June 20, 2025 • 46 mins
In this episode, I speak with Rip Reeves, CEO of Institutional Investor and former CIO of AEGIS Insurance Services. Rip brings over four decades of experience across investment management, insurance, and endowments. We discuss his unconventional path from Salomon Brothers to leading one of the most iconic platforms in the investment world, his views on the OCIO model, portfolio construction, the “art” of manager selection, and why he believes building authentic relationships matters more than ever in this industry.
We also cover his deep ties to LSU, how he uses qualitative signals (like waiting room conversations) in manager evaluations, and the future of Institutional Investor in a changing GP-LP landscape.
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Episode Transcript
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(00:00):
You overlook the LSU university systems, andyou've decided to go with an OCIO with
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Cambridge.
Why did you make that decision?
The one of the one of the reasons to to for aan endowment to use the OCIO model, and not
just an endowment, but any kind of pool ofmoney, part of it is size.
No disrespect to about a billion dollars, but,when you're running a pool of money that's
(00:26):
about a billion or 2,000,000,000, you generallydon't have the type of funds to attract the
type of talent that you would want in order torun the portfolio, and exacerbating the
relative small size of our endowment at themoment is the fact that we're in Baton Rouge,
Louisiana.
Again, no disrespect to the financeprofessionals in Baton Rouge, Louisiana, but
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it's very different from the type of pool offolks that I can that I can work with or
attract when I'm in New York City, when I'm inBoston, when I'm in Chicago, I'm in London,
which are the places that I've spent most ofthe past forty years.
So it really allows us as a relatively smallpool of money to get the type of top notch
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research and resources, that a Cambridge andAssociates can bring to the table.
So, it basically is a stronger team that Icould afford to put in place internally, and I
basically rent to them and all the hundreds andthousands of people, that work globally for for
that institution.
(01:32):
So you're able to have a world class team evenbeing in Baton Rouge.
Talk to me on the allocation sizes.
Having a billion dollars an advantage in beingable to access more interesting funds, or is it
also disadvantage?
No.
I would say, another aspect or advantage of theOCIO model.
Again, for someone, generally speaking, ifyou're looking at, say, I would say less than
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$2,000,000,000, the OCIO model, regardless ofthe type of monies pool of monies that you're
managing, can really there's a very strong casefor it.
And, again, especially if you're not in afinancial hub like a New York or a Boston or
London.
So what we've basically done is the ability toaccess various types of investments are are is
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a huge advantage by using an OCIO model withCambridge because, we are some of the allocator
some of the allocation sizes that we might endup trying to invest in, we'd just be too small.
Our bite sizes would be too small.
So what Cambridge allows us to do is they'llcall and combine several portfolios like
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ourselves and then go out and do a bigger chunkas well as possibly get discount pricing
because of volume.
So, it is a massive, significant advantage fromour perspective that we're gonna have access to
various types of investments, especially in thealternative and private sector that we likely
wouldn't have access to on our own.
(03:06):
Your portfolio allocation is 40% stock, 30%bonds, 30% alternatives.
It suspiciously feels like very round numbers.
How did you come to this?
And to to walk me through the rationale.
Those are those are fairly general, allocation,guy guidelines, and it basically stems from
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what is known as the endowment model, whichwas, the idea that came out of David Swinson,
who was the CIO at Yale's endowment.
I think he probably started in the mideighties.
And as a fun fact, Dave Swinson is a member ofthe Institutional Investor Investment Hall of
Fame.
The 40% stock, 30% bond, 30% alternative is,the general idea for the endowment model that
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was, I would offer is a bit of an uptick or anevolution from what was called, originally the
pension model, which was 60% stocks, 40% bonds.
Given given the the excess liquidity that manyendowments enjoy relative to other pools of
money, such as insurance money, pension planmoney, whether you're corporate or public,
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there's certainly the opportunity if you thinkthe relative value is there for an endowment to
give up some liquidity in order to get higherlevels of income and higher levels of
forecasted return.
And that's basically what this model does.
One of the things that we've done at LSUEndowment is to put very wide guardrails around
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those forty, thirty, 30 type general neutralpoints.
And one of the reasons for that is as a formerportfolio manager, I always wanted more
flexibility than less flexibility because thatallowed me as the person making the buys and
sells in the portfolio, it gave me moreflexibility to use all the really great
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resources of the various companies that I was aportfolio manager at.
When you tend to put more restrictions on aportfolio manager, it kind of restrains the
ability to bring the best attributes of thecompany to the market.
So we have put those as very general rules and,to your point, very, very suspiciously round
(05:22):
numbers.
But we've got pretty wide guardrails thatCambridge can play in.
These guardrails serve as a useful frameworkfor you and the investment committee and to
really be able to articulate your strategy bothinternally and externally while also not being
these arbitrary constraints that you put onespecially short term fluctuations in the
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market.
Sometimes it makes more sense to own morestocks, less bonds, and vice versa.
And one of the things that I learned early whenI made the switch from a portfolio manager
where I was responsible for every granulardetail of every portfolio that was that was
mine or that I was entrusted with, when Iswitched to become twenty years ago to a chief
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investment officer, you had to kinda step backbecause your role is a little different.
And one of the things that I started to do,which we're certainly enjoying and giving
Cambridge the flexibility to do at in in thecase of LSU's endowment, is to allow them,
since they're on the front line, let them makethe determination to your point of whether she
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would we should tweak the allocation to theprivate equity sector versus the hedge fund
sector versus the bond sector versus the,equity sector.
So like right now, one of the things thatcertainly is a bit of a trend is we've got a
little bit of a migration going on out of US,public equities to international equities
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because of the outperformance for the pastseveral years of US versus non US.
You're similarly seeing a lot of conversations,which as a an ex bond portfolio manager and
bond trader really warms my heart.
You're seeing a lot of conversations andendowments on the fixed income, public fixed
income market.
You know, prior to 2022 and since the globalfinancial crisis, interest rates were
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effectively near or at zero.
You even had some countries like Japan and andSwitzerland that had negative, government
rates.
So now with a 5% increase in Fed funds duringthe calendar year of 02/2022, fixed income also
look all of a sudden looks a little littleinteresting.
And specifically to a lot of your collegeendowments, you can get returns, on the fixed
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income, high grade fixed income sector that isgreater than this than the general liquidity
spend of a lot of these endowments of, like,four to 5%.
So, you know, it we want to make sure that wegive our portfolio investment team, enough
flexibility to bring their best ideas to to ourportfolio.
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But at the same time, we are a 100% responsiblefor the asset allocation of the portfolio, for
the the management of the risk, the managementof the performance.
That is 100% our responsibility as chairman ofthe investment committee.
It certainly doesn't make for the best cocktaildiscussion, your portfolio allocation.
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People love to say, we're in Sequoia.
We're in Citadel.
That's much, much, much more sexy.
That being said, there's been several studies,the most seminal studies, 1986 by Brinson,
Hood, and Bebauer titled determinants ofportfolio performance that analyzed 91 US
pension funds and found that 90%, nine zero, oftheir performance could be attributed to their
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portfolio construction, not their managerselection.
So 90% is a pretty large number, And yet, youknow, it's it's a very unsexy thing to talk
about or, you know, it's not the number onething that would come up in casual
conversation, yet it seems to be where thereturns come from.
(09:03):
It that doesn't necessarily surprise me when itwhen I first saw some of some of that data from
the standpoint of the following.
When you put together a portfolio investmentstrategy, the number one, the absolute number
one priority should be what are thecircumstances of the pool of money that you're
managing?
What is its purpose?
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How much liquidity do you need?
What are you supporting?
And if that portfolio construction is marriedto the purpose of the portfolio, and not just
the purpose of the portfolio, but theobjectives that should be from a governance
standpoint detailed by the governing body,whether it's the board of directors or the
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investment committee or or the executivecommittee of the company.
If that's all done correctly, what I will sharewith you is one of the things I learned when I
switched to the CIO role after 20 of being abond portfolio manager, the number of times
that I went into a finals presentation and itwas me and our company and two other companies
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likely and we give the pitch and I would leavethat presentation, and there was palpable,
chemistry between us and, the people that,know, the company that was interviewing us.
Every one of their objectives was exactly whatwe felt our competitive advantage was, and I
walk out and I think, oh, we so have this inthe bag.
And then I get the phone call and they go, wepicked we picked somebody else and here's why.
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And it always seemed like those those thosereasons that we weren't picked were just so
miniscule.
But then when I became a CIO and I was on theother end the other end of that, if we decided
that we wanted to put an allocation of 5% inemerging market debt, you know, in our bond
allocation.
(10:58):
It was so hard.
There were so many good emerging market bondmanagers out there.
By the time we got to the final three, the goodnews is I couldn't make a mistake.
There was no way to make a mistake.
There's just so many, I think, very talented,managers out there that it doesn't surprise me
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that it's less about the manager and more aboutthe actual allocation.
Double click on that.
So you had this roadshow, and you basically hadthese three finalists.
First of all, how did you decide who came whowent into these last three final managers?
Well, you would go through the RFP process, therequest for proposal.
And so, typically, once you make a decision asa CIO on what your allocation is gonna be to a
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particular general part, so in our case, we'relooking at with the forty, forty, 30, you're
looking at 40% general allocation goal forpublic equities, 30% in public bonds, and 30%
in alternatives.
I'll offer that we're a little higher on thealternatives, a little higher on public
equities, and a little lower on bonds in ouractual allocation relative to that.
(12:09):
But, again, if I decide that let's go back tothe emerging market debt, manager or
allocation.
Once we have decided that's something we wannado, we will then go out and do interviews,
basically, with, you know, all the people thatclaim, to have an emerging market bond,
product.
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And then we'll we'll send out a questionnairethat says, you know, what's your name?
You'd write David Weisberg, you know, who's thecompany you work for, how long have you been in
business, what does your team look like, what'syour strategy, show me performance, risk
metrics, all that kind of stuff, and then we'llbasically look all through all these answers
from these interviews, and it generally ispretty easy to cull it down to probably six or
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seven.
It gets more challenging when you want to getto, like, the final three, but or two or three,
but to have six people come into your office todo hour presentations, it's a bit much.
So it it tends to be pretty easy to get it downto, like, six or seven, but then it gets a
little challenging to get to to get to asmaller number for the finals.
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But it's a it's it's analyzing and reading theresponses to your RFP questions.
It's easy to get to the six or seven.
Is that performance driven?
Is that qualitative based on the answers?
Why is it so easy to get those to six or seven?
Because they're usually in some cases, forexample, when I was CIO at an insurance
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company, the insurance company that I was CIOfor last, was offshore, domiciled in Bermuda.
So if the if the company didn't have anoffshore vehicle that I could that I could
invest in, you know, from from a from a from aregulatory standpoint, I could eliminate them.
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So there generally are some things that youjust go, no.
No.
That doesn't work for us.
You're sitting at your IC, and you have six orseven qualified managers.
How do you call that down to three?
That's where it gets a little challenging, andthat's where judgment and that's where I mean,
there are some questions that you can ask whereI'd say, you know, this is just as much art as
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it is science.
You can look at the information all day long.
You can also, in this case, when you're addinganother partner, investment partner to your
stable of managers, what can also come intoplay, which has absolutely nothing to do with
the quality of the product that manager x y zis offering.
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If, for example, I have a lot of big, what Iwould call big global asset managers in my
stable, a GSAM, a JPMorgan, a BlackRock, aPIMCO, adding another big boy to the, quote
unquote, to the stable of managers, might wantto get someone who's maybe a little more, niche
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y and and, just smaller, to help round out, thestable of managers.
And that and that, unfortunately, hasabsolutely nothing to do with the answers to
the to RFP questions.
So you tend to start to look at tangentialthings relative to instead of just the actual
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numbers, and it's not just about theperformance numbers.
A lot of it is the reputation and what you knowabout the people that are running it, how
they're set up, if it's suitable to you, or isthere going to be one portfolio manager who's
also going to be the client service manager ortwo separate people?
You know, you can look at a lot of differentfactors that are not necessarily specific to
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the actual product that they're managing.
But it it the the direct the short answer toyour question is it's kinda difficult.
You gotta you gotta bring judgment into theinto
the arena.
Specs of your own portfolio construction,what's in your portfolio, and also the
qualitative factors.
What do other LPs, what do other managers sayabout this specific manager?
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So there's both kind of internal and externalconsiderations.
And that goes a long way because you've you'veyou've you've you've been in the industry long
enough to where you can do an interview withsomebody and go, god.
I really, really liked it.
It just seems like a perfect fit.
And then you start to live with the person.
You go, oh, I didn't see that.
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Didn't see it.
You know?
So I can talk to other managers, and that's oneof the great things about institutional
investor.
I could go to an event and rub elbows for a dayor three two or three days with 40 other
insurance or endowment CIOs and go, hey, David,you know, which how how are you working with
this?
You know, what are you doing with that?
What do you think about x y z manager?
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You know, I saw you know, we're thinking abouthiring them.
Those are those are very, very valuable piecesof information to see to experience other
people's experience or to be to be to be tohave access to other people's experience with
those same people.
My favorite definition of reputation is whatpeople say about you behind your back.
(17:17):
Yeah.
Very similar to you can tell more aboutsomeone's character about what they do when
people aren't looking.
One the things I always did, and we made itpart of the investment policy at my last CIO
job, is part of the investment policy was ayearly review of every asset manager teammate
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in our stable, and I purposely made it that wehad to go to, their office for that meeting for
several several reasons.
One, it it was the easiest way for us, youknow, when the CIO comes in and other people on
on the team I would bring with me, they wouldroll out everybody from the CEO of the company
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generally to the person that's, you know,getting the coffee, so to speak, And it was
always very interesting when you had a dozenpeople in the room, how the senior people
worked with the junior people.
It would tell you a lot about the culture ofthe place.
The other thing I religiously did is if themeeting was at twelve, I would purposely go at
11:40.
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You know, I'd go fifteen, twenty minutes earlyand just sit by myself in the the waiting room
because you would see people coming from thehallways, you know, in twos and threes, and you
could you could tell a lot about the culture ofa place by the conversation that was taking
place that they didn't think anybody washearing, to kinda your point.
And it was I just thought that was always veryvaluable, you know, qualitative information to
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get about our partners because you know ourpartners.
What's what's a great conversation when you'rea fly in the wall with an organization?
God, I love working here.
Something like that.
This is the greatest job.
Or if they just seem happy, but they just youknow, they they they you know, it's it's a
positive conversation as opposed to, you know,somebody coming out and swearing like, god.
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Hate that, you know, SOB blah blah blah.
I mean, because you'll hear it all.
You'll hear all of
that.
If you're a quant quant trader with AI facialrecognition, you would be kind of measuring the
the ultimate mood of of the office.
Do you subscribe to this idea of you go totheir office, you have them come to your
office, and then you grab a beer?
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Or today, it would be a non alcohol nonalcoholic drink with the manager.
Is that useful to get different environmentalcontext to a manager?
Absolutely.
All of the above.
All of the above.
Because you'll you'll see all sides of thesepeople.
I mean, it's interesting.
I'll go back to what we were talking about alittle bit before, David.
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I think my gut's pretty good, but it's notperfect.
The there have been several times when I'veinterviewed someone and just literally came
home and told my wife, Susie, you know, whoknew I was interviewing, go, oh my god.
I love this guy David who came in the office.
I mean, he just I I wanna be his, you know, Iwanna be his mentor.
I want him to come work for me.
He's gonna be great.
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Get you in, and all of a sudden, I realizeyou're a weirdo.
You're you're not a very hard worker.
You just you pulled the wool over my eyes.
And again, the the always I always approachedmy asset managers that we hired.
These are my partners.
You're, you know, you're not working for me.
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You're working with me.
And so I'm gonna be as transparent as possiblewith you, and therefore, not everybody's going
to be that open as I tend to be.
And so by going and having a beer with them,definitely not alcoholic because that tells you
a lot.
Going to a game with them.
I'm always
sure, not a side effect.
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And, you know, one of the fun things about hereat LSU is it's very easy to get people to come
down for a football game, for a basketballgame, for, you know, anything sports related.
And you go to something like that and spend,four hours with someone, you have a much better
feel for who they are and what they are thanwhen you're in a very scripted and rehearsed,
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in many cases, thirty minute presentation wheneverybody's in a suit.
You just see different sides of people.
And if these people are my partners and theyare my partners, I want them to enjoy the
relationship as much as I do, because, youknow, we're the the works the work will likely
take care of itself because I am that confidentin the governance and and how we are set up in
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our investment policy.
So it it is absolutely a partnership, and themore venues and and variety of of exposures
that I can have with these folks and viceversa, the better.
And then the more they know about what we wantand what our objectives are.
Do you ever use your wife Susie as a secretweapon as a like, you got a football game,
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you're talking to somebody else, you're havingher talk talk to the the manager and his or her
partner?
Absolutely.
She Steve, she's also someone that I will go toa lot with, you know, how when you're when
you're working on a presentation and you'vebeen looking at it for a month solid, and I'll,
you know, go, I gotta get a fresh set of eyesand ears on this thing.
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I'll go present it to her, and Susie is gottons of wonderful qualities.
She's not a finance or investment person.
So if I can if she gets it when when I try toexplain it, I'm like, okay.
Good job.
Good job.
So I absolutely use her sounding board for alot of that stuff.
Obviously, Susie's not in finance, but I lovethis, like, bifurcated, like, a three year old
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child and the best first principles thinkers onthe planet will get the same questions, which
is why.
Why do you do this?
Oh, it's finance.
Why?
Oh, where does the money come from?
Oh, it comes from this.
So This is best practice.
Why is it best practice?
So you just keep on asking why.
Sometimes these heuristics are from, you know,the eighties or the nineties that have just
been passed down, in the industry withoutwithout giving second thought.
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And just an example, this morning, I went andhad her look at about a 10 page deck that's
gonna be going to an investment banker, youknow, through some institutional investor,
projects that we're working on.
In the very first slide, she goes, oh, you'remissing a semicolon here.
I'm like, I never saw that.
And I think I'm pretty good at, you know,proofreading.
So just goes to show you fresh set of, eyes andears is worth a
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lot.
You mentioned going to a football game andmeeting with a manager.
How much room, if any, is there for a managerto open up about his or her life to the LP, and
at which point in the relationship is thatappropriate?
I know you talk to some of my friends as wellwho would say that, boundaries are I tend to be
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very open.
I you know, I'm I'm just of the belief that themore the more I share with you, and you know
how I think, the better job you can do in thispartnership of ours.
So if anything, I am certainly guilty moreguilty at times of of overstepping, you know,
that what is possibly appropriate and not.
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It will blur the lines.
I will speak for myself.
I will certainly get uncomfortable when theconversation gets really personal because I
just don't think that's appropriate, buttalking about, you know, general knowledge
about your family, your kids, you know, thosekind of experiences, trips.
(24:48):
Yeah.
It's it's it's a again, I'd say that's art andart a little bit of art, and it's gonna come
down to your judgment.
And you're the CEO of the InstitutionalInvestor, one of the greatest brands in our
industry.
How did that come about?
And tell me a little bit more about theInstitutional Investor.
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Although I've only been in this role as CEO fortwo years, my relationship with the company
goes back to 1982, which was my last, my senioryear of undergrad here at LSU, and then I did
MBA right afterwards, and I took my firstinvestment class, and you know, given that I'm
(25:31):
old enough, I don't think you remember the dayswhen we didn't have phones and iPads and so
forth and we read magazines, and so I was toldby one of my investment professors to start
reading Institutional Investor magazine, and Igenuinely say that I've probably read it just
about every month since then.
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And then the whole time I was a portfoliomanager and working on the trading floor at
Solomon Brothers in the eighties, it was one ofthe monthly must reads.
My appreciation and and, respect, for themagazine is is pretty pretty long standing.
And then when I became a CIO, it was probablymy second or third investment committee meeting
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with the board, and the chairman of thecommittee said, I want you to go and do, and
again, this is twenty twenty plus years ago.
He said, I want you to go do a research projecton hedge funds, you know, and whether or not we
should invest in them.
Well, at the time, if I had to guess, therewere probably, I don't know, ten, twelve,
15,000 hedge funds out there.
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And it's not like there was a directory thatsaid, here's all the hedge funds, and here's
what they do.
And we didn't have a consultant.
I didn't I didn't have the luxury of having aconsultant like Cambridge.
I I started to drown in one hour meetings withvarious hedge funds.
And I was I was whining to a friend of mine,Mark Silverstein, who just, last year, retired
(27:02):
as CIO of, Sampo Insurance, which was in the inEndurance.
And I was complaining to him about how I wasdrying and he goes, hey, why don't you come to
an II, you know, institutional investor event?
And I go, they do events?
And he goes, yeah, he goes, you'll meet 40 ofthem in two days you'll be able to speed date
them.
So I went to my first II event in March in DC.
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It was for insurance companies.
I was the CIO at insurance company, and it wasthe most effective use of two days I could have
imagined.
I probably went home with 30 business cards ofof hedge funds that I had met.
We ended up not doing an allocation to hedgefunds, by the way, because I couldn't prove I
(27:43):
would I couldn't I didn't get comfortable withI couldn't get confident that the
diversification characteristics of most of thefund to funds type approach was gonna do what
we wanted it to do.
So we ended up not doing it, but I got hookedon the quality of the CIOs that were there, the
(28:08):
quality of the asset managers that were there,the seniority.
I mean, most of the allocators that are at anyof our events are the actual decision makers,
the CIOs like myself, if anything, would sharethat we are focused on what's called the next
gen, next generation to get the people belowthe actual decision makers, so that we can
(28:28):
increase and expand the community that weserve, but it has been and I've got other
examples, like I remember I went to an II eventfor pension plans when I was given the pension
plan to manage at an insurance company, not ourgeneral account, the pension plan, putting
putting the the the framework of what theinvestment choices for you and I as pension
(28:53):
participants for the company, piece of cake.
I do that all day long, but then I startedgetting asked questions like, well, should we
have a default to a target date fund?
You know, should we allow loans?
If so, how many?
What percentage of the underlying balance?
And these were all very administrativequestions that had nothing to do with picking
asset classes, and I was way over my head andhad no confidence in those types of so I called
(29:19):
up my II relationship manager and I said, Kat,where can I go to an event that has a bunch of
corporate pension plan CIOs so that I can askevery stupid question under the book?
And I literally went to that event, spent twodays asking every dumb question imaginable.
It was an incredible use of my time, anincredibly efficient way to get information and
(29:46):
get educated on something that I needed to getup to speed on pretty quickly, given given what
I was asked I was tasked to do.
So it's an incredible opportunity to bringtogether, the best and brightest on the asset
management side, the consulting side, and theallocator side in a very private and safe
space.
It's Chatham House rules, everything that wedo.
(30:08):
You can pick and choose whether it's a singlefamily office event, an RIA event, an insurance
event, an endowment foundation event.
You can pick whether you want to do it inEurope, Middle East, or Asia Pacific.
We are truly a global platform of about a 100individual events managed out of various
(30:33):
offices throughout the world, and regardless ofwhat type of money you're managing, who you're
managing it for, what geographic locationyou're managing it, there's an event you can go
to.
And I have found it invaluable to my careerover the past forty years as a portfolio
(30:53):
manager, a trader, and a chief investmentofficer.
I cannot put a price tag on what it's meant tomy career.
I mean, tell the young kids that go to theseevents, you know, who are sometimes a little
roll in their eyes, like, why do I have to behere?
And I go, if you promise me that you will goaway from this with one or two friends, new
(31:16):
friends in the business, over the course of tenor twenty years, you're gonna look back at this
and go, I've got some serious long friendshipsthat are doing the exact same thing in many
cases that I'm doing, and they will they theywill totally help you be better at what you're
doing.
Thank you for listening.
To join our community and to make sure you donot miss any future episodes, please click the
(31:38):
follow button above to subscribe.
What are the different types of events?
And it's it's gonna change primarily becausethe suitability and the circumstances of what
of what you're managing and what it's for.
So for example, right now, I will say if you ifyou look at the global public equity, public
bond, and alternative market, not quite half,but close to half of all of the assets that are
(32:02):
out there, let's say 45 ish percent, 45% are USdomestic.
So by economies of scale, The US or the NorthAmerican market is quote unquote the largest.
And so you have more allocators, more assetmanagers, more asset AUM, assets under
management here.
And so that provides us the ability to be a bitmore granular in how we approach events in The
(32:30):
US market.
So, for example, we will have events that arejust insurance only, just corporate pension
plan only, just public pension plan only, onlyendowments and a foundation, only single family
offices, multifamily offices, RAAs.
We will have peer to peer meetings that havejust CEOs of asset management firms, just the
(32:53):
IT people of asset management firms, just thelegal people, the HR people.
So every kind of way you can slice and dicedice either the private wealth or the
institutional market, we've got something foryou, as well as just peer to peer where you'll
have 40 people who do nothing but legal workfor asset management companies in a room
(33:14):
talking about all the challenges of being thechief legal counsel, of an asset management
firm.
What an opportunity to rub elbows with the bestand best.
I mean, if you looked at the 100 top assetmanagers ranked by AUM, we've got memberships
and and relationships with ninety ninety plusof them.
Now it's a little different when you look atEurope.
(33:34):
One of the things that's unique that's uniqueabout Europe is that they tend to be more
language or geographic based.
So we'll have a Nordic event, we'll have aFrench event, we'll have a German event.
There are some trends going on in the marketthat we are very, very sensitive to in
continuing to evolve how we service the assetmanagement consultant and allocator community
(33:59):
so that we can remain as relevant as we are,you know, as the only global ecosystem of its
kind, but you've got a trend of what we'reseeing of the globalization of asset
management.
So what I mean by that is ten years ago atmanaging a global portfolio, I had to have
(34:19):
someone like one of the big boys, theBlackRock, PIMCO, you know, JP Morgan, a GSAM
in my stable of managers because they're theones I could go to to say, hey, I've got to go
put a portfolio in place in Japanese yen.
Well, have an office there, so they canfacilitate and execute that for me very well.
(34:42):
Well, we're finding managers in New York andother places throughout the country, throughout
the world, quite honestly, that are20,000,000,000, 25,000,000,000.
No disrespect to 25,000,000,000 of AUM, butthey have clients all over the world, but
they're not large enough necessarily to have anoffice in London, have an office in Tokyo, have
(35:05):
an office in Hong Kong or Singapore.
And so using our platform is a huge benefit tosome of these, quote unquote, smaller and
medium sized managers, because we do have theglobal platform.
So that's one industry trend going on.
Another one is the collusion of what wenormally thought of as the public market,
(35:25):
public bonds and equities and the alternativemarket, you know, hedge funds, private equity,
private credit, private mortgages,infrastructure, massive limit partnerships, a
lot of the illiquid space.
The allocator as well as the asset managers arenow both looking at all of that as basically
one market.
(35:46):
And last but not least is a similar collusionof what was originally thought of as completely
separate on the retail side of private wealthversus the institutional side.
Our private wealth, single family, multifamily, and RIA members and partners are
looking at the allocation of their pools ofmoney exactly like our institutional investors
(36:10):
are.
So all of these investors and asset managersare starting to kind of just blend in together,
and we've got to continue to have ourmemberships and our events cater to that so
that we can remain as relevant as we are.
That's a lot of fun.
(36:30):
It's a big puzzle.
It's just like putting a a portfolio strategytogether to me.
You're managing a puzzle.
You see thousands of these GP, LP interactionsand relationships forming.
For a GP that goes to one of your events ormeets an LP for the first time, what is the
best practice in terms of how you go aboutbuilding that relationship?
(36:52):
One of the things that is part of the contractwith our asset manager and consultant members
and partners is that it is you cannot bebasically in people's face.
The last thing that we want for ourrelationships is to come to one of our events,
(37:17):
and you've basically got to walk the hall ofall these, like if you go to a really big
convention, you see people with a big old assbag and they're going up and down every single
booth and getting popcorn from this person andeverybody's pawing at you.
That is absolutely not what we deliver.
It is absolutely not what we're all about.
(37:38):
We're about a very understated, very whiteglove, very relevant topics of conversation,
community.
So when you come in, it is very much part ofthe the the fabric of how we operate that you
(37:59):
are going to be pretty laid back, and this is avery uber professional environment.
So best practice is to use a be cool.
Just be cool.
You know, the relationship is gonna take off orit's not.
You can't I mean, the reality is you can'tforce something like that.
So you wanna be cool.
You have a great conversation.
(38:21):
When should you follow-up?
Just tell me about best practices.
You've seen some of the best in the world dothis.
What do they do?
One of the things that we do at our events isto try to make what we call experiential
events.
So for example, I was at a single family officeevent in Lausanne, if I said that right, on
(38:45):
Lake Geneva in Switzerland.
It was just an awful place to have to go.
So we did about a three hour, right before theevening dinner, we did in the afternoon about a
two or three hour event where we, 120 people atthe event split everybody up in groups of like
(39:05):
six or seven.
And we went to a beach on Lake Geneva, and youhad to with your group, you had to build a
raft.
And then we had a raft race.
I can't tell you when you went when I went tothe the dinner that night and we gave out
awards on who won, who got the booby prize forthe crappiest, you know, because a couple of
(39:26):
the rest fell apart during the race.
People were laughing and giggling like thirdgrade school kids for two, three hours at the
dinner about how much fun it was.
And you can't put a price tag on building onhaving that type of an experience with an
allocator if you're if you're an asset manager.
(39:48):
Literally, you cannot put it I mean, you put aprice tag on it because you pay to come to the
event.
So there is a price tag on it, but that's Andit then makes a follow-up email or a phone call
or request for a meeting so much easier.
It's a warm call as opposed to a cold call.
And again, that is invaluable.
And I will also offer that what we're seeingsince COVID, you know, if you were a
(40:13):
salesperson at an asset management firm, you'rebased out of Chicago and you fly to New York
for a day, you could easily, before COVID, havefive meetings in a day.
You could do a breakfast meeting, fly thereearly, do a breakfast meeting, a 10:30 meeting,
a lunch meeting, a 02:30 meeting, a 03:30meeting, catch a plane.
You can't do that now because half those peopleare working from home and they're not going to
(40:34):
invite you to their house for a meeting.
So coming to one of our events, I'm finding,certainly since COVID, when I still was a CIO,
a little less luxury and a little morenecessity.
And so we want to continue to build on that,but the best practices are to come to one of
the events, participate in all the things thatwe offer, which includes table sessions where
(40:58):
you'll be given, someone will get up and do ageopolitical presentation and then there'll be
a question, two or three questions that aresent out to the audience and you'll have 150
people in the audience and then everyone atyour table has to do a twenty minute discussion
on that question, and then we go around andpoll things.
You're at a table with six or seven otherpeople that are which half of them, or at least
(41:22):
half of them, if not more than half of them,will be CIOs if you're the asset manager.
What a really valuable opportunity to makeconnections with people.
And some people will be afraid of them and say,I have no interest in an emerging market bond
allocation.
None.
Well, okay.
As a salesperson, you just got some valuableinformation.
(41:43):
I'm not gonna waste any time on that guybecause or girl because they have no interest
in in in buying what I what I'm trying to sell.
So it's it's it's valuable information one wayor the other.
How many touch points are typically between GPsand LPs before an LP allocates to GP and over
what time period?
(42:04):
Oh, David, that's there's such a wide range ofpossibilities on that.
I can give you examples where GP has never metan LP and got an allocation just because of the
strength of the product.
But then there have been there have been therehave been managers that I've hired where I
called them to introduce myself because I got Igot I I had information on what their product
(42:29):
was.
A good example.
At at my prior at my last CIO job, when I gotto the company, and I was eleven, twelve years
there, the portfolio was 100% public equitiesand public bonds.
When I left, it was 35% alternatives, illiquid,because we had a ton of excess liquidity that
(42:52):
we didn't need.
And so we thought that it was worthwhile goinginto alternatives that were that were liquidity
constrained, where we could get increasedyield, increased forecasted return, a lower
realized standard deviation of returns.
So that you can imagine how well that plays inthe asset management, you know, stochastic and
(43:14):
deterministic modeling that you can do.
I knew from some of my endowment and corporatepension plan meeting conferences that I had
gone to, some of the names of some of theplayers that were very well respected in the
illiquid space.
(43:34):
So when we were ready to start having thoseconversations, there were two companies that I
had called that I didn't really know well.
I mean, knew the company names, but I didn'tknow them well because they were in the
illiquid space.
I was always a public bond guy and a publicequity guy.
I literally called up the salesperson and said,Hi, my name's Rep Reeves, I'd like to talk to
(43:55):
you about your private commercial mortgageproduct.
So those those they don't happen often, butthey do happen.
And then there are other times where I knowpeople who have spent ten years managing, you
know, forming a relationship before they got inat bat.
(44:15):
So there's every every potential range on that.
What is the best practice for somebody thatjoins institutional investor?
How could they benefit the most from theplatform on the GP side?
Be as as upfront and knowledgeable andcommunicative about what it is you want to get
out of it.
Obviously, the simple answer to that is, I wantto get more AUM.
(44:37):
But if the strength of your company is publicequity, you probably wouldn't want to be
signing up for something that doesn't have alot of public equity allocations in CIOs.
You ask a lot of questions from us because weknow we know our platform better than anybody,
(44:59):
and we can put custom, packages together to youfor you to fill what your need is.
But, again, like with the GPLP relationship, ifa lot of people are walking around, you know,
holding all their cards close to their vest andnot being very open about what they want, what
they need, it makes it much more challengingfor the other side to try to guess what it is
(45:22):
that they're doing.
So just be open with what it is that you want,what your goals are, just because of the the
global nature and the the economies of scale ofwhat of what we're covering and how we're
covering it, you know, that we can we can comeup with something to to fit.
I've really enjoyed this conversation.
How could people learn more about InstitutionalInvestor and find out more about how they could
(45:42):
potentially benefit?
Institutionalinvestor.com.
And how should people follow you?
Follow me?
Yes.
Real brief.
Listen to the David Weisberg podcast.
I'm on LinkedIn.
Audience note, unfortunately, I'm not gettingpaid for this podcast, but I will take payment
(46:07):
in LSU in Death Valley football tickets.
So I will take you up on that, and I look lookforward to, look forward to meeting Susie and
having you meet Jessica as well, and could seeif you still like me at that point.
Talk to later.
Thanks, David.
Thanks for listening to my conversation.
If you enjoyed this episode, please share witha friend.
This helps us grow.
(46:27):
Also provides the very best feedback when wereview the episode's analytics.
Thank you for
your support.
You overlook the LSU university systems, andyou've decided to go with an OCIO with
(00:06):
Cambridge.
Why did you make that decision?
The one of the one of the reasons to to for aan endowment to use the OCIO model, and not
just an endowment, but any kind of pool ofmoney, part of it is size.
No disrespect to about a billion dollars, but,when you're running a pool of money that's
(00:26):
about a billion or 2,000,000,000, you generallydon't have the type of funds to attract the
type of talent that you would want in order torun the portfolio, and exacerbating the
relative small size of our endowment at themoment is the fact that we're in Baton Rouge,
Louisiana.
Again, no disrespect to the financeprofessionals in Baton Rouge, Louisiana, but
(00:50):
it's very different from the type of pool offolks that I can that I can work with or
attract when I'm in New York City, when I'm inBoston, when I'm in Chicago, I'm in London,
which are the places that I've spent most ofthe past forty years.
So it really allows us as a relatively smallpool of money to get the type of top notch
(01:11):
research and resources, that a Cambridge andAssociates can bring to the table.
So, it basically is a stronger team that Icould afford to put in place internally, and I
basically rent to them and all the hundreds andthousands of people, that work globally for for
that institution.
(01:32):
So you're able to have a world class team evenbeing in Baton Rouge.
Talk to me on the allocation sizes.
Having a billion dollars an advantage in beingable to access more interesting funds, or is it
also disadvantage?
No.
I would say, another aspect or advantage of theOCIO model.
Again, for someone, generally speaking, ifyou're looking at, say, I would say less than
(01:56):
$2,000,000,000, the OCIO model, regardless ofthe type of monies pool of monies that you're
managing, can really there's a very strong casefor it.
And, again, especially if you're not in afinancial hub like a New York or a Boston or
London.
So what we've basically done is the ability toaccess various types of investments are are is
(02:23):
a huge advantage by using an OCIO model withCambridge because, we are some of the allocator
some of the allocation sizes that we might endup trying to invest in, we'd just be too small.
Our bite sizes would be too small.
So what Cambridge allows us to do is they'llcall and combine several portfolios like
(02:44):
ourselves and then go out and do a bigger chunkas well as possibly get discount pricing
because of volume.
So, it is a massive, significant advantage fromour perspective that we're gonna have access to
various types of investments, especially in thealternative and private sector that we likely
wouldn't have access to on our own.
(03:06):
Your portfolio allocation is 40% stock, 30%bonds, 30% alternatives.
It suspiciously feels like very round numbers.
How did you come to this?
And to to walk me through the rationale.
Those are those are fairly general, allocation,guy guidelines, and it basically stems from
(03:27):
what is known as the endowment model, whichwas, the idea that came out of David Swinson,
who was the CIO at Yale's endowment.
I think he probably started in the mideighties.
And as a fun fact, Dave Swinson is a member ofthe Institutional Investor Investment Hall of
Fame.
The 40% stock, 30% bond, 30% alternative is,the general idea for the endowment model that
(03:53):
was, I would offer is a bit of an uptick or anevolution from what was called, originally the
pension model, which was 60% stocks, 40% bonds.
Given given the the excess liquidity that manyendowments enjoy relative to other pools of
money, such as insurance money, pension planmoney, whether you're corporate or public,
(04:15):
there's certainly the opportunity if you thinkthe relative value is there for an endowment to
give up some liquidity in order to get higherlevels of income and higher levels of
forecasted return.
And that's basically what this model does.
One of the things that we've done at LSUEndowment is to put very wide guardrails around
(04:39):
those forty, thirty, 30 type general neutralpoints.
And one of the reasons for that is as a formerportfolio manager, I always wanted more
flexibility than less flexibility because thatallowed me as the person making the buys and
sells in the portfolio, it gave me moreflexibility to use all the really great
(05:01):
resources of the various companies that I was aportfolio manager at.
When you tend to put more restrictions on aportfolio manager, it kind of restrains the
ability to bring the best attributes of thecompany to the market.
So we have put those as very general rules and,to your point, very, very suspiciously round
(05:22):
numbers.
But we've got pretty wide guardrails thatCambridge can play in.
These guardrails serve as a useful frameworkfor you and the investment committee and to
really be able to articulate your strategy bothinternally and externally while also not being
these arbitrary constraints that you put onespecially short term fluctuations in the
(05:43):
market.
Sometimes it makes more sense to own morestocks, less bonds, and vice versa.
And one of the things that I learned early whenI made the switch from a portfolio manager
where I was responsible for every granulardetail of every portfolio that was that was
mine or that I was entrusted with, when Iswitched to become twenty years ago to a chief
(06:04):
investment officer, you had to kinda step backbecause your role is a little different.
And one of the things that I started to do,which we're certainly enjoying and giving
Cambridge the flexibility to do at in in thecase of LSU's endowment, is to allow them,
since they're on the front line, let them makethe determination to your point of whether she
(06:24):
would we should tweak the allocation to theprivate equity sector versus the hedge fund
sector versus the bond sector versus the,equity sector.
So like right now, one of the things thatcertainly is a bit of a trend is we've got a
little bit of a migration going on out of US,public equities to international equities
(06:45):
because of the outperformance for the pastseveral years of US versus non US.
You're similarly seeing a lot of conversations,which as a an ex bond portfolio manager and
bond trader really warms my heart.
You're seeing a lot of conversations andendowments on the fixed income, public fixed
income market.
You know, prior to 2022 and since the globalfinancial crisis, interest rates were
(07:09):
effectively near or at zero.
You even had some countries like Japan and andSwitzerland that had negative, government
rates.
So now with a 5% increase in Fed funds duringthe calendar year of 02/2022, fixed income also
look all of a sudden looks a little littleinteresting.
And specifically to a lot of your collegeendowments, you can get returns, on the fixed
(07:35):
income, high grade fixed income sector that isgreater than this than the general liquidity
spend of a lot of these endowments of, like,four to 5%.
So, you know, it we want to make sure that wegive our portfolio investment team, enough
flexibility to bring their best ideas to to ourportfolio.
(07:57):
But at the same time, we are a 100% responsiblefor the asset allocation of the portfolio, for
the the management of the risk, the managementof the performance.
That is 100% our responsibility as chairman ofthe investment committee.
It certainly doesn't make for the best cocktaildiscussion, your portfolio allocation.
(08:17):
People love to say, we're in Sequoia.
We're in Citadel.
That's much, much, much more sexy.
That being said, there's been several studies,the most seminal studies, 1986 by Brinson,
Hood, and Bebauer titled determinants ofportfolio performance that analyzed 91 US
pension funds and found that 90%, nine zero, oftheir performance could be attributed to their
(08:42):
portfolio construction, not their managerselection.
So 90% is a pretty large number, And yet, youknow, it's it's a very unsexy thing to talk
about or, you know, it's not the number onething that would come up in casual
conversation, yet it seems to be where thereturns come from.
(09:03):
It that doesn't necessarily surprise me when itwhen I first saw some of some of that data from
the standpoint of the following.
When you put together a portfolio investmentstrategy, the number one, the absolute number
one priority should be what are thecircumstances of the pool of money that you're
managing?
What is its purpose?
(09:25):
How much liquidity do you need?
What are you supporting?
And if that portfolio construction is marriedto the purpose of the portfolio, and not just
the purpose of the portfolio, but theobjectives that should be from a governance
standpoint detailed by the governing body,whether it's the board of directors or the
(09:50):
investment committee or or the executivecommittee of the company.
If that's all done correctly, what I will sharewith you is one of the things I learned when I
switched to the CIO role after 20 of being abond portfolio manager, the number of times
that I went into a finals presentation and itwas me and our company and two other companies
(10:11):
likely and we give the pitch and I would leavethat presentation, and there was palpable,
chemistry between us and, the people that,know, the company that was interviewing us.
Every one of their objectives was exactly whatwe felt our competitive advantage was, and I
walk out and I think, oh, we so have this inthe bag.
And then I get the phone call and they go, wepicked we picked somebody else and here's why.
(10:36):
And it always seemed like those those thosereasons that we weren't picked were just so
miniscule.
But then when I became a CIO and I was on theother end the other end of that, if we decided
that we wanted to put an allocation of 5% inemerging market debt, you know, in our bond
allocation.
(10:58):
It was so hard.
There were so many good emerging market bondmanagers out there.
By the time we got to the final three, the goodnews is I couldn't make a mistake.
There was no way to make a mistake.
There's just so many, I think, very talented,managers out there that it doesn't surprise me
(11:19):
that it's less about the manager and more aboutthe actual allocation.
Double click on that.
So you had this roadshow, and you basically hadthese three finalists.
First of all, how did you decide who came whowent into these last three final managers?
Well, you would go through the RFP process, therequest for proposal.
And so, typically, once you make a decision asa CIO on what your allocation is gonna be to a
(11:45):
particular general part, so in our case, we'relooking at with the forty, forty, 30, you're
looking at 40% general allocation goal forpublic equities, 30% in public bonds, and 30%
in alternatives.
I'll offer that we're a little higher on thealternatives, a little higher on public
equities, and a little lower on bonds in ouractual allocation relative to that.
(12:09):
But, again, if I decide that let's go back tothe emerging market debt, manager or
allocation.
Once we have decided that's something we wannado, we will then go out and do interviews,
basically, with, you know, all the people thatclaim, to have an emerging market bond,
product.
(12:30):
And then we'll we'll send out a questionnairethat says, you know, what's your name?
You'd write David Weisberg, you know, who's thecompany you work for, how long have you been in
business, what does your team look like, what'syour strategy, show me performance, risk
metrics, all that kind of stuff, and then we'llbasically look all through all these answers
from these interviews, and it generally ispretty easy to cull it down to probably six or
(12:52):
seven.
It gets more challenging when you want to getto, like, the final three, but or two or three,
but to have six people come into your office todo hour presentations, it's a bit much.
So it it tends to be pretty easy to get it downto, like, six or seven, but then it gets a
little challenging to get to to get to asmaller number for the finals.
(13:14):
But it's a it's it's analyzing and reading theresponses to your RFP questions.
It's easy to get to the six or seven.
Is that performance driven?
Is that qualitative based on the answers?
Why is it so easy to get those to six or seven?
Because they're usually in some cases, forexample, when I was CIO at an insurance
(13:35):
company, the insurance company that I was CIOfor last, was offshore, domiciled in Bermuda.
So if the if the company didn't have anoffshore vehicle that I could that I could
invest in, you know, from from a from a from aregulatory standpoint, I could eliminate them.
(13:57):
So there generally are some things that youjust go, no.
No.
That doesn't work for us.
You're sitting at your IC, and you have six orseven qualified managers.
How do you call that down to three?
That's where it gets a little challenging, andthat's where judgment and that's where I mean,
there are some questions that you can ask whereI'd say, you know, this is just as much art as
(14:19):
it is science.
You can look at the information all day long.
You can also, in this case, when you're addinganother partner, investment partner to your
stable of managers, what can also come intoplay, which has absolutely nothing to do with
the quality of the product that manager x y zis offering.
(14:43):
If, for example, I have a lot of big, what Iwould call big global asset managers in my
stable, a GSAM, a JPMorgan, a BlackRock, aPIMCO, adding another big boy to the, quote
unquote, to the stable of managers, might wantto get someone who's maybe a little more, niche
(15:04):
y and and, just smaller, to help round out, thestable of managers.
And that and that, unfortunately, hasabsolutely nothing to do with the answers to
the to RFP questions.
So you tend to start to look at tangentialthings relative to instead of just the actual
(15:26):
numbers, and it's not just about theperformance numbers.
A lot of it is the reputation and what you knowabout the people that are running it, how
they're set up, if it's suitable to you, or isthere going to be one portfolio manager who's
also going to be the client service manager ortwo separate people?
You know, you can look at a lot of differentfactors that are not necessarily specific to
(15:52):
the actual product that they're managing.
But it it the the direct the short answer toyour question is it's kinda difficult.
You gotta you gotta bring judgment into theinto
the arena.
Specs of your own portfolio construction,what's in your portfolio, and also the
qualitative factors.
What do other LPs, what do other managers sayabout this specific manager?
(16:12):
So there's both kind of internal and externalconsiderations.
And that goes a long way because you've you'veyou've you've you've been in the industry long
enough to where you can do an interview withsomebody and go, god.
I really, really liked it.
It just seems like a perfect fit.
And then you start to live with the person.
You go, oh, I didn't see that.
(16:33):
Didn't see it.
You know?
So I can talk to other managers, and that's oneof the great things about institutional
investor.
I could go to an event and rub elbows for a dayor three two or three days with 40 other
insurance or endowment CIOs and go, hey, David,you know, which how how are you working with
this?
You know, what are you doing with that?
What do you think about x y z manager?
(16:53):
You know, I saw you know, we're thinking abouthiring them.
Those are those are very, very valuable piecesof information to see to experience other
people's experience or to be to be to be tohave access to other people's experience with
those same people.
My favorite definition of reputation is whatpeople say about you behind your back.
(17:17):
Yeah.
Very similar to you can tell more aboutsomeone's character about what they do when
people aren't looking.
One the things I always did, and we made itpart of the investment policy at my last CIO
job, is part of the investment policy was ayearly review of every asset manager teammate
(17:38):
in our stable, and I purposely made it that wehad to go to, their office for that meeting for
several several reasons.
One, it it was the easiest way for us, youknow, when the CIO comes in and other people on
on the team I would bring with me, they wouldroll out everybody from the CEO of the company
(18:00):
generally to the person that's, you know,getting the coffee, so to speak, And it was
always very interesting when you had a dozenpeople in the room, how the senior people
worked with the junior people.
It would tell you a lot about the culture ofthe place.
The other thing I religiously did is if themeeting was at twelve, I would purposely go at
11:40.
(18:22):
You know, I'd go fifteen, twenty minutes earlyand just sit by myself in the the waiting room
because you would see people coming from thehallways, you know, in twos and threes, and you
could you could tell a lot about the culture ofa place by the conversation that was taking
place that they didn't think anybody washearing, to kinda your point.
And it was I just thought that was always veryvaluable, you know, qualitative information to
(18:48):
get about our partners because you know ourpartners.
What's what's a great conversation when you'rea fly in the wall with an organization?
God, I love working here.
Something like that.
This is the greatest job.
Or if they just seem happy, but they just youknow, they they they you know, it's it's a
positive conversation as opposed to, you know,somebody coming out and swearing like, god.
(19:13):
Hate that, you know, SOB blah blah blah.
I mean, because you'll hear it all.
You'll hear all of
that.
If you're a quant quant trader with AI facialrecognition, you would be kind of measuring the
the ultimate mood of of the office.
Do you subscribe to this idea of you go totheir office, you have them come to your
office, and then you grab a beer?
(19:34):
Or today, it would be a non alcohol nonalcoholic drink with the manager.
Is that useful to get different environmentalcontext to a manager?
Absolutely.
All of the above.
All of the above.
Because you'll you'll see all sides of thesepeople.
I mean, it's interesting.
I'll go back to what we were talking about alittle bit before, David.
(19:55):
I think my gut's pretty good, but it's notperfect.
The there have been several times when I'veinterviewed someone and just literally came
home and told my wife, Susie, you know, whoknew I was interviewing, go, oh my god.
I love this guy David who came in the office.
I mean, he just I I wanna be his, you know, Iwanna be his mentor.
I want him to come work for me.
He's gonna be great.
(20:15):
Get you in, and all of a sudden, I realizeyou're a weirdo.
You're you're not a very hard worker.
You just you pulled the wool over my eyes.
And again, the the always I always approachedmy asset managers that we hired.
These are my partners.
You're, you know, you're not working for me.
(20:35):
You're working with me.
And so I'm gonna be as transparent as possiblewith you, and therefore, not everybody's going
to be that open as I tend to be.
And so by going and having a beer with them,definitely not alcoholic because that tells you
a lot.
Going to a game with them.
I'm always
sure, not a side effect.
(20:56):
And, you know, one of the fun things about hereat LSU is it's very easy to get people to come
down for a football game, for a basketballgame, for, you know, anything sports related.
And you go to something like that and spend,four hours with someone, you have a much better
feel for who they are and what they are thanwhen you're in a very scripted and rehearsed,
(21:19):
in many cases, thirty minute presentation wheneverybody's in a suit.
You just see different sides of people.
And if these people are my partners and theyare my partners, I want them to enjoy the
relationship as much as I do, because, youknow, we're the the works the work will likely
take care of itself because I am that confidentin the governance and and how we are set up in
(21:42):
our investment policy.
So it it is absolutely a partnership, and themore venues and and variety of of exposures
that I can have with these folks and viceversa, the better.
And then the more they know about what we wantand what our objectives are.
Do you ever use your wife Susie as a secretweapon as a like, you got a football game,
(22:04):
you're talking to somebody else, you're havingher talk talk to the the manager and his or her
partner?
Absolutely.
She Steve, she's also someone that I will go toa lot with, you know, how when you're when
you're working on a presentation and you'vebeen looking at it for a month solid, and I'll,
you know, go, I gotta get a fresh set of eyesand ears on this thing.
(22:25):
I'll go present it to her, and Susie is gottons of wonderful qualities.
She's not a finance or investment person.
So if I can if she gets it when when I try toexplain it, I'm like, okay.
Good job.
Good job.
So I absolutely use her sounding board for alot of that stuff.
Obviously, Susie's not in finance, but I lovethis, like, bifurcated, like, a three year old
(22:50):
child and the best first principles thinkers onthe planet will get the same questions, which
is why.
Why do you do this?
Oh, it's finance.
Why?
Oh, where does the money come from?
Oh, it comes from this.
So This is best practice.
Why is it best practice?
So you just keep on asking why.
Sometimes these heuristics are from, you know,the eighties or the nineties that have just
been passed down, in the industry withoutwithout giving second thought.
(23:14):
And just an example, this morning, I went andhad her look at about a 10 page deck that's
gonna be going to an investment banker, youknow, through some institutional investor,
projects that we're working on.
In the very first slide, she goes, oh, you'remissing a semicolon here.
I'm like, I never saw that.
And I think I'm pretty good at, you know,proofreading.
So just goes to show you fresh set of, eyes andears is worth a
(23:38):
lot.
You mentioned going to a football game andmeeting with a manager.
How much room, if any, is there for a managerto open up about his or her life to the LP, and
at which point in the relationship is thatappropriate?
I know you talk to some of my friends as wellwho would say that, boundaries are I tend to be
(23:59):
very open.
I you know, I'm I'm just of the belief that themore the more I share with you, and you know
how I think, the better job you can do in thispartnership of ours.
So if anything, I am certainly guilty moreguilty at times of of overstepping, you know,
that what is possibly appropriate and not.
(24:24):
It will blur the lines.
I will speak for myself.
I will certainly get uncomfortable when theconversation gets really personal because I
just don't think that's appropriate, buttalking about, you know, general knowledge
about your family, your kids, you know, thosekind of experiences, trips.
(24:48):
Yeah.
It's it's it's a again, I'd say that's art andart a little bit of art, and it's gonna come
down to your judgment.
And you're the CEO of the InstitutionalInvestor, one of the greatest brands in our
industry.
How did that come about?
And tell me a little bit more about theInstitutional Investor.
(25:10):
Although I've only been in this role as CEO fortwo years, my relationship with the company
goes back to 1982, which was my last, my senioryear of undergrad here at LSU, and then I did
MBA right afterwards, and I took my firstinvestment class, and you know, given that I'm
(25:31):
old enough, I don't think you remember the dayswhen we didn't have phones and iPads and so
forth and we read magazines, and so I was toldby one of my investment professors to start
reading Institutional Investor magazine, and Igenuinely say that I've probably read it just
about every month since then.
(25:55):
And then the whole time I was a portfoliomanager and working on the trading floor at
Solomon Brothers in the eighties, it was one ofthe monthly must reads.
My appreciation and and, respect, for themagazine is is pretty pretty long standing.
And then when I became a CIO, it was probablymy second or third investment committee meeting
(26:19):
with the board, and the chairman of thecommittee said, I want you to go and do, and
again, this is twenty twenty plus years ago.
He said, I want you to go do a research projecton hedge funds, you know, and whether or not we
should invest in them.
Well, at the time, if I had to guess, therewere probably, I don't know, ten, twelve,
15,000 hedge funds out there.
(26:42):
And it's not like there was a directory thatsaid, here's all the hedge funds, and here's
what they do.
And we didn't have a consultant.
I didn't I didn't have the luxury of having aconsultant like Cambridge.
I I started to drown in one hour meetings withvarious hedge funds.
And I was I was whining to a friend of mine,Mark Silverstein, who just, last year, retired
(27:02):
as CIO of, Sampo Insurance, which was in the inEndurance.
And I was complaining to him about how I wasdrying and he goes, hey, why don't you come to
an II, you know, institutional investor event?
And I go, they do events?
And he goes, yeah, he goes, you'll meet 40 ofthem in two days you'll be able to speed date
them.
So I went to my first II event in March in DC.
(27:23):
It was for insurance companies.
I was the CIO at insurance company, and it wasthe most effective use of two days I could have
imagined.
I probably went home with 30 business cards ofof hedge funds that I had met.
We ended up not doing an allocation to hedgefunds, by the way, because I couldn't prove I
(27:43):
would I couldn't I didn't get comfortable withI couldn't get confident that the
diversification characteristics of most of thefund to funds type approach was gonna do what
we wanted it to do.
So we ended up not doing it, but I got hookedon the quality of the CIOs that were there, the
(28:08):
quality of the asset managers that were there,the seniority.
I mean, most of the allocators that are at anyof our events are the actual decision makers,
the CIOs like myself, if anything, would sharethat we are focused on what's called the next
gen, next generation to get the people belowthe actual decision makers, so that we can
(28:28):
increase and expand the community that weserve, but it has been and I've got other
examples, like I remember I went to an II eventfor pension plans when I was given the pension
plan to manage at an insurance company, not ourgeneral account, the pension plan, putting
putting the the the framework of what theinvestment choices for you and I as pension
(28:53):
participants for the company, piece of cake.
I do that all day long, but then I startedgetting asked questions like, well, should we
have a default to a target date fund?
You know, should we allow loans?
If so, how many?
What percentage of the underlying balance?
And these were all very administrativequestions that had nothing to do with picking
asset classes, and I was way over my head andhad no confidence in those types of so I called
(29:19):
up my II relationship manager and I said, Kat,where can I go to an event that has a bunch of
corporate pension plan CIOs so that I can askevery stupid question under the book?
And I literally went to that event, spent twodays asking every dumb question imaginable.
It was an incredible use of my time, anincredibly efficient way to get information and
(29:46):
get educated on something that I needed to getup to speed on pretty quickly, given given what
I was asked I was tasked to do.
So it's an incredible opportunity to bringtogether, the best and brightest on the asset
management side, the consulting side, and theallocator side in a very private and safe
space.
It's Chatham House rules, everything that wedo.
(30:08):
You can pick and choose whether it's a singlefamily office event, an RIA event, an insurance
event, an endowment foundation event.
You can pick whether you want to do it inEurope, Middle East, or Asia Pacific.
We are truly a global platform of about a 100individual events managed out of various
(30:33):
offices throughout the world, and regardless ofwhat type of money you're managing, who you're
managing it for, what geographic locationyou're managing it, there's an event you can go
to.
And I have found it invaluable to my careerover the past forty years as a portfolio
(30:53):
manager, a trader, and a chief investmentofficer.
I cannot put a price tag on what it's meant tomy career.
I mean, tell the young kids that go to theseevents, you know, who are sometimes a little
roll in their eyes, like, why do I have to behere?
And I go, if you promise me that you will goaway from this with one or two friends, new
(31:16):
friends in the business, over the course of tenor twenty years, you're gonna look back at this
and go, I've got some serious long friendshipsthat are doing the exact same thing in many
cases that I'm doing, and they will they theywill totally help you be better at what you're
doing.
Thank you for listening.
To join our community and to make sure you donot miss any future episodes, please click the
(31:38):
follow button above to subscribe.
What are the different types of events?
And it's it's gonna change primarily becausethe suitability and the circumstances of what
of what you're managing and what it's for.
So for example, right now, I will say if you ifyou look at the global public equity, public
bond, and alternative market, not quite half,but close to half of all of the assets that are
(32:02):
out there, let's say 45 ish percent, 45% are USdomestic.
So by economies of scale, The US or the NorthAmerican market is quote unquote the largest.
And so you have more allocators, more assetmanagers, more asset AUM, assets under
management here.
And so that provides us the ability to be a bitmore granular in how we approach events in The
(32:30):
US market.
So, for example, we will have events that arejust insurance only, just corporate pension
plan only, just public pension plan only, onlyendowments and a foundation, only single family
offices, multifamily offices, RAAs.
We will have peer to peer meetings that havejust CEOs of asset management firms, just the
(32:53):
IT people of asset management firms, just thelegal people, the HR people.
So every kind of way you can slice and dicedice either the private wealth or the
institutional market, we've got something foryou, as well as just peer to peer where you'll
have 40 people who do nothing but legal workfor asset management companies in a room
(33:14):
talking about all the challenges of being thechief legal counsel, of an asset management
firm.
What an opportunity to rub elbows with the bestand best.
I mean, if you looked at the 100 top assetmanagers ranked by AUM, we've got memberships
and and relationships with ninety ninety plusof them.
Now it's a little different when you look atEurope.
(33:34):
One of the things that's unique that's uniqueabout Europe is that they tend to be more
language or geographic based.
So we'll have a Nordic event, we'll have aFrench event, we'll have a German event.
There are some trends going on in the marketthat we are very, very sensitive to in
continuing to evolve how we service the assetmanagement consultant and allocator community
(33:59):
so that we can remain as relevant as we are,you know, as the only global ecosystem of its
kind, but you've got a trend of what we'reseeing of the globalization of asset
management.
So what I mean by that is ten years ago atmanaging a global portfolio, I had to have
(34:19):
someone like one of the big boys, theBlackRock, PIMCO, you know, JP Morgan, a GSAM
in my stable of managers because they're theones I could go to to say, hey, I've got to go
put a portfolio in place in Japanese yen.
Well, have an office there, so they canfacilitate and execute that for me very well.
(34:42):
Well, we're finding managers in New York andother places throughout the country, throughout
the world, quite honestly, that are20,000,000,000, 25,000,000,000.
No disrespect to 25,000,000,000 of AUM, butthey have clients all over the world, but
they're not large enough necessarily to have anoffice in London, have an office in Tokyo, have
(35:05):
an office in Hong Kong or Singapore.
And so using our platform is a huge benefit tosome of these, quote unquote, smaller and
medium sized managers, because we do have theglobal platform.
So that's one industry trend going on.
Another one is the collusion of what wenormally thought of as the public market,
(35:25):
public bonds and equities and the alternativemarket, you know, hedge funds, private equity,
private credit, private mortgages,infrastructure, massive limit partnerships, a
lot of the illiquid space.
The allocator as well as the asset managers arenow both looking at all of that as basically
one market.
(35:46):
And last but not least is a similar collusionof what was originally thought of as completely
separate on the retail side of private wealthversus the institutional side.
Our private wealth, single family, multifamily, and RIA members and partners are
looking at the allocation of their pools ofmoney exactly like our institutional investors
(36:10):
are.
So all of these investors and asset managersare starting to kind of just blend in together,
and we've got to continue to have ourmemberships and our events cater to that so
that we can remain as relevant as we are.
That's a lot of fun.
(36:30):
It's a big puzzle.
It's just like putting a a portfolio strategytogether to me.
You're managing a puzzle.
You see thousands of these GP, LP interactionsand relationships forming.
For a GP that goes to one of your events ormeets an LP for the first time, what is the
best practice in terms of how you go aboutbuilding that relationship?
(36:52):
One of the things that is part of the contractwith our asset manager and consultant members
and partners is that it is you cannot bebasically in people's face.
The last thing that we want for ourrelationships is to come to one of our events,
(37:17):
and you've basically got to walk the hall ofall these, like if you go to a really big
convention, you see people with a big old assbag and they're going up and down every single
booth and getting popcorn from this person andeverybody's pawing at you.
That is absolutely not what we deliver.
It is absolutely not what we're all about.
(37:38):
We're about a very understated, very whiteglove, very relevant topics of conversation,
community.
So when you come in, it is very much part ofthe the the fabric of how we operate that you
(37:59):
are going to be pretty laid back, and this is avery uber professional environment.
So best practice is to use a be cool.
Just be cool.
You know, the relationship is gonna take off orit's not.
You can't I mean, the reality is you can'tforce something like that.
So you wanna be cool.
You have a great conversation.
(38:21):
When should you follow-up?
Just tell me about best practices.
You've seen some of the best in the world dothis.
What do they do?
One of the things that we do at our events isto try to make what we call experiential
events.
So for example, I was at a single family officeevent in Lausanne, if I said that right, on
(38:45):
Lake Geneva in Switzerland.
It was just an awful place to have to go.
So we did about a three hour, right before theevening dinner, we did in the afternoon about a
two or three hour event where we, 120 people atthe event split everybody up in groups of like
(39:05):
six or seven.
And we went to a beach on Lake Geneva, and youhad to with your group, you had to build a
raft.
And then we had a raft race.
I can't tell you when you went when I went tothe the dinner that night and we gave out
awards on who won, who got the booby prize forthe crappiest, you know, because a couple of
(39:26):
the rest fell apart during the race.
People were laughing and giggling like thirdgrade school kids for two, three hours at the
dinner about how much fun it was.
And you can't put a price tag on building onhaving that type of an experience with an
allocator if you're if you're an asset manager.
(39:48):
Literally, you cannot put it I mean, you put aprice tag on it because you pay to come to the
event.
So there is a price tag on it, but that's Andit then makes a follow-up email or a phone call
or request for a meeting so much easier.
It's a warm call as opposed to a cold call.
And again, that is invaluable.
And I will also offer that what we're seeingsince COVID, you know, if you were a
(40:13):
salesperson at an asset management firm, you'rebased out of Chicago and you fly to New York
for a day, you could easily, before COVID, havefive meetings in a day.
You could do a breakfast meeting, fly thereearly, do a breakfast meeting, a 10:30 meeting,
a lunch meeting, a 02:30 meeting, a 03:30meeting, catch a plane.
You can't do that now because half those peopleare working from home and they're not going to
(40:34):
invite you to their house for a meeting.
So coming to one of our events, I'm finding,certainly since COVID, when I still was a CIO,
a little less luxury and a little morenecessity.
And so we want to continue to build on that,but the best practices are to come to one of
the events, participate in all the things thatwe offer, which includes table sessions where
(40:58):
you'll be given, someone will get up and do ageopolitical presentation and then there'll be
a question, two or three questions that aresent out to the audience and you'll have 150
people in the audience and then everyone atyour table has to do a twenty minute discussion
on that question, and then we go around andpoll things.
You're at a table with six or seven otherpeople that are which half of them, or at least
(41:22):
half of them, if not more than half of them,will be CIOs if you're the asset manager.
What a really valuable opportunity to makeconnections with people.
And some people will be afraid of them and say,I have no interest in an emerging market bond
allocation.
None.
Well, okay.
As a salesperson, you just got some valuableinformation.
(41:43):
I'm not gonna waste any time on that guybecause or girl because they have no interest
in in in buying what I what I'm trying to sell.
So it's it's it's valuable information one wayor the other.
How many touch points are typically between GPsand LPs before an LP allocates to GP and over
what time period?
(42:04):
Oh, David, that's there's such a wide range ofpossibilities on that.
I can give you examples where GP has never metan LP and got an allocation just because of the
strength of the product.
But then there have been there have been therehave been managers that I've hired where I
called them to introduce myself because I got Igot I I had information on what their product
(42:29):
was.
A good example.
At at my prior at my last CIO job, when I gotto the company, and I was eleven, twelve years
there, the portfolio was 100% public equitiesand public bonds.
When I left, it was 35% alternatives, illiquid,because we had a ton of excess liquidity that
(42:52):
we didn't need.
And so we thought that it was worthwhile goinginto alternatives that were that were liquidity
constrained, where we could get increasedyield, increased forecasted return, a lower
realized standard deviation of returns.
So that you can imagine how well that plays inthe asset management, you know, stochastic and
(43:14):
deterministic modeling that you can do.
I knew from some of my endowment and corporatepension plan meeting conferences that I had
gone to, some of the names of some of theplayers that were very well respected in the
illiquid space.
(43:34):
So when we were ready to start having thoseconversations, there were two companies that I
had called that I didn't really know well.
I mean, knew the company names, but I didn'tknow them well because they were in the
illiquid space.
I was always a public bond guy and a publicequity guy.
I literally called up the salesperson and said,Hi, my name's Rep Reeves, I'd like to talk to
(43:55):
you about your private commercial mortgageproduct.
So those those they don't happen often, butthey do happen.
And then there are other times where I knowpeople who have spent ten years managing, you
know, forming a relationship before they got inat bat.
(44:15):
So there's every every potential range on that.
What is the best practice for somebody thatjoins institutional investor?
How could they benefit the most from theplatform on the GP side?
Be as as upfront and knowledgeable andcommunicative about what it is you want to get
out of it.
Obviously, the simple answer to that is, I wantto get more AUM.
(44:37):
But if the strength of your company is publicequity, you probably wouldn't want to be
signing up for something that doesn't have alot of public equity allocations in CIOs.
You ask a lot of questions from us because weknow we know our platform better than anybody,
(44:59):
and we can put custom, packages together to youfor you to fill what your need is.
But, again, like with the GPLP relationship, ifa lot of people are walking around, you know,
holding all their cards close to their vest andnot being very open about what they want, what
they need, it makes it much more challengingfor the other side to try to guess what it is
(45:22):
that they're doing.
So just be open with what it is that you want,what your goals are, just because of the the
global nature and the the economies of scale ofwhat of what we're covering and how we're
covering it, you know, that we can we can comeup with something to to fit.
I've really enjoyed this conversation.
How could people learn more about InstitutionalInvestor and find out more about how they could
(45:42):
potentially benefit?
Institutionalinvestor.com.
And how should people follow you?
Follow me?
Yes.
Real brief.
Listen to the David Weisberg podcast.
I'm on LinkedIn.
Audience note, unfortunately, I'm not gettingpaid for this podcast, but I will take payment
(46:07):
in LSU in Death Valley football tickets.
So I will take you up on that, and I look lookforward to, look forward to meeting Susie and
having you meet Jessica as well, and could seeif you still like me at that point.
Talk to later.
Thanks, David.
Thanks for listening to my conversation.
If you enjoyed this episode, please share witha friend.
This helps us grow.
(46:27):
Also provides the very best feedback when wereview the episode's analytics.
Thank you for
your support.
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