In August 2019, Stephen Vaccaro, Yale MBA ‘03, became the director of private equity at Hirtle, Callaghan & Co., LLC (HC), a leading investment management firm associated with pioneering the outsourced chief investment office (OCIO) model for college endowments, foundations, and wealthy families. Vaccaro, who would work under the guidance of Deputy CIO Dan McCollum (Columbia MBA ’03), was tasked with spearheading efforts to grow HC’s private equity (PE) market value from $1 billion to a new target of roughly $3 billion in order to contribute to the effort of generating higher long-term returns for clients. These new allocations, approved recently by HC’s senior team, represented a sizable shift in HC’s commitment to PE—from roughly 6% to 18% of the firm’s more than $17 billion in assets under management (AUM).
Notwithstanding the senior-level support for the work, Vaccaro and McCollum encountered some early reluctance to embrace the new targets. These early signals suggested that client engagement teams and, by extension, HC’s extensive client base, would require a major reorientation in mindset and practices, particularly given clients’ long-term histories operating at relatively low levels of PE. Complicating matters was the unease many held about the PE asset class, including concerns about liquidity, fees, the state of the market, and the inability to monitor environmental, social, and governance (ESG) investing.
One question hovering around the new program was whether 18% of the firm’s AUM was, in fact, the right new target. Would investment committees overseeing endowments typically in the 10s or 100s of millions embrace this shift, and, more pointedly, was this the best move for client portfolios? If so, Vaccaro and McCollum would also need to address the question of whether the firm had the internal capacity to deliver on this new goal, and what barriers they would likely encounter along the way. “Our mission is to serve these smaller endowments and foundations and families,” said Vaccaro. “How do we educate our clients on why they should be doing more?”
Publication Date: June 30, 2020
Citation: James Quinn, Jaan Elias, and Adam Blumenthal, "Hirtle Callaghan & Co: Building Commitment to Private Equity," Yale School of Management Case Study #20-028, June 30, 2020.