cambridge associates client spotlight
the california wellness
foundation
MISSION AND VISION
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connecting mission and investments
Cal Wellness decided to set up its investments to reflect their mission and “do no harm.”
Judy Belk, President and CEO of Cal Wellness, explains, “We wanted to make sure our $1 billion endowment aligned with our mission to protect and improve the health and wellness of the people of California. And that goal requires a lot of thought and planning. We’re committed to managing our assets in a way that demonstrates that you can ‘do good and make money.’ We invest in public and private market funds that align with our mission. And we’ve fully integrated diversity, equity, and inclusion practices into our investment practices. We are able to do this because our board committed to a learning journey, as did our staff, and they are firmly behind this effort. We are committed to continuing to find ways to innovate, influence, and build the impact investing field.”
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piloting the approach
Beginning in 2018, the foundation chose to test its thesis that impact investing could provide competitive returns by creating a $50 million carve-out, which was piloted as a “mini-endowment” to serve as proof of concept.
This mini-endowment mirrored the asset allocation of the broader portfolio, which made it easier to track performance and also helped the board decide where they wanted to make an impact. In working with Cambridge Associates, the board sought to maximize the firm’s experience in impact investing to implement this pilot portfolio.
After a year, the board, investment committee, and staff were excited about the early performance, the managers they were seeing, and their prior track records — but the board realized the amount set aside for the pilot was too small relative to the total portfolio to be worth the additional governance and administrative resources required to do the job well. The foundation decided to expand its efforts by allocating an additional $50 million to a mission-related private investment mandate focusing explicitly on managers of color.
By 2021, the foundation believed that the pilot had proven itself. They felt that the portfolio was starting to deliver competitive returns, albeit with only three years of data. The investment committee was also excited about the types of managers they were adding to the portfolio and how well those managers aligned with the foundation’s work in the community.
After conducting a governance study, Cal Wellness believed it was time to merge the impact portfolio back into the main portfolio, to operate the overall portfolio under their mission-related guidelines, and to select a partner to help oversee the entire portfolio. After a marketplace review, they chose Cambridge Associates based on their management of the impact portfolio, as well as the firm’s ability to provide full-service operations and advisory services for portfolios of size.
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Source: www.calwellness.org
Meet The California Wellness Foundation
(Cal Wellness), one of California’s largest healthcare philanthropies with the bold vision that every resident of California should enjoy good health and experience wellness — and a $1 billion endowment to support that goal.
Headquartered in Los Angeles, the foundation is working to provide the people of California with access to healthcare, quality education, good jobs, healthy environments, and safe neighborhoods.
We’re committed to managing our assets in a way that demonstrates
that you can
‘do good and make money’
JUDY BELK
In 2016, the board began a learning journey to explore elevating the foundation’s impact by more closely aligning its investments with its mission. In doing so, the board also began to shift the portfolio’s alternative investments from fund of funds to direct commitments in general partnerships, giving the foundation greater opportunity to align that portion of the portfolio with its overall mission.
It may sound simple, but there was a lot of work to do to reflect their values in every part of the organization—including within the portfolio—while simultaneously increasing exposure to private investments and diversifying strategies.
Beginning in early 2022, the total endowment was managed as one mission-aligned portfolio. A new framework and new investment policy statement was developed to increase the portfolio’s mission alignment along two primary dimensions:
LESSONS LEARNED ON INCORPORATING IMPACT INTO YOUR GOALS
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As in traditional investing, there are a myriad of ways to develop and implement an impact investing portfolio. Here are six things Cal Wellness has learned along the way:
do your homework
Before approval of the pilot portfolio, the board and staff spent two years learning all they could about the impact investing landscape. This included interviews with leaders of institutions that implemented similar strategies and presentations from diverse managers. The goal was to build an educational foundation for the board and staff upon which they could implement their impact investing agenda.
build common understanding
Cal Wellness’ ability to articulate priorities made it that much easier for its investment team at Cambridge Associates to develop investment ideas that matched the foundation’s goals. The Cal Wellness board, alongside the investment committee and the investment staff were of similar mind and met regularly to consider their impact investing priorities.
start small
Cal Wellness had sufficient assets to carve out part of the portfolio for a pilot project. While managing the smaller portfolio wasn’t terribly efficient, it did allow the foundation to think about what was most important to them. Moving from the pilot to full-scale implementation also allowed it to streamline its focus — deciding on strategy alignment and diversity — and with the help of Cambridge Associates, to be sure that investment decisions reflected both goals.
be specific
In partnership with Cambridge Associates, Cal Wellness included specific language in the investment policy statement focused on investing with managers who are women and people of color and quantified each manager’s strategic alignment to the mission. Cal Wellness realized there was more to the equation than simply checking the box on hiring a diverse manager. Cambridge Associates helped Cal Wellness analyze not only the underlying portfolios but also the manager’s organizations to ensure that the managers themselves were in alignment with the foundation’s mission. For example, they both considered the diversity of the companies in which the managers were investing — and reporting — and assessed diversity at multiple levels of the organization, not just in company ownership metrics.
0.1 Mission and Vision
0.2 connecting Mission And Investments
0.3 Piloting the Approach
0.4 Lessons Learned
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This profile does not constitute an endorsement of Cambridge Associates by the California Wellness Foundation.
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In 2016, the board began a learning journey to explore elevating the foundation’s impact by more closely aligning its investments with its mission. In doing so, the board also began to shift the portfolio’s alternative investments from fund of funds to direct commitments in general partnerships, giving the foundation greater opportunity to align that portion of the portfolio with its overall mission.
It may sound simple, but there was a lot of work to do to reflect their values in every part of the organization—including within the portfolio—while simultaneously increasing exposure to private investments and diversifying strategies.
Judy Belk
We’re committed to managing our assets in a way that demonstrates that you can ‘do good and
make money.’
Manager Diversity: To more fully reflect an abiding commitment to its mission and its core values of racial and gender equity, the foundation seeks to achieve increased diversity within the portfolio. The goal is to “raise the bar” on mission alignment by assessing manager diversity as an independent factor from the alignment of a manager’s investment strategy with Cal Wellness’ values and priorities. (For Cal Wellness, manager diversity is defined as ownership and leadership by women and people of color (POC) managers.)
Manager Strategy Alignment: The foundation seeks to increase the percentage of investments across the portfolio that have positive impact on the foundation’s mission and/or reflect the foundation’s values while earning a market rate return and contributing to the foundation’s long-term financial stability and growth. Each fund manager and investment strategy is scored and ranked along an alignments pectrum ranging from “negatively aligned” to “targeted impact.”
In 2022, the foundation systematically re-evaluated all its managers under the new mission alignment framework and approved decisions that increased the percentage of assets with diverse managers from 55% to 90% and increased its mission strategy alignment score.
Importantly, during this period of market turbulence, the portfolio also continued to outperform its policy benchmark (which is based on standard broad-market indexes).
be specific
be patient
The learning journey began in 2014 and the pilot portfolio was approved in 2016. Broad implementation of the mission-aligned agenda started in 2021, so it’s still early. Cal Wellness understands the need to exercise patience to realize the full benefits of this work. Yet, the foundation must also remain diligent in its oversight role to ensure that the portfolio is successful when measured against its benchmarks.
consider roles
In selecting a partner to help implement their mission-aligned portfolio, Cal Wellness wanted to remain involved in decision making on portfolio composition and implementation. Cambridge Associates was
able to design a governance process that let the foundation maintain final decision-making. Yet, they still relied on Cambridge Associates to recommend managers for the portfolio and provide full portfolio administration and back-office support.
After a year, the board, investment committee, and staff were excited about the early performance, the managers they were seeing, and their prior track records — but the board realized the amount set aside for the pilot was too small relative to the total portfolio to be worth the additional governance and administrative resources required to do the job well. The foundation decided to expand its efforts by allocating an additional $50 million to a mission-related private investment mandate focusing explicitly on managers of color.
By 2021, the foundation believed that the pilot had proven itself. They felt that the portfolio was starting to deliver competitive returns, albeit with only three years of data. The investment committee was also excited about the types of managers they were adding to the portfolio and how well those managers aligned with the foundation’s work in the community.
After conducting a governance study, Cal Wellness believed it was time to merge the impact portfolio back into the main portfolio, to operate the overall portfolio under their mission-related guidelines, and to select a partner to help oversee the entire portfolio. After a marketplace review, they chose Cambridge Associates based on their management of the impact portfolio, as well as the firm’s ability to provide full-service operations and advisory services for portfolios of size.
Source: stock.adobe.com
Source: www.calwellness.org
LESSONS LEARNED on iNCORPORATING IMPACT INTO YOUR GOALS
Source: www.calwellness.org
BE PATIENT
The learning journey began in 2014 and the pilot portfolio was approved in 2016. Broad implementation of the mission-aligned agenda started in 2021, so it’s still early. Cal Wellness understands that the need to exercise patience to realize the full benefits of this work. Yet, the foundation must also remain diligent in its oversight role to ensure that the portfolio is successful when measured against its benchmarks.
CONSIDER ROLES
In selecting a partner to help implement their mission-aligned portfolio, Cal Wellness wanted to remain involved in decision making on portfolio composition and implementation. Cambridge Associates was
able to design a governance process that let the foundation maintain final decision-making. Yet, they still relied on Cambridge Associates to recommend managers for the portfolio and provide full portfolio administration and back-office support.
Source: www.calwellness.org
Beginning in early 2022, the total endowment was managed as one mission-aligned portfolio. A new framework and new investment policy statement was developed to increase the portfolio’s mission alignment along two primary dimensions:
Manager Diversity: To more fully reflect an abiding commitment to its mission and its core values of racial and gender equity, the foundation seeks to achieve increased diversity within the portfolio. The goal is to “raise the bar” on mission alignment by assessing manager diversity as an independent factor from the alignment of a manager’s investment strategy with Cal Wellness’ values and priorities. (For Cal Wellness, manager diversity is defined as owner-ship and leadership by women and people of color (POC) managers.)
Manager Strategy Alignment: The foundation seeks to increase the percentage of investments across the portfolio that have positive impact on the foundation’s mission and/or reflect the foundation’s values while earning a market rate return and contributing to the foundation’s long-term financial stability and growth. Each fund manager and investment strategy is scored and ranked along an alignments pectrum ranging from “negatively aligned” to “targeted impact.”
In 2022, the foundation systematically re-evaluated all its managers under the new mission alignment framework and approved decisions that increased the percentage of assets with diverse managers from 55% to 90% and increased its mission strategy alignment score.
Importantly, during this period of market turbulence, the portfolio also continued to outperform its policy benchmark (which is based on standard broad-market indexes).
0.5 Download the PDF Version
0.5 Download the PDF Version
It's only the beginning
Cal Wellness believes that it is part of its responsibility to lead by example and to share impact investing experiences to encourage
other institutions that are interested to also take steps towards a more mission-aligned portfolio. For Cal Wellness, this is still the beginning of an ongoing journey towards ensuring that all the resources of the foundation contribute to its overall mission.
It's only the beginning
Cal Wellness believes that it is part of its responsibility to lead by example and to share impact investing experiences to encourage other institutions that are interested to also take steps towards a more mission-aligned portfolio. For Cal Wellness, this is still the beginning of an ongoing journey towards ensuring
that all the resources of the foundation contribute to its overall mission.
Beginning in 2018, the foundation chose to test its thesis that impact investing could provide competitive returns by creating a $50 million carve-out, which was piloted as a “mini-endowment” to serve as proof of concept.
This mini-endowment mirrored the asset allocation of the broader portfolio, which made it easier to track performance and also helped the board decide where they wanted to make an impact. In working with Cambridge Associates, the board sought to maximize the firm’s experience in impact investing to implement this pilot portfolio.
