Trust's investing chief sees 'long run'

By Andrew Gomes
Advertiser Staff Writer

As Kamehameha Schools tries to reverse last fiscal year's rare financial loss, the $5 billion trust has a new investment leader promising a more balanced strategic approach to long-term growth.

BELSBY

He faces some tough challenges, including rebalancing the trust's investment portfolio, selling a few hundred million dollars of Mainland real estate, generating positive income from the trust's Hawai'i property, and achieving an overall return of almost 8 percent — all in the name of growing an endowment for educating Native Hawaiian children.

In the fiscal year ended June 30, Kamehameha Schools lost $89 million on its investments, a 0.65 percent drop primarily attributed to stock market losses.

Belsby said it was no surprise given the performance of U.S. capital markets that big endowments like Kamehameha Schools had marginal negative returns.

"We're still looking at this portfolio like most other pension fund managers or endowment managers as a long-run plan," he said. "There are years where we'll make 15 percent in equities and years where we'll have a negative return. But we're really trying to keep a long-run perspective."

Belsby plans to present more specific ideas on the trust's investment vision, especially regarding its vast real estate holdings in Hawai'i, today at a meeting of real estate professionals at the Pacific Club.

Among topics likely to be discussed will be plans to revitalize the Royal Hawaiian Shopping Center and develop property in Kaka'ako and Makiki. The trust owns about 365,000 acres of property in Hawai'i. Most of it is agriculture and conservation land, with about 885 acres of commercial property producing income.

Last fiscal year, the trust's revenue-producing land in Hawai'i, valued at $1.5 billion, posted a negative return of 2 percent. Part of Belsby's strategy will be to guide that back to a standing goal of about 8 percent.

Another trust goal is to reduce holdings of Mainland real estate from 14 percent to 2.5 percent of its investment portfolio. Last fiscal year, Kamehameha Schools owned about $551 million in Mainland real estate, which generated a 16.6 percent return.

Among the trust's other investments were about $1.2 billion in U.S. equity markets that posted a 10 percent loss and $1.2 billion in fixed-income investments that posted a 7.6 percent gain.

Belsby said ongoing rebalancing efforts of the portfolio have helped the trust's financial performance, something he hopes to improve with his philosophy.

"My basic vision is that the player that is going to be around in the long run to support an endowment like this into perpetuity is going to take a steady approach, not one of going after the flavor of the day," he said. "There were a lot of people that certainly made money during the go-go '80s and the high-tech '90s, but there were also a large number of people that lost as much money.

"Having been through three business cycles in my professional career, I've certainly learned that prudent, stable and thoughtful investing is usually the way that wins out in the long run."

Belsby was born on a wheat and cattle ranch near Spokane, Wash., earned an economics degree from the University of California-Davis and said he never personally invested in Internet stocks in the 1990s.

During the past 20 years, he has been a stockbroker with Shearson Lehman, a project feasibility analyst and asset manager for American Diversified Capital Corp., and vice president of real estate valuations for California appraisal firm Michael Frauenthal & Associates.

He also was a managing partner at Arthur Andersen, where he did consulting work for Kamehameha Schools among other things.

He took over as vice president for endowment at Kamehameha Schools from local real estate veteran Wendell Brooks Jr., who resigned in November 2001.