How have you been a change agent at your organization? What have you done that you’re particularly proud of?
I have learned to appreciate that true investment talent is rare. Once I’ve found an investment partner that I wish to invest with, I work to form a real partnership beyond being a source of funds.
I’ve pushed on this in three ways while at the Seminary:
1) I’ve volunteered to join fund advisory boards, where I help managers think though issues ranging from governance and fund structure to investment strategy/focus.
2) I’ve helped build a co-investment program that provides a solution to our partners so they can get deals done that can’t fully be funded by existing capital, and I co-designed a process with our committee where we can provide an answer to our partners in under two weeks from being notified that an opportunity exists. This allows us to provide the speed and certainty that our partners value.
3) Finally, I take it as a great compliment and a privilege to be a reference for our partners to other like-minded investors.
What is the asset class or investment that keeps you up at night, and why?
The many trillions of dollars of long-dated government bonds that are trading at near- or below-zero yields to maturity, and the unintended consequences of the mark-to-market losses on those assets if/when long-term developed world sovereign rates start to increase.
What methodologies have you adopted within your institution?
We are believers that risk isn’t just one number. In addition to the standard quantitative metrics around value-at-risk and mean-variance optimization, we have also begun to estimate portfolio-wide equity and interest rate betas, measure style factor exposures, run stress scenarios, estimate liquidity, and monitor our various concentrations. We have worked to look through all our funds and understand our underlying holdings and exposures. We have also spent a lot of time analyzing the commitment and liquidity requirements of our illiquid investments to model our capital calls and distributions by asset class.
Where do you fall in the passive vs. active debate?
Active management is like venture capital, it has un-inspiring results on average, but doing it well can add tremendous value to a portfolio. Unless an organization can clearly articulate how it expects to win the alpha zero-sum game, it should stick to passive indexing.
What are the changes you’d like to see the institutional investing community make in 10 years?
I’d like to see the industry continue to improve transparency.
Who is a manager you don’t currently work with whose brain you’d like to pick?
Igor Tulchinsky at WorldQuant.
Ideally, where would that meeting take place?
Over lunch at the Cloud Bistro in the Computer History Museum in Mountain View.
What is the software investment tool that helps you most?
I’ve been working with the Novus software platform for almost a decade. It is a great platform that helps decompose the value creation of each of our managers into its atomic units. Novus also helps us understand our portfolio by aggregating our underlying holdings and estimating risk on a forward-looking basis.
What would improve the relationship between you and managers?
Increased transparency.
Why did you choose your current path?
I help people achieve their dreams while exploring fascinating questions and learning from incredibly talented investors.