Kenneth Frier, M.B.A. ’84 has been named Stanford Management Company’s (SMC) chief investment officer (CIO), a position he currently holds at the Hewlett-Packard Company. Frier is primed to manage the nation’s third-richest college endowment, a charge he will share with SMC president and chief executive officer John Powers, M.B.A. ’83.
Frier’s induction to the SMC team at the start of September will mark the end of a decade-long career at Hewlett-Packard. His recent appointment is the result of an extensive search led by David Barrett Partners.
“We looked at a lot of candidates because we have very high standards,” Powers said of the CIO search. “We were looking for someone who we thought was a great investor with, ideally, a complementary set of skills to what others at the Management Company bring to the table. We thought Ken had very complementary skills.”
According to Powers, what set Frier apart from other candidates was his strong background in risk management, an area where the new CIO is expected to play an active role.
“I hope to enhance the ability of SMC to accurately quantify the risk that the endowment portfolios are facing and, having quantified those risks, make good decisions with respect to which risks we should diminish and which risks are worth taking,” Frier said.
Frier will also be tasked with portfolio construction and manager selection. In brief, this entails determining how much money should be allocated to different asset classes and finding capable investment managers to run them.
Powers said that SMC, as a whole, aims to generate strong risk-adjusted gains in the new fiscal year. This will stand in stark contrast to fiscal year 2009, when the University endowment reportedly declined by 27 percent — a number well above the 18.7-percent national average.
Looking to the future, Frier listed three top priorities for his tenure as CIO. The first, he said, is to get a firm grasp on SMC’s strategic review of the University endowment.
“One of our most interesting challenges is … analyzing opportunities to improve on the endowment model,” Frier said. “My understanding is that there’s been an endowment strategic review underway since last year, with just this purpose in mind.”
This comes at a time when mounting skepticism has been raised about the prevailing endowment model, whereby universities employ low liquidity investment options to enhance returns.
Frier indicated that risk management would be a second priority and enhancing information flow a third. Of the latter, he underscored the importance of capitalizing on Stanford’s “unparalleled access” to expert investment managers — namely, the SMC team, alums and the Stanford community at large.
In that vein, Frier has his sights set on developing an active interchange between SMC and the Graduate School of Business (GSB).
“I think that it’s going to be great when SMC is in the business school complex on campus,” Frier stated. “That’ll be a great opportunity for us to interact with the students at the business school and the faculty, and have a mutually beneficial relationship.”
He believes that such collaboration will enable Stanford Management Company to be attuned to scholarly work done by GSB faculty, especially work that goes beyond rehashing modern portfolio theory and accounts for actual market behaviors.
Frier also sees the opportunity for SMC to gain some fresh talent; he pondered the idea of taking on current GSB students as summer interns and hiring graduates to the endowment staff. He said that SMC experts could, in turn, provide guest lectures to business school classes.
“Given the thinking that we’ll be doing with regard to how to manage investment portfolios, our insights and conclusions could be of benefit to the students,” he added.
Overall, these musings highlight the CIO’s close attachment to the Farm.
“I went to Stanford Business School, I made a lot of friends there, I got married at Stanford Memorial Church, I’m a Stanford sports fan,” Frier said. “I have a lot of personal connections with Stanford.”
But while Frier and Powers received their M.B.A.’s only one year apart, neither recalls meeting the other during their time at the GSB.
“I never ever recall meeting John on campus,” Frier said, quickly adding, “His spouse is one of my classmates.”
Frier emphasized, however, that his many ties to the University are only part of the appeal of his new job — a compatible philosophy is another.
“The mission that Stanford has is quite valuable and the work that we’ll be doing will help deserving students get an education, will help with research and will help generally with the challenges of the future,” he said.