Kim Lew – The Carnegie Way (Capital Allocators, EP.52)

Episode Summary

Executive Summary: Kim Liu recounts her immigrant family background and unconventional path from commercial banking to Ford Foundation and Carnegie Corporation. She explains how mentor-driven risk-taking, endowment-model investing, and co-CIO collaboration shaped her approach, while emphasizing Carnegie’s preference for idiosyncratic, long-term, off-the-run investments, committee education, and ongoing portfolio evolution to meet lower-return realities.

Main Topics: Immigrant upbringing and family influence (Priority: 5/5): Kim describes her parents’ early marriage, hardship, and strong discipline as the foundation for her work ethic, educational drive, and comfort with risk and planning. Career path from banking to institutional investing (Priority: 5/5): She moved from Chemical Bank and HBS to Prudential, then to Ford Foundation, where mentorship and a chance in technology investing launched her long career in foundations and endowments. Ford Foundation vs. Carnegie investing cultures (Priority: 5/5): Kim contrasts Ford’s siloed, traditional portfolio management with Carnegie’s integrated, endowment-style, committee-driven process and long-term institutional consistency. The co-CIO experiment at Carnegie (Priority: 5/5): She and Meredith Jenkins were installed as co-CIOs and split responsibilities intentionally to preserve full-scope experience, manage politics, and maintain a unified front with the investment committee. Endowment model, idiosyncratic ideas, and portfolio construction (Priority: 5/5): Kim argues the Yale-style endowment model still works, but Carnegie must adapt it by finding small, unusual, less crowded opportunities that big institutions cannot efficiently pursue. Risk management, succession, and manager evolution (Priority: 4/5): She highlights the challenge of aging managers, spinouts, farm teams, and the need to build succession while staying patient and selective about how much capital to allocate. Personal growth, mentorship, and life outside investing (Priority: 4/5): Kim discusses mentoring, board service, parenting, and a self-imposed 50-for-50 challenge as ways to broaden perspective and stay brave, curious, and balanced.

Key Arguments: Great investing requires taking calculated risks and accepting that being right only needs to happen most of the time, not always. Mentorship can be transformative; early career advocates and sponsors shape both capability and professional identity. Institutional culture matters: Carnegie’s founder reverence, stable leadership, and integrated decision-making support long-term investing better than a siloed structure. Co-CIO structure can work if responsibilities, committee exposure, and accountability are carefully divided and the relationship is protected. The endowment model remains valid, but implementation must reflect each institution’s size, inflows, liquidity needs, and ability to exploit inefficiencies. Small institutions can outperform by focusing on niche, off-the-run, and earlier-stage opportunities that large allocators cannot efficiently access. The biggest current challenge is manager succession: long-tenured managers are aging together, requiring a deliberate farm-team strategy without sacrificing conviction. Outside responsibilities and broader life experiences improve investing judgment by exposing a CIO to different forms of management, incentives, and stakeholder dynamics.

Data Points: Carnegie Corporation assets under management: $3.5 billion - Kim oversees Carnegie’s foundation portfolio. Ford Foundation private equity allocation (at the time): 10% - Kim described Linda’s traditional portfolio structure at Ford. Ford Foundation co-investment/manager tenure: 6.5 to 7 years - Kim worked with Betty Fagan in technology equities before Betty retired. Time from start at Ford to leaving: 13 years - Kim noted her first and last day at Ford were 13 years apart. Co-CIO planning horizon: 3 years - Kim and Meredith agreed one of them would leave if the arrangement failed after three years. Current number of manager relationships: about 120 - Kim estimated the size of Carnegie’s manager universe across asset classes. Idiosyncratic/off-the-run share of portfolio: 5% to 10% - Kim estimated current exposure to truly unusual opportunities. Target payout rate: 5% - She noted Carnegie’s payout requirement as a constraint on portfolio design. Peru manager fund size example: $20 million fund; Carnegie invested $2 million - Illustrated how Carnegie can support small, niche managers without moving markets. First venture investment size for a new manager: $5 million to $10 million - Kim described how Carnegie typically starts new venture relationships small. Expanded venture position size: $15 million to $20 million - She said it can take years to reach meaningful allocation sizes.

Pivotal Quotes: "You only have to be right 51% of the time, and you can be great at this job." — Kim Liu: Kim recalls Betty Fagan’s advice early in her investing career at Ford Foundation. "Proper planning prevents piss-poor performance." — Kim Liu: A key lesson from her father that shaped her disciplined, over-prepared approach. "Now we have to decide whether we want to be great." — Kim Liu: Her reflection on whether the team is willing to accept discomfort to pursue exceptional outcomes.

Implications: For allocators, the episode shows that long-term outperformance depends on culture, succession planning, and willingness to embrace unusual ideas. For CIOs, it reinforces that the best portfolios are built through disciplined risk-taking, not benchmark hugging.