Transcript
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You guys are a $700,000,000 endowment.
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You mentioned that a 100% of your private
allocation is into venture capital.
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Tell me about that.
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I think it's fairly well known that empirically
venture capital is an asset class where there
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is a persistence of returns at least more than
any other asset asset class.
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So secondly, if you're able to access that
right tail of managers, the long term
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performance is exceptional.
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What are some skills and some practices that
somebody should do when they're starting out as
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an investor?
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The way I did it is I responded to every single
email that that came into my inbox.
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I took a lot of meetings.
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When I was 1, 2 years in, it was meetings all
the time.
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Getting those reps and understanding how
different people present different strategies,
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taking the reps just to understand what to look
for, what you like, what you don't.
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Asking questions, I think that's another thing
that, of course, was always an interesting
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thing is are there no dumb questions?
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And oftentimes, I found in the beginning when I
was young, I wouldn't understand a concept or
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it was being presented a certain way.
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And the reality is is it was being sold, you
know, as you asked earlier, in a in a more
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complex structure.
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But at the end of the day, it's a much simple
concept and just asking the question.
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And I think that helps create dialogues between
LPs and GPs, asking questions to teammates,
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bosses, mentors that are much more experienced.
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You have to build the confidence to ask simple
questions over your career.
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It's a paradox.
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Dean, I've been excited to chat.
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Welcome to 10x Capital podcast.
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Thanks, David.
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It's great to be here.
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Appreciate you having me on.
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So tell me about KFF, formerly known as the
Kaiser Family Foundation.
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Yeah.
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KFF is a wonderful organization and one that
I'm really proud to support.
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The organization is doing really important,
impactful work, and knowing that and coming to
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work every day really centers us, you know, on
the work that we do.
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KFF is a public charity that is an independent
source of health policy research, polling, and
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journalism.
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We have 4 major program areas at KFF, policy
polling, health news, and social impact media.
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And as the CIO, tell me how you've established
your asset allocation across different assets.
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The way I think about it is the asset
allocation and the portfolio is always built in
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service of the organization, putting together a
portfolio that that furthers, you know, our
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goals and the needs of the organizations.
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You know, with that in mind, you know, I don't
think our asset allocation will look very
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different from a lot of our, you know,
institutional endowment foundation peers.
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That is, we we have a decent illiquid
allocation within the portfolio.
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We have a healthy allocation to alternative
investments that support traditional equities,
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fixed income, and real estate and real asset
investments.
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And so, you know, the approach we take is, you
know, we're not trying to reinvent the the
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wheel here.
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We're building a diversified portfolio that can
generate the type of returns that we need to
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support our mission and support the goals of
the organization.
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How do you know you're diversified?
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That's a good question.
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And I think one that, you know, a lot of people
it's a word diversification is a word that a
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lot of people like to use without potentially
understanding the impact and actual meaning of
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what it is.
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You know, having exposure to different asset
classes may appear on paper to be diversified,
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but, you know, as we saw even in in 2022, when
equities and fixed income were both down double
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digits, you know, people had assumed that maybe
they were appropriately diversified or hedged
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because they had access or exposure to these 2
different asset classes.
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But in fact, that was not the case.
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And so, you know, I think it's one of those
things where, you know, it's incumbent on us as
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part of the investment staff to to understand
and underwrite our investments and build a
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portfolio such that our exposures, the factor
exposures, the geographical sector, you know,
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asset type exposures all come together to build
a portfolio that is more durable and
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diversified.
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How do you know you're actually diversified?
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I think it's one of those where you don't know
till you know.
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And if if you think that you are, in many
cases, you aren't, that's when there's some
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real, you know, pain in a portfolio.
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But, you know, ultimately, we do our best to
make sure that we're building a portfolio that
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is complementary to each other.
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I thought I was diversified in 2022.
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I was in venture capital, crypto, biotech, even
some SPACs.
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And lo and behold, they were all highly
correlated.
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Is that just a blip?
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Or is macroeconomics changing in a way that
there's much more correlation between assets?
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And how do you actually know how do you
quantify your diversification?
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Yeah.
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It's a good question.
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And I think it's one of those ones where, you
know, if you look back for, you know, a decade
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plus with with rates anchored to 0, I think a
lot of people got a false sense of
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understanding of what correlations were between
different asset classes, when in effect it was
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just a, you know, an outcome of rates anchored
to 0 with no, you know, forecast to go up, risk
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assets all traded together or were able to be
much less discerning with their capital, in
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search of growth.
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And I think that was kind of a factor that
defined the last decade, decade and a half.
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And as we saw rates rise in a much more, you
know, steep and rapid fashion than than maybe
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people had anticipated, The reaction of the
different asset classes, you know, to that
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environment really changed how people hopefully
think about correlation and diversification
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within their portfolio.
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You know, the macroeconomic picture is one
that's always going to be uncertain.
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There are lots of people who make lots of
different predictions on the path of rates, the
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state of the economy, you know, geopolitical
conflict that catch a lot of people by
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surprise.
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And and so, you know, at the end of the day,
you're never going to know that beforehand,
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and, you know, we can just hope that the work
we do helps put a portfolio in place that that
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can perform, as I said, during, you know, some
of those uncertain macroeconomic.
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How do you think about macroeconomics in
general?
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There's a lot of the LPs that say, we're going
to invest as of the next 50 years, the same in
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macroeconomic.
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There's other other ones that try to get
directionally correct, thesis driven.
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How do you look at that?
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Yeah.
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I think there are 2 different types of, you
know, investors.
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There are some people and managers and GPs that
say, Look, there's a lot about macroeconomics
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that we can't control, we don't know, and we
can't forecast.
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So why are we going to spend valuable time and
effort trying to predict something that is
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unpredictable?
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So we're just going to focus on the
fundamentals of the either, you know, stocks,
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bonds, you know, companies, etcetera, that we
can underwrite, and we'll let the rest take
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care of ourselves.
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There are some people that that obviously say
that, you know, if you're not, quote, unquote,
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macro aware, if you ignore such an impactful
part on what generates returns and outcomes for
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portfolios, you know, you're being doing a
little bit of a disservice to to the
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investments.
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You know, I'd say we probably fall in that 2nd
bucket, which is, you know, trying our best to
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be macro aware, but understanding the
limitations that that come with, you know,
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understanding the macro, the macroeconomic
picture.
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I think you looked early August as, you know, a
prime example of that.
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There was, you know, a week where there was a
chain reaction where markets sold off violently
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and people were trying to understand, you know,
what was going on.
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But you fast forward, you know, a couple weeks
later, the end of the month, and if you had
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guessed where the market was going to be in
early August where it would end up in in late
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August, I don't know that a lot of people would
have potentially gotten that right because of
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the fear and uncertainty at the time.
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And so, you know, I think it always help helps
to step back and and and and be patient and to
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not overreact to, you know, individual days or
periods in the market.
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Coming back to your original question, I think
it's one of those things where, you know, we
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know that we're not going to predict or
understand the path of rates or the market
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that's driven by the macroeconomics, but we try
to understand what are the the underlying
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forces that are pushing and pulling on the
market and at least, you know, being prepared
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to understand, you know, what those forces are.
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In the same vein, do you look at themes,
thematic investing, like health care or AI as
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it pertains to your entire portfolio, over the
long term?
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Or do you just kind of look at them as specific
verticals where you try to get diversification?
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It's a good question and one one of those
things where I don't know that there's a right
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answer and I'm sure people are able to, you
know, take both approaches and and do so
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successfully or not.
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You know, on the health health care piece, you
know, dedicated health care investment is
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something that we generally avoid given the
mandate of our organization in being a, you
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know, nonpartisan, apolitical, you know, source
of information.
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For, you know, a lot of people, we've generally
avoided doing dedicated health care thematic
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investing.
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The second thing you mentioned, AI, you know,
is also an interesting topic just because, what
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we're hearing is that, you know, every company
is going to be an AI company, and our public
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equity managers are investing in stocks that
are, you know, public companies are
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incorporating AI into their workflows and their
products, etcetera, etcetera.
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Venture, I think goes without saying.
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And so in that sense, I think there are some
longer secular themes that you want to be
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aligned with.
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This is kind of how we think about it where,
you know, if there are some long term melting
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ice cubes, maybe there are some incremental
returns you can pick up while people have
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discarded or, you know, avoid, you know, hated
or or dying industries.
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But in general, I think it makes more sense to
be aligned with the long term cyclical secular
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trends, that will benefit, you know,
portfolios.
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Hey.
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I was speaking to Baylor's Renee Hanna, and she
mentioned how she would strategically build
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relationships with her GPs in order for them to
keep her abreast in the venture market, what's
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going on, different factors.
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Do you have those kind of relationships on the
macro side?
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Do you leverage public managers in a way to try
to get
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macro aware?
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Absolutely.
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We do.
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You know, the the roster of managers that we
have on the public side or the hedge fund side,
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you know, are in the portfolio for a reason.
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We certainly underwrite, you know, both the
strategy but also the teams pretty intently
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before we make an allocation.
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And part of that relationship is is we hope,
you know, a two way relationship whereby, you
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know, we're able to pass along some information
or intel that we get from some of our other
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managers that helps them, you know, think about
the markets that they invest and vice versa.
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You know, when we talk to them, we try to
understand their perspective, their view based
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on, you know, the markets that they operate or
the strategies that they execute.
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What we try to, you know, make sure that we we
temper is is making sure that we don't take
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every word that, you know, one of our managers
says is gospel, and then we use it as part of a
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Mosaic where we talk to a lot of different
people.
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We try to build a picture from discussions we
have across the board.
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But absolutely, you know, leveraging the
relationships with the existing portfolio GPs,
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you know, to get smarter on different, you
know, themes or or things going on in the
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market is always an important part of the
relationship we have with our GPs.
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And you mentioned getting a mosaic of
information, essentially talking to different
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parties and getting different opinions.
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Talk me through the average day.
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How much of it is done with investing?
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How much is it is administrative?
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How much is it gathering information?
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Breakdown how you manage your portfolio.
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No 2 days are the same, David.
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You know, that that's what makes it exciting
and interesting.
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But, you know, I mean that in that sense, in
that, you know, look, we're always getting a
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lot of information into our inbox from
different service providers, banks, managers,
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you know, prospective managers, etcetera,
etcetera.
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So, you know, reading through letters, tear
sheets, research pieces, etcetera, etcetera,
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you know, making sure we're scheduling updates
with the existing portfolio to make sure we
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understand what our managers are doing, how
they're shifting the portfolio, etcetera,
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etcetera.
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We have a generalist model.
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During a given day, we might talk to a, you
know, a long only equity manager that's focused
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on international or emerging market stocks,
while at the same time having a discussion, you
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know, with a core fixed income manager, and a
real estate manager and, you know, a hedge fund
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at the same time.
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The risk is that you overschedule yourself and
you don't allow yourself that time to reflect
215
00:11:27,509 --> 00:11:31,110
and think on what you've heard, what you've
learned, what you've read, which can, you know,
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shape the direction of of how you wanna spend
that time moving forward.
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00:11:33,990 --> 00:11:37,990
One thing I've been really thinking about is
the difference between a GP that has good
218
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performance and that could sell in almost 2
different groups.
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00:11:40,945 --> 00:11:42,304
And sometimes they have both skills.
220
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Sometimes one person has one skill, another
person has another skill.
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Talk to me about really trying to differentiate
between who is really good at selling and who's
222
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really good at performance.
223
00:11:51,904 --> 00:11:53,924
And how do you avoid being sold?
224
00:11:54,240 --> 00:11:54,740
Yeah.
225
00:11:54,799 --> 00:11:57,120
Great question and something that we think
about constantly.
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I think, you know, one of the lenses or filters
as an LP, you know, you develop kind of early
227
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is understanding that you're always being sold
to.
228
00:12:03,440 --> 00:12:07,360
And that affects the dynamic of every
discussion you have whether the intent is there
229
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or not.
230
00:12:07,985 --> 00:12:12,545
Know, at the end of the day, the the LP is an
asset owner, and and the GPs are asset
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managers, and they're looking to manage money
on behalf of the LP.
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And so that that comes with every interaction.
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But, you know, one of the things regarding
performance that we try to think about is
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making sure we're not conflating process and
outcome.
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00:12:23,629 --> 00:12:26,909
You know, again, this is not something
groundbreaking or new, but, you know, there
236
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there are, you know, many instances where firms
can have good performance with with bad process
237
00:12:31,309 --> 00:12:33,389
and, you know, that's where you can run into
mistakes.
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00:12:33,389 --> 00:12:38,125
And so, you know, 1st and foremost, trying to
not take performance on its face as good or
239
00:12:38,125 --> 00:12:41,825
bad, because there are a lot of factors that go
into that performance.
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00:12:42,285 --> 00:12:46,125
And the outcome is sometimes not controllable,
but the process is.
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00:12:46,125 --> 00:12:50,929
And and so making sure that we're consistent
and clear on how we think about process, and
242
00:12:50,929 --> 00:12:54,850
not over focusing on performance, you know, as
the only metric that matters.
243
00:12:54,850 --> 00:12:57,570
So that's one of the things that that that we
try to focus on.
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00:12:57,570 --> 00:13:01,410
But in terms of selling and and and what that
means and, you know, are we being sold to, I
245
00:13:01,410 --> 00:13:06,384
think focus on on the former, which is good
process regardless of outcome, allows us to
246
00:13:06,384 --> 00:13:10,384
kind of cut through some of that that selling
stuff, which is where if we consistently have a
247
00:13:10,384 --> 00:13:14,785
framework whereby which we are evaluating GPs,
you know, and that's different across each of
248
00:13:14,785 --> 00:13:18,590
the different asset classes that we invest in,
But having a clear understanding of that,
249
00:13:18,730 --> 00:13:23,370
having a process that is fairly consistent, I
think allows us to hopefully cut out some of
250
00:13:23,370 --> 00:13:26,830
that noise around being sold to and focus on
the things that matter.
251
00:13:27,129 --> 00:13:28,330
I think it also depends.
252
00:13:28,330 --> 00:13:31,665
Sometimes being a good salesman is part of the
job in venture capital.
253
00:13:31,665 --> 00:13:35,585
Whereas in hedge funds, you're a passive
player, and it's about having the highest IQs
254
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and and the best rate.
255
00:13:36,545 --> 00:13:39,445
So sometimes it's it's literally part of the
job qualification.
256
00:13:39,825 --> 00:13:45,250
One of the issues I see in GPs pitching LPs is
that they really have 30 minutes to very
257
00:13:45,250 --> 00:13:46,690
clearly explain a strategy.
258
00:13:46,690 --> 00:13:52,290
And I see oftentimes a bias towards very simple
sounding strategies and a bias against complex
259
00:13:52,290 --> 00:13:52,790
strategies.
260
00:13:53,090 --> 00:13:53,570
It depends.
261
00:13:53,570 --> 00:13:54,049
Right?
262
00:13:54,049 --> 00:13:59,205
I think, you know, in many cases, you know,
simplicity is celebrated and appreciated by
263
00:13:59,205 --> 00:13:59,684
many people.
264
00:13:59,684 --> 00:14:04,165
If you if you can write your strategy on a
napkin and define it, you know, in a 30 second
265
00:14:04,165 --> 00:14:07,865
elevator ride, then many people might argue
that you you you'll be more consistent.
266
00:14:07,924 --> 00:14:10,264
You know, people can tell if you're straying
from your strategy.
267
00:14:10,404 --> 00:14:11,669
You're not trying to do too much.
268
00:14:11,750 --> 00:14:14,629
You focus on one thing, and you do it better
than anyone else.
269
00:14:14,629 --> 00:14:17,350
Well, I think there is some merit to that, you
know, obviously.
270
00:14:17,350 --> 00:14:20,089
I think complexity again, it depends.
271
00:14:20,149 --> 00:14:25,110
If complexity is trying to be complex as a
feature of the strategy, then I'm not
272
00:14:25,110 --> 00:14:27,129
necessarily sure that that adds anything.
273
00:14:27,475 --> 00:14:32,115
But if there is an investment opportunity that
requires complex understanding of a certain
274
00:14:32,115 --> 00:14:36,914
market or structure or asset and, you know, the
specific GP has a better knowledge or for
275
00:14:36,914 --> 00:14:41,139
whatever reason has a competitive advantage
around that specific complexity, you know, one,
276
00:14:41,139 --> 00:14:45,059
I would I would like to believe that if that
were the case, they would learn how to explain
277
00:14:45,059 --> 00:14:48,600
it in a way that people understand that makes
it special for them.
278
00:14:48,659 --> 00:14:52,179
And so, you know, in that sense, I think
complexity would be an asset because it would
279
00:14:52,179 --> 00:14:56,634
create barriers to entry or, you know, it would
eliminate lots of, you know, quote, unquote,
280
00:14:56,634 --> 00:15:01,434
investment tourists coming in trying to access
this investment versus someone who is an expert
281
00:15:01,434 --> 00:15:04,174
who understands this, who's been investing in
it for a long time.
282
00:15:04,394 --> 00:15:08,315
And so, again, you know, I think it it just
depends on on the type of asset, the type of
283
00:15:08,315 --> 00:15:12,139
strategy, and the role that it's looking to be
played in a given portfolio.
284
00:15:12,200 --> 00:15:13,899
So it would depend, I think.
285
00:15:14,200 --> 00:15:18,440
So in the grand scheme of things, you guys are
a $700,000,000 endowment, which was on the
286
00:15:18,440 --> 00:15:19,320
smaller side.
287
00:15:19,320 --> 00:15:20,860
How does that play into your strategy?
288
00:15:20,919 --> 00:15:24,764
Like with anything, there are pros and cons to
any feature of an organization.
289
00:15:25,065 --> 00:15:29,865
You know, at our size, I think we're we're
large enough to be institutional, and to be
290
00:15:29,865 --> 00:15:34,585
able to build a portfolio like we talked about
earlier that has access and, you know, the the
291
00:15:34,585 --> 00:15:38,629
capacity to invest in in different types of
asset classes and and build what we think is a
292
00:15:38,629 --> 00:15:40,169
diversified institutional portfolio.
293
00:15:40,710 --> 00:15:44,950
At our size, I think we're big enough to matter
for a lot of the the well known institutional
294
00:15:44,950 --> 00:15:50,549
funds, but we're also not so large whereby
capacity or access can be a limiting factor for
295
00:15:50,549 --> 00:15:50,789
us.
296
00:15:50,789 --> 00:15:52,809
We don't often find that to be the case.
297
00:15:52,924 --> 00:15:56,524
You know, at our size, we're able to invest in
maybe some of these strategies that that other
298
00:15:56,524 --> 00:16:01,644
larger organizations simply don't have the
ability to do so because the checks they need
299
00:16:01,644 --> 00:16:05,245
to write are substantially larger, and it
wouldn't make sense, you know, for what the
300
00:16:05,245 --> 00:16:06,539
strategy calls for.
301
00:16:06,699 --> 00:16:09,259
In terms of the downsides to it, I think there
are really just 2.
302
00:16:09,259 --> 00:16:13,659
If you look at investment expense and resources
as a percent of assets, obviously, the math
303
00:16:13,659 --> 00:16:18,059
won't add up to to some of the larger peers
that that can, you know, spend a lot more money
304
00:16:18,059 --> 00:16:22,695
on different resources, you know, as it relates
to to portfolio building and management,
305
00:16:22,915 --> 00:16:23,415
etcetera.
306
00:16:23,634 --> 00:16:28,035
And then the other one that that some might say
is just that at our size, as an investor in
307
00:16:28,035 --> 00:16:33,075
some funds, we might not have the leverage or
voice to to dictate terms, fees, or have a bit
308
00:16:33,075 --> 00:16:35,254
more influence in some of those factors.
309
00:16:35,610 --> 00:16:39,769
But but as with anything, you know, I think we
understand what those limitations are with with
310
00:16:39,769 --> 00:16:44,330
our size, and and we try to be creative in
working around, you know, in working around
311
00:16:44,330 --> 00:16:44,730
those.
312
00:16:44,730 --> 00:16:48,570
On the size, in terms of dictating terms and
fees, it it might be that we're a better
313
00:16:48,570 --> 00:16:53,144
thought partner to the GPs, and and we we make
our viewpoint heard in other ways that, you
314
00:16:53,144 --> 00:16:55,164
know, they value our feedback.
315
00:16:55,304 --> 00:16:58,585
You know, resource wise, it's just being a lot
more disciplined on where we're spending our
316
00:16:58,585 --> 00:17:02,664
time and how we're focusing, leveraging our
network to maybe get answers that, you know, we
317
00:17:02,664 --> 00:17:06,200
didn't have in house, but, you know, we build
relationships such that we can work around
318
00:17:06,200 --> 00:17:06,359
that.
319
00:17:06,359 --> 00:17:10,680
And so, you know, as with anything, there there
are pluses and minuses and and just making sure
320
00:17:10,680 --> 00:17:14,680
that, you know, we're looking to optimize what
those pluses are and managing around what what
321
00:17:14,680 --> 00:17:17,019
any of those perceived shortcomings might be.
322
00:17:17,305 --> 00:17:20,984
Had a lot of institutional LPs tell me off the
record that their favorite check size would be
323
00:17:20,984 --> 00:17:21,724
10 to 30,000,000.
324
00:17:22,265 --> 00:17:26,184
I'm not sure how how they get to that, but
probably roughly, you know, be able to invest
325
00:17:26,184 --> 00:17:33,005
in sub $300,000,000 funds, but also, be able to
command enough attention from from GPs as well.
326
00:17:33,200 --> 00:17:37,920
So when we last chatted, you mentioned that a
100% of your private allocation is into venture
327
00:17:37,920 --> 00:17:38,420
capital.
328
00:17:38,559 --> 00:17:39,680
I had to do a double take.
329
00:17:39,680 --> 00:17:40,660
Tell me about that.
330
00:17:41,119 --> 00:17:41,359
Yeah.
331
00:17:41,359 --> 00:17:44,980
So I think it's one of those things that it's a
coming together of a few factors.
332
00:17:45,039 --> 00:17:46,845
That that wasn't always the case.
333
00:17:46,845 --> 00:17:51,345
There was some, you know, non venture private
equity in the portfolio a while ago.
334
00:17:51,484 --> 00:17:56,045
But as we looked at our portfolio and our
private allocation, there were a few things
335
00:17:56,045 --> 00:17:57,644
that really, you know, came to mind.
336
00:17:57,644 --> 00:18:01,849
You know, one is, you know, I think it's fairly
well known that empirically, you know, venture
337
00:18:01,849 --> 00:18:06,170
capital is an asset class where there is a
persistence of returns at least more than than
338
00:18:06,170 --> 00:18:07,130
any other asset class.
339
00:18:07,130 --> 00:18:10,829
So understanding that there is a persistence of
returns in this asset class.
340
00:18:11,049 --> 00:18:16,765
Secondly, if you're able to access that right
tail of managers, the long term performance is
341
00:18:16,765 --> 00:18:17,265
exceptional.
342
00:18:17,485 --> 00:18:19,485
And I think that's been proven over time.
343
00:18:19,485 --> 00:18:21,565
Again, that's not beta for an asset class.
344
00:18:21,565 --> 00:18:25,005
That is, you know, access, you know,
identifying an access that that that that right
345
00:18:25,005 --> 00:18:27,345
tail of managers within this asset class.
346
00:18:27,404 --> 00:18:30,065
That was combined with the fact on the private
equity portfolio.
347
00:18:30,950 --> 00:18:32,230
It's a massive market.
348
00:18:32,230 --> 00:18:36,470
Obviously, we sit in San Francisco and, you
know, we think venture is an area we spend a
349
00:18:36,470 --> 00:18:40,230
lot of time, but the private equity world is
just much, much, much larger than the venture
350
00:18:40,230 --> 00:18:40,710
world.
351
00:18:40,710 --> 00:18:45,505
And really understanding that we did not have
any type of edge or competitive advantage in,
352
00:18:45,505 --> 00:18:50,484
you know, sourcing, accessing, underwriting,
allocating to private equity.
353
00:18:50,544 --> 00:18:54,384
And there really wasn't a cohesive strategy
around how we wanted to execute that.
354
00:18:54,384 --> 00:18:57,930
We just didn't have a clear path on how we
wanted to do that.
355
00:18:58,009 --> 00:19:00,350
At the time, we undertook this exercise.
356
00:19:00,490 --> 00:19:04,269
Our offices were on San Hill Road, so
locationally, there was some benefit there.
357
00:19:04,570 --> 00:19:08,970
You know, Kaiser slash KFF is a name that is
well known in the valley, you know, our work
358
00:19:08,970 --> 00:19:11,724
and our mission, and so that would help with
access.
359
00:19:11,865 --> 00:19:15,384
And then, you know, people understanding our
mission, you know, we certainly thought was
360
00:19:15,384 --> 00:19:18,045
gonna be beneficial, for accessing some of
these managers.
361
00:19:18,265 --> 00:19:22,904
And then it just allowed us to concentrate our
time and focus on a on a smaller subset of the
362
00:19:22,904 --> 00:19:27,250
market that we felt if we could, you know,
dedicate more time, effort, and energy, we
363
00:19:27,250 --> 00:19:28,470
could build a better portfolio.
364
00:19:28,769 --> 00:19:33,649
And so, you know, the coming together of all
those factors, you know, has led to this led to
365
00:19:33,649 --> 00:19:38,849
this outcome in whereby there is no traditional
private equity buyout in the portfolio as it
366
00:19:38,849 --> 00:19:39,349
stands.
367
00:19:40,035 --> 00:19:44,355
Just to play devil's advocate, I think it's
really self aware that you guys focused on
368
00:19:44,355 --> 00:19:48,035
venture capital, and you realize you didn't
have competitive advantage in private equity.
369
00:19:48,035 --> 00:19:54,190
But why not access private equity via fund of
funds or via OCIO or other form factors that
370
00:19:54,190 --> 00:19:56,929
would allow you to access the S Class.
371
00:19:56,990 --> 00:19:58,429
You know, look, you're not wrong.
372
00:19:58,429 --> 00:20:01,190
Those are certainly other considerations or
ways we could have.
373
00:20:01,190 --> 00:20:04,990
You know, going direct was is something that's
been core to our strategy for a while.
374
00:20:04,990 --> 00:20:09,195
And, you know, investing in a fund to fund
structure for a lot of reasons is not something
375
00:20:09,195 --> 00:20:10,875
that we're super interested in.
376
00:20:10,875 --> 00:20:14,555
And I think, again, it came back to this belief
where, you know, venture capital returns for
377
00:20:14,555 --> 00:20:19,914
any liquid dollar, if we could maximize our
positioning as an LP and access the best of the
378
00:20:19,914 --> 00:20:23,960
best, then, you know, I think, empirically
would suggest that long term, that's a better
379
00:20:23,960 --> 00:20:26,779
place to be than than some private equity beta.
380
00:20:27,160 --> 00:20:31,799
And so, you know, that that's kind of why the
decision was made, and that's kind of why we've
381
00:20:31,799 --> 00:20:33,259
ended up the way we are.
382
00:20:33,400 --> 00:20:38,184
As you played devil at advocate, those are
certainly valid questions and options.
383
00:20:38,724 --> 00:20:41,605
And not to say that those wouldn't be good
outcomes either.
384
00:20:41,605 --> 00:20:45,924
We just felt at the time what was optimal or
necessary for our organization was was this
385
00:20:45,924 --> 00:20:46,424
direction.
386
00:20:47,500 --> 00:20:49,359
You have a bit of a contrarian view.
387
00:20:49,420 --> 00:20:52,940
You believe that the main issue in venture
capital is not timing the market, but
388
00:20:52,940 --> 00:20:54,240
stomaching the illiquidity.
389
00:20:55,019 --> 00:20:58,694
Tell me about why you believe investing in
venture capital in any market.
390
00:20:58,934 --> 00:20:59,174
Yeah.
391
00:20:59,174 --> 00:21:01,654
So again, I think this comes back to a few
things.
392
00:21:01,654 --> 00:21:06,134
1, we have the benefits of being, you know, an
organization that has perpetual capital.
393
00:21:06,134 --> 00:21:10,615
That that should be something we lean into, and
leverage as a competitive advantage versus a
394
00:21:10,615 --> 00:21:12,509
lot of other investors in the market.
395
00:21:12,670 --> 00:21:17,150
And again, coming back to this persistence of
returns, you know, for the asset class and
396
00:21:17,150 --> 00:21:18,190
access to the right tail.
397
00:21:18,190 --> 00:21:21,630
Again, you know, the biggest issue is not
necessarily just stomaching the liquidity
398
00:21:21,630 --> 00:21:25,309
because I think the debt also would show you
that if you have just venture capital beta,
399
00:21:25,309 --> 00:21:29,664
there are a lot more issues you're gonna have
than than just illiquidity, because venture
400
00:21:29,664 --> 00:21:34,144
capital beta is not necessarily something you
want to introduce or have a lot of in the
401
00:21:34,144 --> 00:21:34,644
portfolio.
402
00:21:34,865 --> 00:21:39,684
The purpose of investing in the asset class is
to access those right tail managers to generate
403
00:21:40,304 --> 00:21:41,970
material outperformance over time.
404
00:21:42,450 --> 00:21:46,049
In terms of, you know, investing through cycles
within venture, you can stomach the
405
00:21:46,049 --> 00:21:46,529
illiquidity.
406
00:21:46,529 --> 00:21:51,409
Great companies are being formed at all
periods, you know, within the venture and start
407
00:21:51,409 --> 00:21:52,049
up market.
408
00:21:52,049 --> 00:21:55,744
And the structure of these firms is such that
you know, seed and early stage firms are are
409
00:21:55,744 --> 00:22:00,304
buying material ownership in these businesses
that take a long time to build and compound
410
00:22:00,304 --> 00:22:00,804
value.
411
00:22:01,025 --> 00:22:04,785
And I think, you know, you always hear stories
or anecdotes of generational companies being
412
00:22:04,785 --> 00:22:07,664
founded during tough times in the market or
during great times in the market.
413
00:22:07,664 --> 00:22:11,259
And so that's why able to commit and be
thoughtful and disciplined around investing
414
00:22:11,259 --> 00:22:14,480
through the cycle without trying to time, you
know, specific vintages.
415
00:22:14,859 --> 00:22:19,339
But again, you know, if you have that
perspective, which I just laid out, then, you
416
00:22:19,339 --> 00:22:22,779
know, it should be something that, you know, we
continue to do, you know, you know, no matter
417
00:22:22,779 --> 00:22:23,759
the market conditions.
418
00:22:24,174 --> 00:22:28,414
So the fame famous study, of course, is the
University of Chicago study that showed that
419
00:22:28,414 --> 00:22:31,875
52% of the time, top quartile persists in
venture capital.
420
00:22:32,255 --> 00:22:35,075
And it is very statistically significant over
many decades.
421
00:22:35,375 --> 00:22:42,269
What I worry about is that it's $20,000,000,000
venture funds.
422
00:22:42,269 --> 00:22:42,549
Mhmm.
423
00:22:42,549 --> 00:22:43,950
You know, how do you look at that?
424
00:22:43,950 --> 00:22:47,390
And do you believe that that level of
persistence will continue over the next 10, 20,
425
00:22:47,390 --> 00:22:48,109
30 years?
426
00:22:48,109 --> 00:22:48,509
Yes.
427
00:22:48,509 --> 00:22:52,154
Speaks to our certain our favorite disclaimer
on every presentation, past performance are not
428
00:22:52,154 --> 00:22:53,454
indicative of future results.
429
00:22:53,595 --> 00:22:57,694
Obviously, in certain cases, that that is not
the case, especially as it relates to venture.
430
00:22:57,835 --> 00:23:02,234
But, yeah, as you look at some of these firms
that that have grown and and raised significant
431
00:23:02,234 --> 00:23:06,339
pools of capital, have added different products
to their firm and their lineup.
432
00:23:06,639 --> 00:23:11,440
I think what it comes down to is, you know, for
us to make sure that our expectations in
433
00:23:11,440 --> 00:23:15,200
underwriting these managers are aligned with
are bucketed properly.
434
00:23:15,200 --> 00:23:15,359
Right?
435
00:23:15,359 --> 00:23:18,106
A $20,000,000,000 fund is not a venture capital
firm anymore.
436
00:23:18,106 --> 00:23:18,396
Right?
437
00:23:18,396 --> 00:23:21,591
It should almost be, by definition, a different
type of firm.
438
00:23:21,591 --> 00:23:27,110
And so, you know, as we look at what venture
capital is and what the role of venture capital
439
00:23:27,110 --> 00:23:31,176
is in a portfolio, you know, a $200,000,000
fund to $400,000,000 fund are fundamentally
440
00:23:31,176 --> 00:23:34,890
different than what a 10 or 20,000,000,000 fund
do for a portfolio.
441
00:23:34,890 --> 00:23:38,750
And so, you know, do we think that the
persistence of returns carries through
442
00:23:38,890 --> 00:23:40,429
different AUM levels?
443
00:23:40,569 --> 00:23:42,809
I I don't know if there's been work done on
that.
444
00:23:42,809 --> 00:23:45,769
It would be hard to believe that that would be
the case.
445
00:23:45,769 --> 00:23:47,924
I share some of those same concerns you do.
446
00:23:48,085 --> 00:23:51,365
And so I think, you know, at the end of the
day, what what that means is just making sure
447
00:23:51,365 --> 00:23:55,845
that, you know, our expectations are aligned
with what a fund, you know, is offering and
448
00:23:55,845 --> 00:23:58,664
making sure that there's not a mismatch of
expectations there.
449
00:23:58,725 --> 00:24:03,660
I worry that we're not gonna see a reversion in
asset gathering anytime soon.
450
00:24:03,660 --> 00:24:08,559
Specifically, from a tax policy standpoint, we
have people from all sorts of political
451
00:24:08,619 --> 00:24:12,779
spectrums, Republicans and Democrats, all
pushing to get get away with carried interest,
452
00:24:12,779 --> 00:24:17,954
which I think will have a lot of unintended
consequences when it comes to AUM and and asset
453
00:24:17,954 --> 00:24:19,095
gathering and everything.
454
00:24:19,234 --> 00:24:25,394
You know, today, smart GPS are able to forego
short term management fees in order to get long
455
00:24:25,394 --> 00:24:25,875
term carry.
456
00:24:25,875 --> 00:24:27,075
There's a tax incentive there.
457
00:24:27,075 --> 00:24:29,815
What happens when that tax incentive is taken
away?
458
00:24:29,980 --> 00:24:33,579
Unlike many of your peers, you demonstrate
incredible ability to have what crypto
459
00:24:33,579 --> 00:24:34,940
investors would call dime enhance.
460
00:24:34,940 --> 00:24:40,700
So to to hold through the most difficult
market, and you held all held and reop through
461
00:24:40,700 --> 00:24:42,399
2018, 2024.
462
00:24:42,815 --> 00:24:47,775
Very curious, how did that play out in your
portfolio continuing to invest throughout the
463
00:24:47,775 --> 00:24:50,115
bull market and then into the bear market as
well?
464
00:24:50,174 --> 00:24:54,174
We were investing through that period, you
know, committing to funds both new and and and,
465
00:24:54,174 --> 00:24:56,515
you know, existing GPs within the portfolio.
466
00:24:57,070 --> 00:25:01,650
Obviously, seeing the the value run up within
the portfolio across 2020 and 2021.
467
00:25:02,109 --> 00:25:06,769
There were some, you know, really remarkable
things happening in the market at that time,
468
00:25:06,990 --> 00:25:12,154
coming back down to earth a little bit, you
know, across 22 and 23 as valuations
469
00:25:12,154 --> 00:25:14,815
normalized, GPs took some write downs.
470
00:25:15,515 --> 00:25:18,095
You know, there was some rationalization within
the portfolio.
471
00:25:18,555 --> 00:25:22,634
There was a shifting from the underlying
portfolio companies, from a growth at all costs
472
00:25:22,634 --> 00:25:25,855
to a profitability and, you know, focus on cash
flow.
473
00:25:26,230 --> 00:25:29,750
You know, but but at the end of the day, we had
a very mature portfolio.
474
00:25:29,750 --> 00:25:32,569
We've been investing in the asset class since
19 nineties.
475
00:25:32,710 --> 00:25:36,149
And the result of that, what, you know, I think
we talked about this last time, was was net
476
00:25:36,149 --> 00:25:41,825
distributions, you know, back to our portfolio
in excess of capital calls for every year, you
477
00:25:41,825 --> 00:25:42,804
know, since 2019.
478
00:25:42,944 --> 00:25:46,944
And so, you know, some of the liquidity issues
that that some of other investors have talked
479
00:25:46,944 --> 00:25:50,144
about and, you know, in terms of lack of
liquidity, yes, it's certainly not been as
480
00:25:50,144 --> 00:25:55,079
robust as it was during 2020 and 2021, and
that's allowed us to to be consistent with our
481
00:25:55,159 --> 00:25:59,399
pacing and allocating to to, you know, to
different managers, you know, during that time
482
00:25:59,399 --> 00:25:59,899
period.
483
00:26:00,359 --> 00:26:05,740
I still think there's a long way to go with the
effects of of that time period, but I think
484
00:26:06,440 --> 00:26:10,375
there are some things happening right now in in
ventures, specifically around AI, that, you
485
00:26:10,375 --> 00:26:14,375
know, are are potentially waking, you know, the
space back up, which I think would be, you
486
00:26:14,375 --> 00:26:16,875
know, welcome for GPs and LPs alike.
487
00:26:16,934 --> 00:26:20,214
We talked about macro factors and whether you
wanna play macro investor.
488
00:26:20,214 --> 00:26:24,134
I think it's very foolish to try to time the
venture market for a couple of reasons.
489
00:26:24,134 --> 00:26:26,819
One is you've looked historically at returns.
490
00:26:27,279 --> 00:26:30,579
A lot of the returns actually come in the last
3, 4 years of the bull market.
491
00:26:31,119 --> 00:26:33,759
So the question is not whether the market will
go down.
492
00:26:33,759 --> 00:26:35,519
It's always gonna go up and go down.
493
00:26:35,519 --> 00:26:38,179
The question is, can you time it an exact way?
494
00:26:38,375 --> 00:26:44,775
And if you sold it in 2016, and then bought in
2023, you'd be worse off than if you just held
495
00:26:44,775 --> 00:26:45,174
it to that.
496
00:26:45,174 --> 00:26:48,795
So I think that's that that's a perilous
activity.
497
00:26:48,855 --> 00:26:53,019
The other thing is, I think a lot of venture
investors did not realize there are macro
498
00:26:53,019 --> 00:26:57,339
investors, that no matter what companies they
were picking, they were all either gonna be
499
00:26:57,339 --> 00:26:59,419
down or up based on macro conditions.
500
00:26:59,419 --> 00:27:03,579
And I think it's it's always foolish to try to
major in something that you're not studying and
501
00:27:03,579 --> 00:27:06,315
you're not you're not really keeping up with
with the public market.
502
00:27:06,394 --> 00:27:10,974
So I think, the prudent and the wise thing in
ventures to continue to deploy.
503
00:27:11,274 --> 00:27:15,934
Venture is one of those asset classes that's
has such a high return on average historically
504
00:27:16,154 --> 00:27:19,674
that if you just don't try to time the market,
you're gonna do quite well, especially as an
505
00:27:19,674 --> 00:27:20,654
institutional investor.
506
00:27:20,910 --> 00:27:21,150
Yeah.
507
00:27:21,150 --> 00:27:22,109
I I agree with that.
508
00:27:22,109 --> 00:27:27,230
I was, both very impressed and and very scared
for you to have all your asset all your private
509
00:27:27,230 --> 00:27:28,210
assets and venture.
510
00:27:28,430 --> 00:27:33,570
And we discussed whether you had any plans to
to diversify, your liquid portfolio.
511
00:27:33,710 --> 00:27:34,830
Have you given thought to that?
512
00:27:34,830 --> 00:27:35,330
And
513
00:27:35,595 --> 00:27:35,914
Yeah.
514
00:27:35,914 --> 00:27:39,755
We did talk about that, and and I think it's a
natural question and and one that that we
515
00:27:39,755 --> 00:27:40,954
constantly evaluate.
516
00:27:40,954 --> 00:27:41,194
Right?
517
00:27:41,194 --> 00:27:46,634
When I mentioned that the shift to this current
structure was made, you know, there was a lot
518
00:27:46,634 --> 00:27:52,180
of thought at the time given into, you know,
the potential impacts of pursuing such a setup.
519
00:27:52,320 --> 00:27:55,359
Look, at the end of the day, I alluded to this
earlier, and it's something that's very
520
00:27:55,359 --> 00:28:00,240
important for us, is that any decision we make
strategically around the portfolio is always
521
00:28:00,240 --> 00:28:04,080
done again in mind with the organization as a
whole, 1st and foremost.
522
00:28:04,080 --> 00:28:09,115
Will this benefit, and is this better for, you
know, the mission of KFF as a whole?
523
00:28:09,174 --> 00:28:12,375
And I think one of the things that we've
learned over the past 6 years, this period that
524
00:28:12,375 --> 00:28:16,855
we just talked about with some of the ups and
downs, is that, you know, while while we do
525
00:28:16,855 --> 00:28:21,130
have patient capital and have the ability, you
know, to see some of this through, you know,
526
00:28:21,130 --> 00:28:25,609
there's potentially the ability to to add
incremental value to our own portfolio by, you
527
00:28:25,609 --> 00:28:27,930
know, diversifying within the specific asset
class.
528
00:28:27,930 --> 00:28:31,130
You asked a, you know, very prescient question
earlier about, you know, how do you know you're
529
00:28:31,130 --> 00:28:31,950
actually diversified?
530
00:28:32,009 --> 00:28:36,404
And and I think, having such a large allocation
to venture, a lot of them trade on very similar
531
00:28:36,404 --> 00:28:36,904
factors.
532
00:28:37,205 --> 00:28:41,065
I think the understanding is that there's
potentially a way for us to incrementally
533
00:28:41,445 --> 00:28:46,244
improve the risk adjusted return of our private
portfolio by introducing some different types
534
00:28:46,244 --> 00:28:46,725
of exposure.
535
00:28:46,725 --> 00:28:48,345
And so that's something we are considering.
536
00:28:48,619 --> 00:28:51,980
You know, earlier, I talked about when the
decision was made to move away from that, a lot
537
00:28:51,980 --> 00:28:54,779
of the reasons why, you know, we felt it was
the right reason.
538
00:28:54,779 --> 00:28:57,820
And and those things haven't simply
disappeared, especially, you know, not having
539
00:28:57,820 --> 00:29:01,019
spent time in these markets for a long period
of time.
540
00:29:01,019 --> 00:29:05,005
You know, our our competitive advantage or our
edge in understanding, accessing, sourcing some
541
00:29:05,005 --> 00:29:07,025
of these managers is even worse than it was.
542
00:29:07,085 --> 00:29:11,484
You know, we do have the benefit of having a,
you know, blank slate within this small area of
543
00:29:11,484 --> 00:29:12,144
the portfolio.
544
00:29:12,445 --> 00:29:17,424
We also have the ability to understand, you
know, the existing structure of our portfolio
545
00:29:18,160 --> 00:29:22,480
and what types of exposures or investments
would be, you know, value additive.
546
00:29:22,480 --> 00:29:26,160
And so we can be much more intentional about
where we spend our time, you know, the types of
547
00:29:26,160 --> 00:29:27,359
managers that we evaluate.
548
00:29:27,359 --> 00:29:30,799
Again, we're not trying to meet with anyone and
everyone as it relates to, you know,
549
00:29:30,799 --> 00:29:33,794
potentially adding, you know, this new sleeve
within the portfolio.
550
00:29:33,794 --> 00:29:36,355
You know, importantly, again, though, this this
wouldn't be a massive overhaul.
551
00:29:36,355 --> 00:29:40,115
As I said, this is incrementally making
adjustments to the portfolio, you know, in
552
00:29:40,115 --> 00:29:43,414
service to the organization that will will suit
us better in the long run.
553
00:29:43,474 --> 00:29:48,410
How does an endowment like a KFF start
investing into a new asset class like buyout?
554
00:29:48,470 --> 00:29:51,829
Walk me through the process of investing into a
new asset class.
555
00:29:51,829 --> 00:29:55,029
This is something that we've not done a lot of
in the past.
556
00:29:55,029 --> 00:29:58,390
And, you know, again, I don't know that there's
a right way or a wrong way.
557
00:29:58,390 --> 00:30:00,569
Well, there probably is a wrong way to do it,
actually.
558
00:30:00,994 --> 00:30:03,015
But but in terms of Just start guessing.
559
00:30:03,315 --> 00:30:03,555
Yeah.
560
00:30:03,555 --> 00:30:03,955
Exactly.
561
00:30:03,955 --> 00:30:07,154
Just to fire away and throwing throwing darts.
562
00:30:07,154 --> 00:30:07,394
No.
563
00:30:07,394 --> 00:30:08,595
That's that's that's not what we're doing.
564
00:30:08,595 --> 00:30:10,855
But but much like anything, we talked about
this earlier.
565
00:30:11,075 --> 00:30:15,190
It's leveraging the the network we have, both
GPs and different asset classes within the
566
00:30:15,190 --> 00:30:19,509
portfolio, LPs, service providers, vendors,
etcetera, etcetera, people in our network,
567
00:30:19,750 --> 00:30:24,809
where we're able to talk, thoughtfully
evaluate, spend the time, take some meetings,
568
00:30:24,950 --> 00:30:29,585
you know, figure out, you know, what is of
interest, what is not, understand why,
569
00:30:29,644 --> 00:30:32,305
understand some of the driving factors behind
that.
570
00:30:32,365 --> 00:30:35,484
And then, again, you know, it's a word I've
used a lot, be very intentional about how
571
00:30:35,484 --> 00:30:38,525
we're, you know, evaluating and underwriting
all these specific investments.
572
00:30:38,525 --> 00:30:42,460
You know, have a pretty tight, you know, tight
circle around, you know, what we're looking for
573
00:30:42,460 --> 00:30:46,619
and what we need, not compromising on what that
looks like, you know, be it size, team,
574
00:30:46,619 --> 00:30:48,000
strategy, etcetera, etcetera.
575
00:30:48,380 --> 00:30:52,859
And then start to tow our way in, you know, to
make sure that we make an investment, we make
576
00:30:52,859 --> 00:30:56,805
another investment, you know, not put all our
eggs in one basket, but be thoughtful about
577
00:30:56,805 --> 00:30:58,105
building some of that exposure.
578
00:30:58,404 --> 00:31:01,765
And then, you know, again, being very, you
know, disciplined around evaluate self
579
00:31:01,765 --> 00:31:03,605
evaluation of of what that looks like.
580
00:31:03,605 --> 00:31:04,725
Is it performing as we hope?
581
00:31:04,725 --> 00:31:05,924
Is it delivering what we hope?
582
00:31:05,924 --> 00:31:09,490
It's not out of this question that there's a
world in which we evaluate this and it's
583
00:31:09,490 --> 00:31:13,009
performing as maybe we hoped, but, you know,
it's not doing what we wanted it to do.
584
00:31:13,009 --> 00:31:16,049
And so in that sense, we'd have to make a, you
know, another decision.
585
00:31:16,049 --> 00:31:19,490
But, you know, at the end of the day, you know,
the answer is is we're just deliberate and
586
00:31:19,490 --> 00:31:23,605
thoughtful about doing so and being really
intentional about how we spend our time, what
587
00:31:23,605 --> 00:31:27,544
we're looking for, and being disciplined
around, you know, making those decisions.
588
00:31:27,764 --> 00:31:29,684
You've been at KFF for 13 years.
589
00:31:29,684 --> 00:31:31,304
What do you wish you knew when you started?
590
00:31:32,325 --> 00:31:33,330
That's actually a really good question.
591
00:31:33,330 --> 00:31:33,990
One thing.
592
00:31:34,130 --> 00:31:34,289
Yeah.
593
00:31:34,289 --> 00:31:34,769
Yeah.
594
00:31:34,769 --> 00:31:36,390
As many as you'd like to add.
595
00:31:36,529 --> 00:31:37,029
Yeah.
596
00:31:37,170 --> 00:31:40,930
Jokingly, I'd say the the price of Bitcoin in
2024, you know, I don't know if that was
597
00:31:40,930 --> 00:31:41,569
the right answer.
598
00:31:41,569 --> 00:31:42,690
You said there's no right answer.
599
00:31:42,690 --> 00:31:43,650
That is the right answer.
600
00:31:43,650 --> 00:31:47,784
I think it's one of those things where I feel
so fortunate to be in this role, you know, at
601
00:31:47,784 --> 00:31:48,525
this organization.
602
00:31:48,585 --> 00:31:50,585
I think the the benefits are are immense.
603
00:31:50,585 --> 00:31:55,304
The ability to interact with, you know,
incredibly smart people across a wide range of,
604
00:31:55,304 --> 00:31:59,065
you know, both asset classes and disciplines,
you know, has been really, you know,
605
00:31:59,065 --> 00:32:01,079
instrumental on me as an investor.
606
00:32:01,159 --> 00:32:05,640
I think, you know, some of the lessons there
are lessons learned from mistakes made over the
607
00:32:05,640 --> 00:32:09,240
past, but, you know, as some people would say
is that those mistakes and learning those
608
00:32:09,240 --> 00:32:14,115
lessons are crucial and vital in terms of being
a better investor today.
609
00:32:14,115 --> 00:32:18,275
And so one answer might have been, hey, I would
have, you know, loved to avoid making mistake,
610
00:32:18,275 --> 00:32:19,075
you know, a, b, or c.
611
00:32:19,075 --> 00:32:23,315
But but if if I didn't avoid making mistake a,
b, or c, then I wouldn't have learned from
612
00:32:23,315 --> 00:32:27,654
those mistakes and and helped shape how I think
about the portfolio and investing today.
613
00:32:27,880 --> 00:32:31,400
And so, you know, there were a lot of lessons
learned over that period of time.
614
00:32:31,400 --> 00:32:33,319
You know, I feel like I've I've grown a ton.
615
00:32:33,319 --> 00:32:37,079
Just understanding that that this is, you know,
not an easy thing to do and and and, you know,
616
00:32:37,079 --> 00:32:41,994
making sure that you're patient making
decisions clear head with a consistent
617
00:32:41,994 --> 00:32:43,994
framework is is the most important thing.
618
00:32:43,994 --> 00:32:48,154
As I alluded to, focusing on process over
outcome for GPs is something we can do for
619
00:32:48,154 --> 00:32:51,994
ourselves too, making sure that the process is
done well, is done right, and, you know, the
620
00:32:51,994 --> 00:32:53,535
outcomes will take care of themselves.
621
00:32:54,309 --> 00:32:58,789
For somebody that's breaking into endowments,
and not literally, but figuratively, for
622
00:32:58,789 --> 00:33:03,670
somebody that's starting to work at endowments
in 1st couple of years, what are some meta
623
00:33:03,670 --> 00:33:04,070
skills?
624
00:33:04,070 --> 00:33:08,070
What are some skills and some practices that
somebody should do when they're starting out as
625
00:33:08,070 --> 00:33:09,210
an institutional investor?
626
00:33:09,615 --> 00:33:10,015
Yeah.
627
00:33:10,015 --> 00:33:10,894
A really good question.
628
00:33:10,894 --> 00:33:14,494
Again, I think, you know, each individual
organization is different in in in what it can
629
00:33:14,494 --> 00:33:14,815
provide.
630
00:33:14,815 --> 00:33:18,494
You know, for me, the way I did it is I, you
know, responded to every single email that that
631
00:33:18,494 --> 00:33:19,295
came into my inbox.
632
00:33:19,295 --> 00:33:20,894
I took a lot of meetings.
633
00:33:20,894 --> 00:33:22,974
You know, you know, you asked the question
about spending time.
634
00:33:22,974 --> 00:33:26,410
When I was, you know, 1, 2 years in, it was it
was meetings all the time.
635
00:33:26,410 --> 00:33:29,690
You know, getting those reps and understanding,
you know, how different people present
636
00:33:29,690 --> 00:33:33,529
different strategies, taking the reps just to
understand what to look for, what you like,
637
00:33:33,529 --> 00:33:34,269
what you don't.
638
00:33:34,410 --> 00:33:38,484
Asking questions, I think that's another thing
that, of course, is always an interesting thing
639
00:33:38,484 --> 00:33:40,005
is, you know, are there no dumb questions?
640
00:33:40,005 --> 00:33:43,125
And, you know, oftentimes, I found in the
beginning when I was young, I wouldn't
641
00:33:43,125 --> 00:33:45,444
understand a concept or it was being presented
a certain way.
642
00:33:45,444 --> 00:33:49,365
And the reality is is it was being sold, you
know, as you asked earlier, in a in a more
643
00:33:49,365 --> 00:33:50,164
complex structure.
644
00:33:50,164 --> 00:33:51,845
But at the end of the day, it's a much simple
concept.
645
00:33:51,845 --> 00:33:57,190
And just asking the question, and I think that
helps, you know, create dialogues between LPs
646
00:33:57,190 --> 00:34:02,329
and GPs, you know, asking questions to to
teammates, bosses, mentors that are, you know,
647
00:34:02,390 --> 00:34:05,289
much more experienced, longer time in the role.
648
00:34:05,734 --> 00:34:06,455
And then access.
649
00:34:06,455 --> 00:34:10,954
I think, again, this is one of the underrated
benefits of a seat, you know, at an endowment
650
00:34:11,015 --> 00:34:15,675
or a foundation or a, you know, nonprofit
institution is, you know, access to different
651
00:34:15,894 --> 00:34:17,094
banks, vendors, funds.
652
00:34:17,094 --> 00:34:18,695
Being an asset owner opens a lot of doors.
653
00:34:18,695 --> 00:34:21,590
You know, in the beginning, I was not naive
enough to the fact people don't want to talk to
654
00:34:21,590 --> 00:34:21,670
me.
655
00:34:21,670 --> 00:34:23,510
They like talking to the name on the door, and
that's okay.
656
00:34:23,510 --> 00:34:24,730
And I was fine with that.
657
00:34:24,789 --> 00:34:28,630
And, you know, understanding that, you know,
that is something that should not be looked
658
00:34:28,630 --> 00:34:29,349
upon poorly.
659
00:34:29,349 --> 00:34:29,670
Right?
660
00:34:29,670 --> 00:34:34,070
I I think, you know, taking advantage of that
to ask questions, get smarter, meet really
661
00:34:34,070 --> 00:34:37,726
interesting people, develop relationships that
will serve you later on down the line.
662
00:34:37,726 --> 00:34:41,175
You know, one of the other things is that, you
know, it's a it's a pretty small industry and,
663
00:34:41,175 --> 00:34:43,594
you know, often there's 1 or 2 or 3 degrees of
separation.
664
00:34:43,894 --> 00:34:49,940
It's also, you know, I find an area where a lot
of people spend long periods of time in their
665
00:34:49,940 --> 00:34:50,179
career.
666
00:34:50,179 --> 00:34:53,539
And so point being is that a relationship
developed in year 1, 2, 3.
667
00:34:53,539 --> 00:34:54,739
You never know where that leads.
668
00:34:54,739 --> 00:34:57,539
And it's amazing how people, you know, end up
at different places.
669
00:34:57,539 --> 00:35:00,099
There's different, you know, paths cross at
different times.
670
00:35:00,099 --> 00:35:04,175
And so, you know, working on networking,
building relationships, maintaining
671
00:35:04,175 --> 00:35:07,715
relationships, being authentic, all of that is
something that I would, you know, encourage,
672
00:35:07,775 --> 00:35:12,195
you know, a younger person to do, you know,
take advantage of what these seats provide.
673
00:35:12,735 --> 00:35:16,869
And also, you know, maybe lastly, just don't
lose focus of the work you're doing on behalf
674
00:35:16,869 --> 00:35:20,630
of the organization that you're working for,
which is oftentimes really impactful and
675
00:35:20,630 --> 00:35:23,690
important and, you know, again, should not be
taken for granted.
676
00:35:23,829 --> 00:35:25,190
You mentioned asking questions.
677
00:35:25,190 --> 00:35:30,835
Unfortunately, I think this is a big liability
of the Western Western Education System is the
678
00:35:30,835 --> 00:35:33,974
punishing of asking questions, the punishing of
not knowing the right answers.
679
00:35:34,275 --> 00:35:40,934
The entire concept of a right answer in these
highly evolving industries is a very dangerous,
680
00:35:41,635 --> 00:35:45,635
very dangerous concept in general because the
right answer today might be completely wrong
681
00:35:45,635 --> 00:35:47,230
answer, next quarter.
682
00:35:47,449 --> 00:35:51,130
You have to build the confidence to actually
ask simple questions over your career.
683
00:35:51,130 --> 00:35:53,630
It's it's a it's a paradox of sorts.
684
00:35:54,409 --> 00:35:57,869
You mentioned building your network and being
investor.
685
00:35:58,905 --> 00:36:04,285
To me, it feels like being an LP is could
oftentimes be a siloed position.
686
00:36:04,585 --> 00:36:09,065
How do you get out of kind of this siloed
positions and network with your with your peers
687
00:36:09,065 --> 00:36:10,559
and network with with other people?
688
00:36:10,640 --> 00:36:14,960
It just takes a little bit of work, you know,
going to conferences, you know, annual meetings
689
00:36:14,960 --> 00:36:18,880
for existing or prospective managers, you know,
introducing yourselves to to LPs.
690
00:36:18,880 --> 00:36:22,640
What I found, and and again, this comes back to
that last point, is that oftentimes a lot of
691
00:36:22,640 --> 00:36:27,114
LPs have similar questions or have similar
perspectives, and and people are hesitant to
692
00:36:27,114 --> 00:36:27,514
share.
693
00:36:27,514 --> 00:36:30,554
And that that creates kind of a gap between
between people.
694
00:36:30,554 --> 00:36:34,875
And I found that one of the the best recipes
for doing that is being open, being willing to,
695
00:36:34,875 --> 00:36:37,034
you know, have discussions, identify issues.
696
00:36:37,034 --> 00:36:37,275
Right?
697
00:36:37,275 --> 00:36:40,570
Everyone sometimes, you know, everyone says
everything's going great and, you know, sitting
698
00:36:40,570 --> 00:36:43,690
in the same seat on, you know, a different
organization, opening up about, you know,
699
00:36:43,690 --> 00:36:46,570
things that are challenging, I think just
builds a natural rapport with people.
700
00:36:46,570 --> 00:36:50,269
And but, yeah, I I think, like anything, it's
something you have to put the work into.
701
00:36:50,484 --> 00:36:50,804
Absolutely.
702
00:36:50,804 --> 00:36:54,085
Well, thanks so much for taking the time to
jump on the podcast.
703
00:36:54,085 --> 00:36:55,385
Look forward to seeing you soon.
704
00:36:55,445 --> 00:36:55,764
Great.
705
00:36:55,764 --> 00:36:56,244
David, thanks.
706
00:36:56,244 --> 00:36:57,125
This was a lot of fun.
707
00:36:57,125 --> 00:36:58,824
And, I look forward to keeping in touch.
708
00:36:59,015 --> 00:36:59,594
Thanks, Dean.
709
00:37:00,295 --> 00:37:01,434
Thank you for listening.
710
00:37:01,494 --> 00:37:06,215
The 10x Capital podcast now receives more than
a 170,000 downloads per month.
711
00:37:06,215 --> 00:37:09,195
If you are interested in sponsoring, please
email me at david@10xcapital.com.
