This is a hidden column

getTagNameMorningstarCorporate:blog/bigpicture

Q&A: What We Learned From Ben Carlson

Carlson explains the principles behind his new book for institutional investors

Jeff Ptak, Morningstar Research Services LLC

 

Ben Carlson, the author of the popular A Wealth of Common Sense blog and a book of the same name, is about as good an authority on institutional investing as you’ll find. Carlson began his career in sell-side research, but before long moved to the buy side, working for years as an investment consultant and then as a portfolio manager at a large Michigan-based foundation. He now heads the institutional asset-management practice at Ritholtz Wealth Management, a fast-expanding, New York-based registered investment adviser.                                           

At heart, like so many keen observers of the portfolio management process, Carlson is a teacher. He seeks to dispel, clarify, and above all, simplify. That vein runs through much of his writing and was the impulse for his latest offering, a recently published book on institutional investing decision-making aptly titled Organizational Alpha: How to Add Value in Institutional Asset Management.

We sat down with Carlson to discuss the motivation for the book, the principles that animate it, and some of the key takeaways for practitioners. Here’s an excerpt of the interview:

Q: For those who aren’t as familiar with your resume or don’t regularly read your work, let’s start by stepping back: Why do you think it’s important not just to think and make decisions for clients, but also to write as you often do?

Ben Carlson: There’s an old quote that goes something along the lines of “I write to know what I think.” I was never a huge fan of writing in my younger days, but I’ve found the more I write the more I’m willing to learn. It’s not enough to be knowledgeable on a subject; you also have to be able to effectively communicate and educate others to get your point across in an accessible way. And we now live in an age of ever-increasing transparency. People want you to be straight with them and communicate through a variety of platforms. Writing is a great way to reach people and share your thoughts, experiences, ideas, and views.

Q: In a previous life, you worked at a foundation. To what extent did your experiences there inspire or inform the advice you’re dispensing in the new book?

Carlson: My history in this industry has definitely shaped the way I look at the institutional asset-management industry. I’ve gotten to work with a number of really great nonprofits over the years, and the one thing that always amazes me is how many great charitable organizations there are out there. These institutions are really looking to make a difference in people’s lives, and I think it’s easy to forget that when you’re simply focused on the investment dollars. The whole point of investing these funds is to serve the beneficiaries.

Q: Let’s talk about the new book. Why did the world need this book and what are you trying to help with it?

Carlson: There are more than 80,000 charitable foundations in the U.S., and 99% of them have less than $100 million. We hear all the time about Harvard, Yale, and CalPERS, but there is a large number of nonprofits out there who don’t have the resources, donor base, investment staff, or connections that these large funds have. This book is meant to help those small and midsize institutional investors.

Q: One would think that the institutions of the world that you’re targeting the book toward are endowed with ample resources, plenty of access to managers, and other advantages. What’s your call to action in trying to help them?

Carlson: The smaller institutional investors don’t have as many resources or as much access as you would think. Only around 20% of the board members for these funds have any experience working in asset management. While there is a lot of money in these space, that doesn’t always translate into investment knowledge. Most of these nonprofits are more focused on the mission of their organization than portfolio management because most can’t afford to have a fully staffed investment office.

This blog post is an excerpt from the April/May issue of Morningstar Magazine. Read the full interview .

Please see below for important disclosure. 

Read Morningstar magazine for more credible, in-depth, and relevant analysis on the latest investing trends.

Subscribe for Free

Important Disclosure

The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission.

The Advisor Toolkit

Get practical behavioral finance tools to help clients avoid common pitfalls.

The Investor Success Project

Read our latest research on how to help investors.