Hewlett Case Study

For the exclusive use of C. Bravo, 2016.

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REV: JANUARY 26, 2006

LUIS M. VICEIRA

HELEN H. TUNG

Investment Policy at the Hewlett Foundation (2005)

In early January 2005, Laurance (Laurie) Hoagland Jr., the vice president and chief investment

officer of the William and Flora Hewlett Foundation (HF), and his investment team met to finish their

recommendations to the HF Investment Committee of a new asset allocation policy for the

foundation’s investment portfolio, which was then valued at $6.4 billion. The HF Investment

Committee included three members of the foundation’s board and three nonboard members.

Hoagland was not a member of the committee.

It was a warm Sunday afternoon in Palo Alto, and sunlight inundated the bright, open spaces of

the foundation’s building. The building, completed in May 2002, reflected HF’s commitment to

energy conservation and environmental protection. More generally, the building was also a reflection

of HF’s approach to philanthropy, based on encouraging innovation and attaining demonstrable

results in the solution of complex social and environmental problems. The building was only the fifth

in the nation to receive a gold-level certification by the U.S. Green Building Council for its

outstanding and innovative “green” design. HF had earned this recognition by addressing a wide

range of building-related environmental issues concerning site design, water and energy efficiency,

materials and resources, and indoor environmental quality and by creating a healthy and productive

workplace.

If the investment team went ahead with the proposal, and the Investment Committee approved it,

HF would adopt a new asset allocation policy that included a substantial reduction in the overall

exposure of the investment portfolio to domestic public equities (from 30% to 21%) and a significant

increase in the allocation to absolute-return strategies (from 10% to 20%) and to TIPS1 (from 7% to

13%). The new asset...