“When Brooke joined Carnegie Corporation in 2012, she quickly got to work rebuilding our emerging markets portfolio. The breadth and depth of her knowledge of the highly complex and esoteric collection of countries that comprise the emerging or developing markets is second to NONE.
She doesn’t just know that daily news facts about these countries, but also the complexities of their trade policies and capital flows, not to mention the local scuttlebutt. She is able to do this because she builds deep relationships across all the segments of markets and economies and does in-depth primary research.
Although it had not historically been an area of focus for her, she also took on the management of the long-short hedge fund portfolio. As with the emerging markets portfolio, she has added a number of first-time funds or emerging managers because she has a knack for identifying up-and-coming talents. She coaches these managers. She helps them to see the value of building strong businesses that align with their limited partners and that allows them to attract and retain the best talent. They see her as valued counsel or even free consulting.
These strong partnerships allow her to build the portfolio for the next generation. Her thorough and methodical approach to researching new asset classes and constructing balanced and thoughtful portfolios will serve her well when she becomes a CIO. I look forward to seeing her take on that new challenge and am thankful for what she has done to help reposition the Carnegie portfolio.”
—Kim Lew, CIO, Carnegie Corporation
Brooke Jones is the managing director of investments at Carnegie Corporation of New York and is responsible for the success of a diverse range of opportunity sets across several different asset classes. She joined Carnegie Corporation eight years ago and today, she credits the foundation with broadening the breadth and depth of her specialties and knowledge base. In public markets, Jones is the co-lead of the endowment fund’s efforts across the fixed income, absolute return, and long-only asset classes. She also manages the Carnegie Corporation’s emerging markets efforts in venture capital, growth, and buyout investments.
Prior to working for the Carnegie Corporation, Jones served as a manager of public equity investments at Stanford University, her alma mater. She received a scholarship in order to attain her graduate degree, and feels fortunate to have been a part of the university’s endowment team. Furthering equal access to a quality education is a cause Jones cares deeply about. It’s one of the many reasons she is proud to work for Carnegie Corporation of New York, which has a significant K-12 portfolio of philanthropic grants.
Aside from her MBA at Stanford’s Graduate School of Business, Jones holds two bachelor’s degrees from the University of Pennsylvania: a B.S. in Economics from Wharton and a B.A. in International Studies from the College of Arts & Sciences.
CIO: What did you think you understood before the COVID-19 crisis … and if, during the crisis you were proven wrong, what did you learn from it?
Jones: I find this difficult to answer because I don’t think we’ve seen the end of this crisis or the lessons we will all learn from it. One thing I am worried about, though, is the degree of illiquidity that has crept into the average endowment and foundation portfolio prior to the crisis. As a broad group, we have far fewer degrees of freedom than we did during and immediately following the global financial crisis and greater stressors being placed on us at the enterprise level, whether you are a school that is worried about tuition or a hospital that has seen its revenue decline precipitously. The confluence of differences worries me. I am not sure every investment team or board will have the muscle memory or emotional calm to handle this crisis’s aftermath well.
CIO: What took you by surprise? What worked?
Jones: I think it’s premature to claim victory about what has worked. There were two interesting surprises, though. First, the A-share market has remained relatively untouched throughout the crisis. Second, the pace at which the US markets corrected and reflated was a bit of a shock. It has always been received wisdom that you rebalance a portfolio slowly back to target. I don’t want to over extrapolate based on a single data point, but I’m starting to wonder if that wisdom is true when you are living in a world where sovereigns seem committed to propping up asset values at any cost. If drawdown opportunities evaporate quickly, slow rebalancing will be a mistake.
CIO: How would you build the portfolio differently now that you have gone through this massive accelerated shift in the market?
Jones: This question tempts you to play Monday morning quarterback! Rather than do that, I’d just say that we are focused more on the forward picture. We were worried about the bull market being long overdue for a correction, but no one could have predicted that a global pandemic would be the accelerant. We are where we are, though, and based on what we know now, I would start to position us for a longer credit cycle. We have plenty of equity exposure and our portfolio will do phenomenally well in a benign recovery scenario. What we don’t have enough of is a way to capitalize upon a distress cycle. The challenge for us, though, will be how to fund this exposure. We expect liquidity to be constrained.
CIO: ESG has been a tidal wave force behind recent innovative investment framework in our industry. How do you see the ESG framework and effort be influenced by the recent event?
Jones: I think environment, sustainability, and governance considerations are here to stay and the recent events may have simply converted more followers to the cause. Broadly speaking, evaluating a company’s broad business practices and its mean of engaging with various stakeholders is critical to long-term investing. They used to call ESG “stakeholder analysis” in business ethics courses 20 years ago. Now it’s ESG and we are not talking about it in academic circles, we are talking about how to really use this framework as a mean of investing. I think that’s a wonderful idea. But like all things, the devil will be in the details.
My hope is that we get to a point in the asset management industry where ESG is not a marketing term or a guise to raise assets, but an integral, thoughtful, and measurable part of people’s broader investment processes. For that to be done well, investors and asset allocators will need to do the hard work of thinking through meaningful, observable, and measurable indicators that can be tracked longitudinally and incorporated into traditional fundamental analysis.
We have accounting standards for a reason. It is to allow some measure of consistency and rules to financial disclosures. And then we have data providers that allow investors to easily download standard data and overlay their own views and judgement. ESG will ultimately need an analogous set of standards and supportive data environments to facilitate investors adopting this additional lens. There are lots of early-stage companies hoping to provide that solution to us all; so hopefully we will see this change in the near to medium term.
CIO: What’s your view on the “perfect storm” that is currently impacting the oil markets, and how will that change how you invest in upstream energy?
Jones: In cyclical industries, there is always a perfect storm. That’s the nature of the sector. And, usually, it’s precisely when there is a “perfect storm” that long-term, patient investors need to pile in. The trouble this time around, though, for us and for many endowments and foundations is that we are all shying away from oil and gas strategies because of the aforementioned ESG concerns. I’m not sure how front-footed anyone in E&F can be as a result. Add to that matter the liquidity constraints we are likely to face in the coming years and I suspect we will have more muted allocations to energy private equity going forward.
CIO: What’s your view on the fate of the Euro and the EU?
Jones: Of course, no one really knows. There are many logical arguments as to why they should fail: chief amongst them, the European countries’ respective electorates and their national identities ultimately trumping a regional one. But necessity, external threats, and a sense of competition force people, organizations, and ultimately countries into corners that often yield strange alliances. The crisis may ultimately force the EU to fix its imperfections and bind together. Germany and France have taken actions recently that certainly point in that direction.
CIO: What do you think will be the impact of COVID-19 on developing economies?
Jones: I think COVID-19 will lay bare countries with weaker institutional underpinnings: weaker public sectors, weaker free press, weaker civil societies, and weaker private sector actors. Those fractures and fissures exist in developed economies as well as developing, but to varying degrees. Those developing economies that have much stronger institutions than others will come out of the crisis faster and reap the benefits. Others may languish, which not only would take a terrible toll on human life, but also on their economies, currencies, and, ultimately, political stability. I am actively working through what this means for our own emerging markets portfolio. We do not typically invest with a top-down mentality. We pick managers and the geographic output is a secondary consideration. I am not sure if that is wise going forward and, yet, picking countries is not a skill most of us possess.
CIO: What are the new creative/innovative strategies that you are researching right now?
Jones: In recent years, my research was focused largely on equity long-short and credit strategies in addition to emerging markets and many of the people and firms we work with are creative and innovative. It’s one of the reasons we have backed them! There are, though, some truly different strategies I have been looking at that defy being put in a box. One of them is particularly intriguing because it is trying to consistently quantify, measure, and monetize differences in corporate culture, arguing that culture and human capital are the last fundamental investment criteria that have been left to subjective judgment and can be more scientifically approached. I’m still learning more, but it’s genuinely differentiated.
CIO: With the shakeout of industries currently going on—where do you see the most exciting opportunities over the coming years?
Jones: Absent the Fed crowding out private investment, I think we may finally see a distress cycle and that the most interesting opportunities in credit will be the ones that are small and sub-scale for the large, household name firms who have made their money on distressed credit in the past. We shall see, though. If we as a nation have decided that firms should be bailed out at any cost to society, distressed credit is going to be the purview of government and not institutional investors like ourselves.
CIO: And professionally, where do you see the most exciting areas to specialize further over the coming years?
Jones: I don’t think specializing is wise, actually. I think investment professionals need to start their careers as specialists in order to develop quick pattern detection, but then widen their aperture. The world is an unpredictable place and, rather than predict the next hot thing, I think professionally you need to keep learning and widening your circle of competence. One of the best things about this career is the never-ending learning curves you get to climb. Why give that up?
CIO: How is the quarantine affecting the way you view teams and working environments, such as work from home, meetings, etc.?
Jones: I started out my career as a consultant in a global economic development firm. We were always working remotely, for long stretches of time and in far more challenging conditions than my living room couch. We also were used to working on multiple “project teams” across geographies and industry focus areas at a single time. I think quarantine has reminded me of that early and formative time in my professional life and encouraged me to borrow more from it and apply it to how investment management teams should ideally work. It also gives me perspective that has instilled a sense of calm during an otherwise stressful and unusual moment in life.
I would add that quarantine has forced me to really focus on what matters most, a lesson I learn and relearn many times in life. My husband and I have two small children who need love and attention, and a very involved approach to homeschooling. We decided early on that during the crisis we would create morning and afternoon shifts and take turns being very present as teachers and parents, and then very present as workers. You would think we would get less done, but we haven’t. We’ve just eliminated the unnecessary and focused on what matters most.
CIO: What exercises have you found useful?
Jones: Are we talking physical exercise? If so, then the answer is clearly chasing my kids. And kundalini-style yogi breathing. The two really go together rather nicely.
CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?
Jones: I’m going to cheat right now and completely bend your question to my will. I would actually pick someone we do work with already and with whom I have the pleasure of speaking on occasion, but not in the way I might ideally wish. So now that I have completely cheated, I will answer. I want to sit down with Seth Klarman for an unchaperoned and unconstrained amount of time and just talk like normal human beings about many a thing. A girl can dream…
CIO: And in a fantasy scenario, if money was no obstacle, where in the world would that meeting take place?
Jones: At my dining room table over a nice cup of tea or coffee.
CIO: What asset class or investment troubles you most right now—and why?
Jones: Real estate. It’s been a boon to our portfolio, but I am sincerely worried about very long-term disruptive forces that might undermine the asset class and, thus, our ability to really underwrite asset values and evaluate downside.
CIO: Name your four-member investment dream team for your own family office.
Jones: This is clearly a trick question. Clearly the right answer is the people I work with already!
CIO: Describe the weirdest interaction you’ve had with an asset manager.
Jones: How much time have you got? Here are some fun little vignettes. Pick your poison.
Right after I got married many moons ago, I received an email from a marketer, with whom I had never met and never corresponded, telling me he was trying to figure out where I was spending my honeymoon so he could send me a bottle of champagne. I never thought I would have to say this, but stalking is not cool. And, as a corollary, no means no, people.
I have had a couple of prospective managers tell me how meaningful How to Win Friends and Influence People was in their lives as a nod to their strong sense of affiliation with our foundation. That book, as many readers might know, was written by Dale Carnegie, not our founder, Andrew Carnegie. The layers of irony here are worth savoring.
CIO: What should be an investment trend, but isn’t (yet)?
Jones: Active management.
