(Exclusive) Triage: How a Virus, a Mission and NYC’s Most Vulnerable Created a Story of Hope
Jason Klein, CIO of Memorial Sloan Kettering / Art by John Jay Cabuay
There are times when a chief investment officer’s job is to answer a higher calling of the institution he or she serves. The greater the mission, sometimes the greater the calling.
This year, one CIO in our community was called to deploy 30% of his staff to help society’s most vulnerable at the exact time the markets were experiencing their fastest crash in history. His ability to still grow his fund might be called a miracle by some, or fantastic planning and risk control by others. By all accounts, it’s a feat for the CIO storybooks and a slice of New York history.
The Beginning
Our story takes place in March 2020 in New York City. It was a dire situation with an almost impossible question: How do you save the lives of the most vulnerable cancer patients who are coming to Memorial Sloan Kettering for treatment during one of the deadliest pandemics to hit Manhattan?
But First, a Bit of Biology for Context
When a person is diagnosed with a deadly and unpredictable illness such as cancer, it can suddenly rage like a wildfire through one’s body. Cancer patients generally want to get treated as quickly and precisely as possible to increase their chances of survival. Patients and their loved ones try to find the best cancer hospital they can.
Each year, in the US News & World Report’s best hospital rankings, New York City’s Memorial Sloan Kettering (MSK) Cancer Center armwrestles with University of Texas MD Anderson Cancer Center as the No. 1 or No. 2 cancer hospital in the United States. Sometimes MSK wins, sometimes Anderson wins. But given the innovative edge that MSK has developed through the close integration of clinical excellence at Memorial Hospital with breakthrough scientific research conducted at the Sloan Kettering Institute, many people who live on the East Coast or, increasingly, somewhere in the United States or anywhere in the world where they have the ability to travel, try to receive treatment at Memorial Sloan Kettering Cancer Center.
Some patients who are declared “hopeless” or terminally ill in other states and countries often find hope and lifesaving treatment at Memorial Sloan Kettering. Other patients participate in life-extending clinical trials while cures are still sought. And, as a research hospital, Memorial Sloan Kettering has discovered and administered treatments that frequently put patients into remission. Even if they cannot afford to stay in New York City, patients can work with social workers and are sometimes lucky enough to find comfortable, free lodging at the American Cancer Society’s Hope Lodge (currently closed during COVID-19). Others come by bus, train, or plane from all over the world. Still others endure daily trips into the city from four or five hours away, just to get treated by MSK’s experts.
Yet treatment creates vulnerability. When a patient undergoes chemotherapy treatment for cancer, it kills both good and bad cells within the body in an effort to stop the bad ones from wreaking havoc.
Without the “good” blood cells, the body’s immune system becomes weak, sometimes even neutropenic, which means there are dangerously few white blood cells in their body to fight foreign illnesses. (The white blood cells generally act as soldiers to fight off germs and infections, and the fewer you have, the more likely they are to lose the battle.)
Afterward, the patient is often able to recover in the years following treatment. But during radiation and chemotherapy, most patients are in such fragile health that they must keep away from all things dangerous: mainly, things and people that carry germs. Even a fresh salad becomes a threat because of the potential of catching salmonella or other foodborne dangers that could lurk within the salad’s healthy leaves.
Beware the Ides of March
When Manhattan began surging with COVID-19 cases, cancer patients became incredibly vulnerable. Some were receiving treatments they could only get from Memorial Sloan Kettering. Yet with one in four, or 28% of cancer patients dying from COVID-19, patients faced a deadly choice: Did they risk their lives to trudge into coronavirus-filled New York City to get treated, or did they stay home and let the cancer rage through their bodies, unhampered by MSK’s lifesaving treatment?
Memorial Sloan Kettering was in full triage mode. It was deciding which patients could stall their treatment, and which patients would die if they did. Surgeries were postponed. Physicians visited patients via iPad. Operating rooms and entire floors were converted to intensive care units (ICUs) to treat patients with both cancer and COVID-19. And then, the world’s oldest and largest private cancer center opened its doors wide to patients in other hospitals in the city who were afflicted with both COVID-19 and cancer. The intent was to provide a safer haven to the most vulnerable and get them away from the other germs in the general hospitals.
Needless to say, it was all hands on deck. And, knowing the hospital’s mission was to help those in dire need, Jason Klein, MSK’s chief investment officer, was doing his own kind of triage across the investment portfolio.
The markets were incredibly active, gapping down in historical fashion, with the S&P 500 establishing its fastest-ever correction and bear market. For context, while a bear market in the S&P took 274 days to develop during the onset of the great financial crisis (and averages 255 days), the S&P imploded from an all-time high to a full-on bear market in just 20 trading sessions leading to March 12. (Even in 1929, the market took 36 days to dip into bear territory.)
At the same time, given the surge in COVID-19 cases in both patients and staff members, the hospital was asking business and administrative groups for a redeployment of 30% of personnel to support everything from patient intake paperwork to security to the frantic search for protective equipment such as effective face masks. The focus was—and needed to be—on meeting the cancer-defying mission of MSK and that meant doing whatever it would take.
About Jason
Let’s back up a second just in case you don’t know MSK’s investment chief.
If there was a likeability scale for CIOs, Klein, with his 10,000-watt smile and incredibly helpful, insightful nature, would live at the top of the chart even on his bad days. As a professional, he’s analytical and methodical, and although his specific investments are kept close to the vest as per company policy, he’s never hesitant to brainstorm on a new idea, participate in an investment discussion, or to make an introduction to another smart person.
Pre-COVID-19, a visit to his Chrysler Building office meant seeing family photos with four smiling kids and a happy wife. His diverse staff draws from all walks of life, and he has been known to place an emphasis on inclusiveness to welcome their perspectives, coaxing the potential out of each member. (This was affirmed when he nominated Novisi Nirschl for CIO’s NextGen series, along with quote that would make any NextGen kvell.) And so, it’s easy to imagine how an “ask” from Klein to his staff during the most critical time of COVID-19 would have inspired an immediate call to action.
“The overwhelming majority of my group actually volunteered for redeployment,” he said. Those who didn’t presumably had to protect individuals at home.
And so, after about a decade of bullish markets, during the stock market’s rapid and potentially bottomless COVID-19 crash, Klein redeployed staff to help the greater needs of the hospital. The mission of Memorial Sloan Kettering had to come first. Now, short-staffed during the fastest market crash in history, Klein had to rely completely on his investment themes and his team’s acumen.
How MSK Did It
Luckily, more than 10 years ago, Klein had put a business continuity plan (BCP) in place, and tested and implemented it from time to time. It covered everything from investment strategy to investment operations, communication and coordination. Klein also notes the value of MSK’s top leadership and investment committee and, particularly, their focus on governance, strategic guidance, and alignment as a necessary and enabling factor of success.
“The team rallied around. We have a series of playbooks and checklists and we went through each person, each role, literally item-by-item: Who does what, how’s it done, who will cover it, what’s not going to get done—because whenever you say ‘yes’ to one thing, you’re sort of, by definition, saying ‘no’ to something else. So we quickly developed a series of priorities to make sure that we were transferring knowledge and know-how so that people could cover functions that they hadn’t been in before,” Klein said.
Investment-wise, the team of 14 with more than $6 billion in long-term investments was seeking dislocated assets to invest in amid the tumult. Although Klein declined to name specific investments, he offered a hint. Years ago, Klein’s team had invested in disruption before it was a buzzword. Biotech and technology were fair game. He had shortened his fixed income duration and added a gold position that now gave him the liquidity he needed in March.
Gold Price
Data as of December 18, 2020
Gold prices for the past three years.
Note: End of month, LBMA Gold Price PM USD/oz.
Sources: ICE Benchmark Administration, World Gold Council
“Gold performed remarkably well during March’s stock market pullback, despite the initial dip in the price on the back of the massive sell-off across asset classes,” said Juan Carlos Artigas, head of research, World Gold Council. “Gold’s quick recovery was spurred by investor appetite for a highly liquid safe haven they could leverage to raise cash as bid-ask spreads remained low and tighter on average than those of 30-year Treasuries over the same period.”
Klein had initially used gold as an inflation hedge, but he now sees it as a hedge against experimental monetary policy and broader instability, noting, “gold has been a store of value for thousands of years and in almost every modern market, dislocation has sustained value as well.
“The theme is flexibility in the public markets and disruption in the private markets. … So when the market sell-off started to happen and there were dislocated assets, we were positioned to realign with managers and focus on dislocated opportunities,” he said.
Jason Klein’s Thesis
For quite a while, he has based his overall thesis on sluggish broader markets characterized by big bouts of volatility and narrow seams of growth.
For example, when he considers prevailing structural imbalances, he observes levered national balance sheets, unfavorable demographics, budgetary pressures, and technology-based displacements. For geo-political impediments, he studies globalization in retreat and trade disputes. For starting-point market conditions, he ponders high equity market valuations, and record-low risk-free rates.
And, he looks for “present headwinds that could position forward-looking returns substantially below levels achieved by globally diversified portfolios since WWII and particularly since the early 1980s: a period that has been characterized by a massive falling interest rate cycle, Baby Boomer peak earnings/consumption, globalization that brought more than 2 billion people into integrated markets, and dramatic computer/mobile/telecommunications advancements,” he said.
And so, although overall growth was seen to be limited, pockets of transformational potential were identified across technology and biotechnology sectors. At the same time, that market-wide growth was perceived to be lower than historical levels, and market-wide volatility was expected to remain the same or increase.
In anticipation of such volatility, the CIO had been pursuing what he and his team call “flexible mandate managers,” including global macro managers.
During last year’s volatility on the upside, and when early 2020 had volatility on the downside followed very quickly by volatility on the upside, those managers, he said, positioned themselves incredibly well during the spring. “Partnering with top managers is key to MSK’s strategy,” he noted, and Klein’s team is particularly eager to support managers with multiple degrees of freedom and the ability to adapt to changing market conditions. “We had added exposure on that front last year in anticipation of what proved to be unprecedented volatility, in pursuit of our overall thesis,” he said.
His group is divided into three primary areas: investment strategy, investment operations, and investment administration. Redeployment drew from all areas, which meant, for six weeks, the remaining staff members worked relentlessly to maintain close relationships with managers. They were following the continued theme of “being disruption-friendly in the private markets and flexibility-friendly in the public markets.”
“It was not so much ‘divide and conquer’ as it was ‘collaborate and cover,’” he said, adding, “the areas that were super critical were those flexible mandate managers in the public markets.”
Klein was keeping in mind the cancer hospital’s core values: “One is ‘we are united,’ the second is ‘we are relentless,’ and the third is ‘we care.’” He said the team lived these values through their actions—working nights and weekends to cover for redeployed teammates while learning on-the-fly in the process of doing so.
In the end, the story has a happy ending. The long-term themes that they had begun in 2017 accelerated successfully in 2020, with the long-term investment pool (which provides financial strength and funding to the hospital and its research) generating strong double-digit gains this year on the strength of favorable positioning, flexibility, and exceptional manager-level performance.
The strengths and growth in the investment portfolio this year have also been paralleled by developments on the team, which added positions to augment trading and risk activities, increase liquidity management coordination with finance across short-term investment and pension management lines, and enhance portfolio analytic efforts.
Recruiting and on-boarding team members remotely and successfully has presented its own set of challenges, which Klein’s team met through its longstanding emphasis on innovating and collaborating. The culture of the group is team-oriented and mission-focused. And those who had been deployed to aid the hospital at large seemed to have returned from the front lines with an even greater sense of mission.
Each Monday, Klein’s team members begin the week with a “Memorial Moment”—whether it’s a scientist working on a breakthrough or a special moment from the nursing staff, so they can connect with their broader mission. He’s been noticing a change and a new depth to these meetings.
“I think the difference with the redeployed personnel is they actually lived it for over a month,” Klein reflected. “I think there was definitely an appreciation formed in a way that was much more tangible for them and for every member of our group. They each rose to the challenge of doing whatever was needed to support Memorial Sloan Kettering. My teammates were impressive before, but this year they really took things to a much higher level.”
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