Class of 2012 | Chief Investment Officer

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For the world's largest asset owners

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Healthcare OrganizationAscension Health AllianceSt. Louis, Missouri

In May 2010, aiCIO wrote an article titled "Wealth in Sin" focusing on the Vice Fund portfolio, a mutual fund targeting about 30 "sin stocks"—a stark contrast with socially responsible investing (SRI). Catholic Healthcare Investment Management Company (CHIMCO) would not be one to recommend investing in that fund. As a wholly owned subsidiary of Ascension Health Alliance, the largest Catholic and largest nonprofit health system in the country, its goal for Ascension is to build asset allocation for the long haul so that it can provide better healthcare to all, with special attention to those who are poor and vulnerable, and to invest with values.

"We invest with specific values," says CHIMCO CIO David Erickson. Erickson was snagged by Ascension from the $2.2 billion University of Wisconsin Foundation in 2009 to become its very first CIO. In the nearly three years since Erickson assumed his role, St. Louis-based CHIMCO has expanded its staff —now totaling about 25—to manage investments internally.

"Everything we invest in is done with our values in mind, and the clients we partner with have similar values to ours." The next obvious question: How has that approach—one that takes into account more than just pure return—impacted Ascension's performance? Critics of such an approach are numerous, especially in the US where many investors value returns above all else, criticizing environmental, social, and corporate governance (ESG)-guided investors, for example, for intentionally limiting the breadth of their investing options. Yet, Erickson responds to such critics by saying this philosophy has not hurt Ascension's performance; however, it has required an extra amount of work. "It requires more due diligence and monitoring," Erickson asserts. The asset size ($23 billion in assets under management) also helps. "We work every day in developing relationships," Erickson says. "Obviously, our size helps us to access excellent managers and negotiate from a position of strength."

Ascension is also perhaps the most intricate entity featured in this issue. Ascension formed CHIMCO as a subsidiary in 2011. CHIMCO is a federally registered investment advisor, and manages assets on behalf of a variety of institutional types. Those types include a nonprofit healthcare system, foundations, defined benefit and defined contribution pension schemes, and an offshore insurance trust.

One of the most successful initiatives for CHIMCO has been the way its investment staff has overhauled its parent company's asset allocation. "When I first joined," Erickson explains, "we had an asset allocation that was stocks, bonds, and alternatives. But we've changed that to one based on economic regimes: growth, inflation, and deflation." It involved a renovation of Ascension's investment philosophy, Erickson says, thinking in terms of economic regimes, with assets fitting into those categories. "We feel we understand diversification better with the new approach," he says. "We're able to be more tactical, having a better understanding how our investments are correlated to the economic regime." That new framework has ended up expanding the opportunities available to hedge funds, which are used in both the growth and deflation allocations. —PV

"We invest with Catholic values. We don't think those guidelines impair our returns, but they do require extra work—more due diligence and monitoring."David Erickson, CIO
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