buchman) positions.

The two investment directors have begun taking on investment chief responsibilities, but will not change titles to interim co-CIO or otherwise.

Neither Kim nor Moorghen would discuss the circumstances surrounding Friday’s breakup.“We are not looking to fill the CIO position.” “As a matter of policy, we don’t comment on details pertaining to the departure of an employee,” the spokesman said. The now-ex CIO, when reached for confirmation, said he had resigned from the organization and declined to comment further.

Kim joined Los Angeles-based Hilton in 2008, having spent the decade prior investing for his alma mater at the Yale Investments Office.

He named his former boss and legendary Yale CIO David Swensen as one of “very few role models” in a 2014 interview, as well as Notre Dame chief Scott Malpass.

Kim’s ascent at 32 years old to brand-name foundation CIO indicated early a dominant generation of Yale investors, one seeding elite nonprofits. Last year, for example, former Yale colleague Rob Wallace took over Stanford’s endowment, and brought in another ex-Swensen acolyte—Kim’s own deputy.

The five-member portfolio team remaining at Hilton will uphold Kim’s investment legacy without him, Moorghen said.

“We remain committed to our existing investment strategy and our work continues as planned,” he noted. “Randy made a tremendous impact on our investment strategy during his time at the foundation, and we wish him the best in his future endeavors.”

The $302 billion pension fund said it would look at ‘alternative’ ways to invest in private asset classes, which now account for nearly 90% of its fee spend.

The California Public Employees’ Retirement System (CalPERS) cut management fee expenses by $161 million over the last five years by bringing assets in-house, despite nearly doubling in assets under management over that time period.

“We are going to need to begin looking at alternative ways to engage in private markets.”At its May investment meeting Monday, the $302 billion pension fund said it spent $750 million on management fees from 2014 to 2015, compared to $911 million from 2009 to 2010.

Total portfolio costs, excluding performance fees, dropped from $1.02 billion to $888 million over the same period.

“The absolute costs of running the portfolio actually dropped while the portfolio almost doubled in size,” said Wylie Tollette, chief operating investment officer.

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Cost savings were driven largely by the decision to cut hedge funds and fewer investments in real estate and private equity, according to an analysis by CEM Benchmarking. The pension instead favored passive and internal management.

CalPERS dropped $4 billion worth of hedge fund investments in 2014, citing fees as a primary reason. The following year, the fund announced its intention to reduce its manager count across the portfolio by 50%.

Tollette said CalPERS has so far decreased its number of external managers from 212 to 159, with the goal of getting down to 100.

“We need managers’ help to execute the goals of our program,” Tollette said. “However, we want to make sure those managers are strategically aligned with the objectives and the mission of CalPERS.”

Tollette said the “key strategy” in cutting costs has been the insourcing of public asset classes. CalPERS now manages 68% of assets internally. The average US public fund, meanwhile, manages just 10% of assets in-house.

Private investments remain the most expensive part of CalPERS’ portfolio, accounting for 88% of external management costs, or roughly 80% of total fund costs.

“That is really where we are going to have to continue to look to drive cost savings,” Tollette said. “We are going to need to begin looking at alternative ways to engage in private markets, particularly in private equity.”