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June 20, 2022

Deep pools of Hartford-area investment capital look to diversity to boost returns

HBJ PHOTO | STEVE LASCHEVER Hartford HealthCare Chief Investment Officer David Holmgren manages the health system’s roughly $4.5 billion pension and endowment fund.
HBJ PHOTO | STEVE LASCHEVER
Hartford HealthCare Chief Investment Officer David Holmgren and his team were replaced last week by Morgan Stanley
By Michael Puffer

Hartford’s star as the insurance capital of the world may have dimmed a bit from its heyday, but the area is still home to large corporations and nonprofits with deep-pocketed pension and endowment funds capable of wielding considerable clout.

That influence was on display in late May as leaders of several Hartford-area funds collectively worth more than a third of a trillion dollars gathered in a small ballroom in West Hartford’s four-star Delamar Hotel. They were in the room to discuss achieving above-average returns by investing in ventures led by women and people of color.

The investment arms of The Hartford, Eversource, Hartford Foundation, Mercer, Raytheon, state of Connecticut and city of Hartford were represented.

“An educational gathering of this magnitude has never been done in Hartford before,” said David J. Holmgren, chief investment officer for Hartford HealthCare’s roughly $4.5 billion pension and endowment fund. “The significance is rather epic.”

Holmgren hosted the meeting, which focused on the $400 million “Xponance Diverse Opportunities” (XDO) fund launched in late 2020 by New York-based alternative investment manager Investcorp and Philadelphia-based investment and asset management firm Xponance.

Hartford HealthCare’s investment fund seeded the project with a $50 million commitment, then invited other Hartford-area heavyweights to participate.

Diversity investing

Holmgren is known for achieving unusually high returns. Hartford HealthCare’s investment fund has earned an average of 12.2% annually over the past five years, making it a top performer among nonprofits nationally. The XDO fund seeks out traditionally overlooked markets through diverse managers. It is a strategy focused on making above average returns with the tangential benefit of empowering women- and minority-owned ventures.

Adam Cloud

“This is not feel-good and it’s not charity,” said Hartford Treasurer Adam M. Cloud, one of the attendees at the May 26 gathering. “We, as trustees of this capital, are always looking for excess return. So, it’s not about race. It’s about excess performance. And these people perform.”

The XDO fund’s investors have obligations to show returns. And if this also accomplishes a social good, so much the better.

The fund has invested in five firms so far; it will invest in 10 overall. Holmgren said the fund will invest in private credit, private equity buyouts, real estate and other ventures.

For Hartford HealthCare, investing in the XDO fund is part of its strategy to grow the “economic hedge” portion of its portfolio, which includes investments tied to assets seen as more resistant to inflation. The target return is 7.5%. The economic hedge occupies about 18% of Hartford HealthCare’s portfolio at present, Holmgren said, and will move up to 20% by the end of the second quarter.

Hartford's financial clout

Hartford’s strength as a center of deep-pocketed investment funds is not widely recognized, Holmgren and others said. He believes the collaboration between several of the largest Hartford area investors and this diverse fund will increase the city’s profile.

Ignacio Jayanti

“Hartford is a very historic place, the capital for insurance,” said Ignacio Jayanti, CEO of Manhattan-based Corsair Capital, which is one of the XDO investment vehicles that presented at the May 26 event. “It still has a number of significant pools of capital from private corporations and public money.”

Other presenters at the May 26 event included Centre Lane Partners, Turning Rock Partners, Artemis Real Estate Partners and Eagle Tree Capital.

Jayanti emigrated from Costa Rica to New York in the 1980s, right after earning a bachelor’s degree in economics and mathematics. Today, he heads an investment firm with a staff of 60 managing $8.5 billion.

“Most of the people here today are not people I have met previously,” Jayanti said during the May 26 event. “So, it’s a tremendous opportunity to introduce myself and get to know them.”

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