“Brian has played a key role in the growth of the Weinberg Foundation Investment Office and our portfolio. I have had the privilege of working with Brian since 2015 and have witnessed his growth as both an investment professional and a leader. Very early in his tenure here, Brian fully embraced the mission of the institution, and it shows every day in how he represents the foundation. His exceptional analytical skills have been crucial in making investment decisions and driving strong results across the portfolio, particularly in the private equity portfolio. He has also been a great mentor to his co-workers, always generous with his time and in providing feedback. Brian has the exceptional combination of focus, intellectual curiosity and strong work ethic that will serve him well in the future. He is among the most talented individuals I have known in the industry.”
—David Gilmore, CIO, The Harry and Jeanette Weinberg Foundation
The CIO Editorial Team shared a dozen questions with all our NextGen nominees and asked them each to pick six to answer. Their answers informed our decision to include them as a NextGen. Below are the answers from Brian Clark.
CIO: How are you dealing with rising interest rates and economic uncertainty?
Clark: With a risk-free rate today of +5%, we are seeing increased competition for capital. With this in mind, I believe an attractive area of the market right now is partnering with family-owned businesses in the lower to middle market. These companies, in some cases, have been around for 30 years and have survived multiple recessions, but need a succession plan. They can be purchased in inefficient processes where price is not always the leading factor. This can lead to attractive entry valuations, providing a robust margin of safety for investors. If an operator can successfully professionalize and grow the business, strong outcomes can be achieved through selling into competitive auctions where more capital sits above us. In an environment like today, this is a high-conviction strategy that I would like to lean into, given the profitability of the companies and the inefficient nature of the market.
CIO: What is the best way to bring more diversity to the financial industry?
Clark: One of the ways our foundation is supporting diversity in the investment industry is through our goal of increasing our allocation to diverse managers. With this in mind, the foundation continues to be a fully transparent participant in the Knight Foundation’s Diversity of Asset Managers study that brings more transparency to the hiring of diverse asset managers. We are also surveying each of our managers to understand their progress in increasing diversity across their organizations. I’m proud of the progress and commitment the foundation has shown in this important area, and it has our team’s full support. I try to be a resource and provide guidance for emerging diverse managers as they look to grow and am an ardent advocate of increasing diversity when talking to peers and other market participants across the industry.
CIO: What traditional and/or alternative asset classes do you think are most important for institutional investors, and why?
Clark: To me, one of the most attractive asset classes is growth equity. This is not late-stage venture capital, but, rather, asset-light companies that have been bootstrapped and don’t need the capital to survive. These companies are profitable or breakeven, have strong growth rates, and are very capital efficient (unlike most of venture capital). They typically have much stronger growth rates than traditional private equity and also require much less debt. I also like that growth equity companies are often found outside of traditional venture capital hubs, where less capital is chasing deals. Growth equity is not reliant on the IPO market, with exits frequently coming from larger funds and strategic acquirers within three to five years. Another attractive feature of this asset class is the strong structural downside protection provided by being in a preferred equity position. Someone once described this space to me as the nirvana of growth and value, and I strongly agree. I think this area of the market is asymmetric to the upside and one of the most attractive risk/returns for institutional investors.
CIO: What asset class or investment troubles you most right now, and why?
Clark: In the current environment, I worry about private loans that were underwritten over the past few years with very rosy growth and profitability projections. Most of these companies never expected to see interest rates as high as they are today. With these loans typically being floating rate, companies’ debt service costs have risen significantly, which will likely lead to many stressed and distressed situations. In addition, many of these loans are covenant lite. This structure can lead to creditor-on-creditor violence in which some investors get primmed out of their senior positions and into more junior positions lower in the capital structure. I believe this dynamic will take years to work its way out of the system and lead to significant capital impairment. On the flip side, this should provide a large opportunity set for sophisticated credit investors who can navigate complex loan documents and is an area I continue to watch closely.
CIO: What investing decision have you made for your organization that you’re most proud of?
Clark: We make our investment decisions as a team, and I’m proud to play a role in promoting an inclusive and friendly environment where everyone on the team feels comfortable speaking up and challenging the status quo. As an example, when we debrief after manager meetings, the youngest person always goes first so that they are not influenced by anyone else’s thoughts. This helps younger team members develop their own opinions, build conviction and confidence, and practice defending a position. I especially enjoy coaching and mentoring people, and if I was not in the investment industry, I’d likely be a high school basketball coach. I get a lot of satisfaction from seeing my colleagues develop and grow in their careers, and I’m proud to support them however I can, because countless people have done the same for me.
CIO: Which asset manager (exclusive of their firm) has most influenced your growth as an institutional asset manager?
Clark: I’ve been very fortunate to have had some distinguished mentors throughout my career. Three key individuals that have been critical to my growth are David Gilmore (the foundation’s CIO), Jonathan Hook (the foundation’s former CIO) and Karl Scheer (University of Cincinnati CIO). Each of them has had an enormous impact on my development during different stages of my career. They are incredible leaders who trust, encourage, teach, listen and challenge their teams every day. They have instilled in me that it’s not about us, it’s about the institution and to always do what is right. Each one demonstrates the highest level of integrity and treats everyone on their team like an equal. These qualities engender a great culture and environment where we all feel comfortable speaking up, challenging the consensus view and admitting mistakes. This industry is really an apprenticeship business, and I’ve been lucky to have worked with and learned from each one of them along the way. I’m also very grateful for the support from our board and president, who have provided me with the resources and opportunities to continue to grow in my investment career.
