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Joel Wittenberg

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2020-08-31

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2020-08-31

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1

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1. “We all have conscious and more importantly unconscious biases. And we're all products of how we grew up. We come from these backgrounds that have created who we are, and being aware of your unconscious biases, and you're never fully aware of them because they're unconscious, but being aware of your unconscious biases allows you to have the conversation.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Never crossed my mind, and a Kellogg, it allowed me to have that conversation to talk to people that not even just my team, but my peers and the people I was hiring. And what I hope to create was a workplace where people are confident they will be given responsibilities and promoted based on their experience, based on their expertise, and not based on them coming in as a person of color where they may have prejudgment going on and you can't really get to that mental thought until you've actually talked to the people about that. The conversations we have at Kellogg around race are incredible conversations. They're the most growth as a person you could ever have. And that's what allows you to create a diverse workforce.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “The racial equity work is really, really interesting as a corporate executive at two companies. I really try to make a workplace that was welcoming, that was comfortable for everybody, gender, race, and it was really a priority for me. And I had it at fairly diverse group. The one thing I never did. Had the conversation with those diverse employees of mine about Where they came from about what their work career was like, about what their experiences were. And it's amazing to try to create a workspace where people will be successful and you've never actually had that conversation with people about what they would like in that workplace”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “I was able to bring that lens, my new lens, which is obviously after 11 years, I'm still learning a lot about myself, but I was able to bring that lens and bring in the foundation's focus on diversity in order to hire a totally diverse staff. So here we are. We're in the west side of Michigan, which is hard to recruit for anybody. And I have built a team that is two-thirds racially and ethnically diverse if we include gender where we're 75%. We don't include gender when we think about this. But it was a mindset that I had, and it was a mindset that the foundation gave me that allowed me to drive my team and get the diversity right from the start.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “I quickly became a part of the foundation working with the people I work with, which I can talk to you about who we are, which really is an important part of this, and saw that as a white man at 50 years old who had had the benefits of white privilege for my whole career, I had a role in racial equity. And that's the part that was really empowering me. As I started to hire for this function, because like I said, I built it from the bottom up.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “Me, it was on day one. The thing about Kellogg is we are a culture of diversity and inclusion. It's not talk it requires. Hours and hours and off sites and focusing on race and the discussion about race and where do we come from. So it's not the type of thing you can fake, right? You've got to believe in this and you've got to be a part of it. So it happens to people very quickly. The example of me, I'm a white man. I came into the foundation at 49 years old. Obviously, I knew there was a problem. I didn't know what the problem, how to think about it, how to deal with it.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Obviously, right now, as we've learned this year in particular, too many communities aren't providing those pathways, those pathways of opportunity for the families and our children. And so what we do is we're dedicated to changing that and building a great future for all children. The one thing that goes through everything we do is everything about our DNA is racial equity, diversity and inclusion. And that is a key part of who we are and what we do.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “The Kellogg Foundation started in 1930. Mr. Kellogg created this incredible structure. So we have two structures. One is called the Foundation where the philanthropy is done. And then we have the trust where the investments are done. And that allows each entity which has such a unique position to manage themselves specifically for that need. And the trust, obviously, puts money into the foundation, and that's how we do our philanthropy. The foundation was created itself, like I said, 1930, by the serial entrepreneur W.K. Kellogg, and for us in this business, we have to point out cereals with a C here. And his focus right from day one was on children. And we know that children live in families, families live in communities, and so what we believe is that for our families and our children to thrive, they need to be in communities that provide for them equitable places of opportunity for everybody.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Yeah, Vara's not the be all end all for sure. And so we've got a lot of risk management tools that we utilize. We will buy out of the money puts that have so little delta in them that you can't really count them as part of your equity allocation. But when we get into the craziness of the markets and correlations go to one, the VAR model is helping you on the one and two standard deviation moves, and that's it. We have all sorts of risks. We've got a risk management model that helps us with that.”

   2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “One other question about that you had mentioned being familiar with VAR calculations in the early days. And I think on the one hand we understand what VAR means in a normal environment. And on the other hand, it seems like everything important happens on the tails. I'm curious, how have you integrated that into your thought process?”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “Were some numbers moving around because it was a risk management spreadsheet. And I said, What are those numbers? He said, Well, I'm allowed to have some separate trades on the side. And so I started asking questions about those. Those weren't within the risk management guidelines. They were just his trades. And that was the last time I was at that office.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Think newer managers and more value oriented managers who do things from a bottom-up perspective, that's where it tends to go off. I can't think of a specific situation that went that way. What I've seen is that when we've gone in and done our due diligence on managers, especially ones like in hedge funds that have a more sophisticated, leverage-driven portfolio, if I'm not seeing a really complete risk management system that understands the asset and the liability side of the balance sheet, it's just a non-starter. There was one time years ago we went into a manager and it was a very systematized hedge fund and I was standing with the trader. It was a bond fund. So I was just really having a good time with him. And then in the bottom corner of his spreadsheet.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Think so. My questions as a Bond guy, I think, are different than questions of somebody who comes out of an equity side. It's interesting because most of my team comes from the equity side. One of the things that when I hire, I want to have people who have owned portfolios, who've had to live with their decisions, and of my three directors on the diversified asset side, that's where they come from. And so their questions as more value-oriented investors tend to be those bottom-up questions to managers. My questions are really around portfolio construction, about risk management, and things that I think of as the bond ALM guy that I am.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “Curious, just before we dive into a lot of the special sus we're going to be talking about does that fixed income market lens also color how you might think about manager selection a little bit differently than someone who maybe came at it from an equity lens?”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Coming in one day, not coming in the next day. Commitments that they've made. I think everybody has to, we all have our own balance sheet we have to deal with.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “So we actually look, if you take a side to Kellogg stock, the Kellogg stock is about half of our assets, a little bit over half right now. And if you put that to the side, we then have the diversified portfolio, which is the other half of the assets. So our portfolio really looks like a lot of our peers. The only difference is we do need a little bit more liquidity. And so we probably have a little bit less of private equity. What we're trying to achieve here, though, is growing that diversified portfolio and getting to diversify away through growth. That's really the goal and that's what makes it different. So it's not a family office at all. There's no family involved with the foundation at all. But it's got that family office allocation because of the concentrated position. But at the end of the day, every peer of mine has a balance sheet issue, whether it's a university that may have cash flows.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “The thing for me is, I think it's coming from that corporate side, is that I'm thinking of the entire balance sheet here. We've got a 5% payout, and that is my liability stream that I've got to manage to, and I don't, obviously I'm not fully hedging that, but I am aware of my liability stream and my asset stream. And that's what I think makes me different than that. I do think that my value background combined with my focus on convexity and trying to create some non-normal distributions does push us towards things with a little more cash flow. And I think that's what's different. When I look at our real estate portfolios done really well, and I think it's been because of that focus on cash flow and what it sort of means, because the higher cash flow assets have done well coming out of the GFC at least.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “And when you think about using that duration and convexity lens for other asset classes, do you find, or where do you find there are areas where you end up at a different thought process or assessment of maybe an asset class or a manager than someone who has maybe more of a traditional just risk and return framework?”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “The return on the VC investment. And so you really have to focus on this aspect of duration. The convexity piece is really the key to it, though. When you combine them together. Because what we look for in a private equity investment, for example, is really more on the growth side is how do they get to a mid-teens type return and where does that positive convexity come from to get to a higher return? More importantly, Where does the negative convexity affect us? How do we know that we're managing the downside in this? And so it all comes back to a bond market mindset that really drives how I think about the entire balance sheet that I've got to manage here.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “Really important. Everything to me comes back to duration. And I can't calculate the duration of a stock, but what I know is that a gross stock has a very long duration. And so as we look at any asset at the foundation, any asset class, any private equity fund, any manager, my mind and now my team's mind goes to the duration of that. It creates some really interesting dynamics because on one hand a VC investment is going to be our longest duration asset. But if you think about a, for example, a shorter duration asset, it distressed bond fund allocation, your duration risk is a lot lower. Your cash flow is a lot higher and your return over the distressed cycles because you're going to go through many there may end up being similar or better than”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Being treasurer, running the pension fund on my own. The Kellogg Foundation chief investment officer position opened up. The foundation is a, Mr. Kellogg created a situation where he wanted the foundation to be completely separate from the company, although there's board overlap. So when the CEO of Kellogg Company came and said, I found you the greatest job in the world, I applied for it and I moved two blocks away and I've been at the Kellogg Foundation for the past 11 years. It's been a great place to be. I had the ability to kind of build the function really from the ground up and do it my way, do it my team's way. And it's just been the gift that keeps giving to me.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “Stepped in and said, I can do the debt deals. And next thing I knew I was the treasurer of the company. So after a bit of time there, I went to the Kellogg Company where I was treasurer. Kellogg was in the process of buying Kiebler. We took the balance sheet from a AAA rating down to a high BB rating, which was really an interesting and fun experience. And then after nine years at Kellogg Company,”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Dow Chemical Company, where I sat on the desk we issued debt and then hedged it. That was in the early 90s. And we created, before it had been created by JP Morgan, we created a value at risk model. So we always knew what our exposures were in our derivatives book. We always knew what would happen if the market moved a certain way. And it was just a great, again, next step for me in the risk management side. Went to the pension area at Dow Chemical for a couple of years and then eventually went to a company called Armstrong World Industries in Lancaster, Pennsylvania. I got out of Michigan for the first time in my life. At Armstrong, I was running the entire pension fund. And that's really where I got my value investing philosophy. I also ended up just the right guy in the right spot because we announced two acquisitions within a week, one in Europe, one in the US. Our treasurer became controller, our assistant treasurer quit.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “At Alexander Hamilton, I ended up very quickly on the Bond desk and investing in investment grade bonds. I just became obsessed with the market, focused on the asset liability structure of an insurance company and how we had to think about that. And then I bought the Fibozi Fixed Income Securities Handbook, and that literally became my Bible. When you look through it and see all the yellow and the writing on it, I read it time and time again. And that was really where I got my love for the bond market. I was getting an MBA at night at the University of Michigan as well. But that really was what launched me on this track of my career because understanding duration, understanding optionality and therefore convexity has been really what has kind of got me to where I am today. When I graduated from University of Michigan, I went to the”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Was kind of my introduction into this world. I pretty quickly left that job, went to work at a life insurance company in the Detroit area called the Alexander Hamilton Life Insurance Company, which I cannot say without singing. I have to really focus on not singing that these days.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Joel, thanks so much for joining me. Thanks very much, Ted. It's great to be here. Well, why don't we start with just your background and how you worked your way into being in the seat you're in today? I got into the financial markets really right out of college. I was a retail stockbroker in 1984 when selling municipal bonds. The long-term yields had just come below 10% and everybody said, I want 10% of my muni bonds. So I was not the most successful broker. But I learned an awful lot about intuitively understanding that if rates went down on all these bonds and got called, people were going to lose a lot of money.”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “My guest on the fourth and final episode of Diversity, Equity, and Inclusion, Awareness, and Action, is Joel Wittenberg, the Chief Investment Officer and Vice President of the WK Kellogg Foundation, where he's managed the foundation's eight billion dollars in assets since 2009. The Kellogg Foundation is guided by the belief that all children should have an equal opportunity to thrive. In accordance with that mission, in 2007, its board committed to be an effective anti-racist organization that promotes racial equity. Over the ensuing 13 years, the organization has become a leader in applying research and taking effective action. Our conversation touches on Joel's background in the fixed income markets and the application of duration and convexity to allocating capital. We then turn to his work at the Foundation Fostering Racial Equity. We discuss the importance of open”

    2020-08-31 · Capital Allocators · Diversity, Equity & Inclusion 4: Joel Wittenberg – A Prescription for the Future (Capital Allocators, EP.154) · IDENTIFIED FROM THE TRANSCRIPT · source