Could This Help Historically Black Colleges Fix Their Endowment Woes?
February 13, 2024
The endowments of Historically Black Colleges and Universities in the U.S. are woefully underfunded and under resourced.
African American-owned investment consultant and outsourced cio firm Paradigm Institutional Investments launched in 2019 with the goal of guiding institutions in their achievement of fiduciary excellence and attainment of financial objectives, while making positive change to diversity and inclusion in the investment industry.
Co-Founders Quentin McCorvey and Burner Crew first connected as executives at KeyBank and ultimately decided to enter business together to change the lack of diversity within the asset management industry, finding it difficult to rattle off more than a couple diverse managers at a time.
“We could name one or two managers and then there would be a pause. We wanted to change that. This was very important to us. If people can’t see it, they don’t think it is possible. That is why the first to do something is so impactful, and why the first to succeed is so significant,” McCorvey said. “We wanted to build something in asset management that inspired others, by showing it was possible. It was at that time that we chose to approach the market with the market position of minority control of assets versus minority-managed assets. This was the birth of Paradigm Institutional Investments … a new Paradigm for diverse institutional asset management.”
Pepper Pike, Ohio-based Paradigm provides a variety of services to endowments, foundations, retirement funds and operational funds at both nonprofit and for-profit organizations, ranging from investment policy creation and affirmation to asset allocation creation and portfolio implementation.
McCorvey has found that collaborating with like-minded organizations and associations that promote diversity and inclusion can provide opportunities for networking, partnerships and client referrals, while emphasizing the firm’s commitment to diversity and inclusion within its business practices has also resonated with clients who prioritize the same values.
The firm’s ability to highlight its expertise, in-depth research and unique approach has caught the eye of institutions like the Cleveland Foundation, Community Foundation of Lorain County, Community Foundation of Mahoning Valley and Deaconess Foundation, which have worked with Paradigm to “add an inclusionary focus within their investment portfolios across all asset classes,” according to McCorvey.
With all of the firm’s traction and success in the institutional investment community over its first few years, it was missing something it had always envisioned, an investment head to let “the industry and our clients know Paradigm was capable of leading and making investment decision[s] and running the institutional investment process,” according to McCorvey, who noted that “it was equally as important that we found the right person … someone who had the institutional background, the credibility, the leadership skills, and most importantly was aligned with the mission of Paradigm.”
Enter Ryan Bailey, a veteran investor who has cut his teeth at a variety of institutions over the last two decades before joining Paradigm as a managing partner and its first cio in April.
Bailey previously worked as an investment officer and interim cio at the Meadows Foundation; served as head of investments at Children’s Health, where he established and led an internal investment office for the organization’s then $1.8 billion in foundation, pension and operating assets; launched private equity placement firm Pacenote Capital; founded Carbonado Partners, a placement agency focused on emerging private equity managers; and served as partner and co-cio at discretionary investment business Investment Office Resources.
“Paradigm is really focused on a culture of diversity, equity, and inclusion. It was more than just winning mandates for them when it came to this issue. Here, it’s passion, it was bred into the firm. They’re really focused on can we move the meter and make a difference in the diversity of the investment industry,” Bailey said.
“Ryan is the right person … Ryan actively participates in multiple investment committees and is well-known among diverse managers. His expertise, judgment, and temperament are crucial in achieving investment excellence while allocating to diverse managers. Investment leaders like Ryan Bailey are poised to help Paradigm pave the way in increasing the amount of assets invested with diverse managers,” McCorvey said.
Bailey would not have joined Paradigm without believing the firm could be one of the best advisors in the industry, identifying that the best advisors are those that understand the limitations of clients, the governance structure in place, which risks are acceptable and which are not and that sometimes you have to make a decision, he said.
“It’s really easy to go, this is a neutral, this is a strong buy or whatever and just put a rating, but it’s a big difference when you have to make an actual investment decision. Those who have sat in the seat and have had to make those investment decisions like I have, they have the advantage just from the ability to relate to those who have to make hard decisions and understand what true fiduciary responsibilities are,” he said, adding that “identifying a great investment is sometimes not the hardest thing. The hardest thing is sometimes convincing people to march into an area where the investment is good but doesn’t seem like it is that good or it is very scary.”
Beyond understanding the forces that go into making an investment decision, Bailey and Paradigm benefit from not only their investment wherewithal, but their connections and network built over time.
“I think there’s two things you have to be as a good investor, and I always go back to this quote that touches on it. ‘A wise man knows everything, and a shrewd man knows everybody.’ You need to be some sort of combination of both of those to get things done,” he said.
Bailey is uniquely qualified for the investment head role having previously served in leading roles at different nonprofit institutions and taking meetings with a bevy of firms over the course of his tenures.
“One of the things I would always say in my position as an allocator is you can get in touch and talk with any mind that you want when you have a billion dollars behind you. Over the years I’ve tried to take multiple manager meetings to learn as well as understand the investment landscape. I’ve taken like three meetings a day, going back to like 16 years,” he said. “When you do that and you see very few minority-owned firms and then you see maybe 50 women owned-firms over that same time period, you start realizing that this isn’t necessarily a level playing field. You realize you don’t have to make a sacrifice in performance or take more risk by adding diversity to your portfolio and you feel like you want to change the industry,” Bailey said.
McCorvey echoed a similar sentiment, saying that institutions are not taking on more risk or sacrificing performance by hiring diverse managers.
“Paradigm’s sourcing of diverse managers relies first on passion and purpose … we inform our clients that our goal is to build portfolios without an underrepresentation of diverse managers. This aspect of sourcing is highly important because it assures diverse managers that our commitment to diversity is genuine and mission oriented,” he said.
He noted that the firm’s sourcing channels often involve historical relationships, organizations like the National Association of Securities Professionals, key conferences, conversations and referrals.
“We seek out managers who contribute to the conversations and strive to achieve success while making a positive impact. With our allocator experience, we can use pattern recognition to identify underrepresented talent. Some of the key attributes we look for include edge, culture, team, a strong and durable opportunity set, a distinct role in the portfolio, and a vision/plan for scaling the business,” McCorvey said.
As the firm looks to build diverse portfolios across asset classes, geographies and sectors spanning the broad manager universe, it is beginning to target institutions that are under resourced and whose mission aligns with Paradigm’s view that diverse teams outperform.
“I think that a lot of these institutions are involved with their communities and they’re involved with the underrepresented, the African Americans, Asians, Latinos and women. [Diversity] is part of their mission, it is part of their having an influence on those communities. When you allocate to diverse managers, those managers are able to do things in different communities that I think also add a mission-driven outflow or an added alpha to what you’re doing,” Bailey said.
As Bailey sees the pathway for managers to grow and to scale their business, while helping institutions build their portfolios to advance their mission, he also sees an opportunity to mentor and foster more diverse talent in the industry.
“I have found myself in the situation where people have reached out to me who are diverse and going into cio positions in an effort to form a relationship with me and asked me how did you deal with this? I am so happy to be in that position to either serve as a mentor or a body of knowledge from what I’ve experienced,” he said.
“I was diverse on the day I was born. You’re going into these institutions and you realize that you might be the only one like you in the room,” Bailey said. “What you have to learn is how to establish relationships and show others what you know and bring to the table. You have to learn to be humble. You also have to learn to learn from others. I wouldn’t say that it’s always easy to navigate and show what you’re able to bring to the institution, but it’s rewarding to see what you’re able to do for others behind you.”
That appetite for change is what differentiated Bailey among other candidates vying to serve as Paradigm’s first investment head and it will also continue to serve as Paradigm’s catalyst to promote and advance diversity and inclusion in the industry.
“While the challenges may exist, it’s important to recognize that the finance industry is evolving, and there are efforts underway to address the lack of diversity. As society progresses toward greater inclusivity, there is increasing recognition of the importance of supporting and promoting African American-owned/led businesses in the finance and investment industry,” McCorvey said.
“Navigating the space as an African American-owned and led outsourced cio and investment advisor has not been easy. However, it has been rewarding. A lot of times, you have felt like the hurdles in front of you can be insurmountable. Those can be anywhere from the need to have huge numbers of assets under management to be considered, or a certain length of track record. At times, you might even be aiming to be taken seriously as a real contender. But when you win, and you are truly given the opportunity, you feel in your own small but major way [you] have changed the world,” he added.
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The endowments of Historically Black Colleges and Universities in the U.S. are woefully underfunded and under resourced.
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