← Capital Allocators – Inside the Institutional Investment Industry
Capital Allocators – Inside the Institutional Investment Industry
Senior Decision Makers: Luis Laboy, Hewlett Foundation (EP.512)
00:47:04
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- [00:00]
Luis LeBoy
If I describe a market to you, I tell you this market has geopolitical risk. It has political uncertainty, it has social polarization, it's got policy risk. The market structure was changing and I asked you to tell me which market I'm describing. You would most likely say an emerging market, but it's not today. It describes any market that's out there. Once upon a time I went into Ana's office. This is back at rcm. It was maddening for a young analyst, this the dollar was weakening, emerging markets were falling. And I asked her, is a strong currency or a weak currency good or bad for emerging markets? And she just said, depends on why. Which was a deeply unsatisfying answer for someone that still believed that the answers were in the spreadsheet. I wanted to put something into a model. What I actually realized many years later, and this is probably why this answer from her has stuck around for 28 plus years, is that my question was wrong. That's where I'm thinking a lot about today. Are we asking the right questions about markets? Markets have indeed changed and all of those risks that I mentioned now describe any country in the world, not just emerging markets. And developed markets are somehow the bastions of the opposite of all of those things. Should we be thinking about the whole structure of markets differently? What does that mean for portfolio construction?
- [01:22]
Ted Seides
I'm Ted Seides and this is Cavity capital allocators. The CIOs of the largest pools of capital have jobs that require broad skill sets. They cover the world across asset classes and strategies, determine portfolio construction and decide what goes into their portfolio. They're also leaders, managing people in an investment office, working with a board, and taking care of all their stakeholders, whether students, grantees, pensioners, family members, insured recipients or sovereign states. It's a complex role that involves far more than just investing. But they don't do it alone. Behind every successful CIO is a talented team who focuses most, if not all, of their time on investing. We've spent time with many of these senior decision makers at our summits and find they're closest to the action and deeply insightful about at investment opportunities and the investment process. This miniseries, Senior Decision Makers, features conversations with investors that have not yet ascended to the CIO seat. These professionals are the primary driver of decisions that lead new ideas into a portfolio or exits from a manager strategy and are at a fascinating point in their career. My partner and the CEO of Capital Allocators, Hank Sturmak, will take the MIC and lead an exploration of the investment Investment Thinking and Role of Senior Decision
- [02:59]
Hank Sturmak
Makers Our next guest on the Senior Decision Maker series is Luis LeBoy, Director of Public equities at the Hewlett foundation, where he spent the last decade running the Public equity book alongside CIO Anna Marshall, a mentor and colleague he first met nearly 30 years ago. The foundation's assets stand at roughly $14 billion today. Luis spent 15 years as a direct emerging markets investor at Everest Capital before crossing to the LP side, and our conversation digs into how he's leveraged experience as an allocator. We discuss how the cadence and depth of decision making changed when he went from a high turnover book at Everest to a handful of high conviction relationships at Hewlett, how his time split between portfolio construction and manager selection has evolved over his career, and how his time marketing funds shaped the way he interviews managers and thinks about turnover. Today. Luis is incredibly insightful about how his early interests and upbringing have shown through across his career. He thinks and speaks in analogies. He's wildly entertaining and in short, he's just a genuinely good dude. And that comes through in spades in our conversation.
- [04:05]
Ted Seides
Before we get going, we're hiring at Capital Allocators, two roles that will shape our next chapter. They're two of the best jobs in the business, at least in my opinion. That'll help us bring together our community of allocators and managers to compound knowledge and relationships. And best of all, we get to serve this community without really selling them anything. The first is investor relations. The role includes both building real relationships with allocators and managers and creating the experiences that bring them together. The relationships come first knowing who should meet who, what each person is working through and where the connections lie. The experiences are how you deliver on them, the kind of unreasonable hospitality that makes Will Guidera smile thinking about how we make someone feel like the only person in the room. It takes off the charts, EQ and real curiosity about how AI can deepen the way we connect with people. Tamar, our relationship savant, owns the role today and she'll tell you it's the best seat in the business. The second is chief of Staff, a great multitasker who takes small projects and strategic planning off Hank and my plates and helps run our three businesses, businesses with AI at the core of the job. It's the seat Hank stepped into five years ago after a single post across our channels and today he's our CEO. The sky is the limit on how the role could evolve. For context, we just hosted our 10th summit and we've now brought together 432 allocator organizations and 301 managers who've shared over 125,001 on one contacts. If either sounds like you, email us@hankapitalallocators.com with your answers to three questions. 1. How did you find the podcast? 2. What was your most recent project using AI? And 3 How are you connected to someone on our team? Full descriptions of the role are available@capitalallocators.com and thanks for spreading the word about our two new roles at Capital Allocators. Capital Allocators is brought to you by AlphaSense here's something for you. Most AI tools today are very good at sounding right. But can you actually trace it back to a filing, transcript or specific passage that drove the answer? Or are you just trusting the confidence of the output? For allocators, that's not a minor concern. A missed filing, incorrect source or context that gets lost somewhere in a retrieval chain aren't edge cases. They're how decisions go wrong. AlphaSense is the AI platform built specifically for this. They own the content, over 500 million curated documents, from broker research and expert transcripts to filings and earnings calls. And they own the retrieval layer on top of it. That means every answer can link back to an exact, verifiable source, because the answer is only as good as what's underneath it. And with AlphaSense, you know exactly what that is. See it for yourself. Try a free trial@AlphaSense.com capital that's AlphaSense.com with a hyphen in the middle. Capital Allocators is also brought to you by Ridgeline. Ridgeline makes your day unrecognizable. That's how refreshingly different it is from legacy investment management technology. With Ridgeline's front to back AI native platform, your typical tech pains disappear. No integration headaches, no data discrepancies and no upgrade cycles. Instead, you get real time data flowing through everything from portfolio accounting to reporting to reconciliation, trading compliance, and more. In the AI era, asset and wealth management firms moving to Ridgeline gain a decided advantage. That's why customers call it miraculous, game changing and an awakening. If that's not how you would describe your investment management tech, request a demo at Ridgeline. AI Capital Allocators is also brought to you by Admired Leadership. Back in april on episode 497, I sat down with Randall Stuttman, the executive coach behind Admired Leadership, who's advised more than 500 CEOs, including some of the most respected names in asset management. Randall introduced me to Alex, an AI leadership coach's team built on 40 years of proprietary research into what the best leaders actually do for investment professionals. That means your entire team gets on demand coaching, grounded in the behaviors that drive results and build the kind of followership that retains your top talent. We use Alex and our team at Capital Allocators swear by it. Try Alex for yourself at the link in Our Show Notes tryalex.admiredleadership.com Please enjoy
- [09:40]
Hank Sturmak
this conversation with Luis Leboy. Luis, I am so excited for this conversation.
- [09:47]
Luis LeBoy
Thanks. I'm very excited to be here with these conversations.
- [09:51]
Hank Sturmak
We're keen to explore your path to the seat, how you spend your time and insights into the life of an institutional lp to start, tell me a little bit about your upbringing.
- [10:05]
Luis LeBoy
I was very fortunate to grow up in a big family. I was the fifth of six kids, two parents, one grandmother. My parents thought that wasn't enough, so they got a St. Bernard here. I grew up in this big house with lots of people, thankfully. Lots of love, laughs and a lot of strong opinions which invited a lot of debate. All that played out in our daily dinners together. And some of my fondest memories come from those dinners. They were always full of lively conversation, everything from school and friends to current events to politics. I remember as early as being about 6, 7 years old sitting at the adult table listening to all these conversations. I remember vividly when we moved to the States listening to conversations about the Iran hostage crisis back in the late 70s and even the 80 election with Carter and Reagan. I think of myself back then. I've always been fairly contrarian by nature. Those family conversations sharpened that. I understood early on that if you were going to get oxygen in a room full of people that were more experienced or in this case older than me, you needed to say something different and value added. There's no premium in consensus thinking. I learned to listen carefully to see where my view differed. I developed that over time, and that's a muscle that I still have today. And the thing that I really learned was that provocative thoughts were like extra credit. That's what lit up that dinner table in that room.
- [11:32]
Hank Sturmak
What were some of your early interests?
- [11:34]
Luis LeBoy
I was into politics as a kid. It's the result of those dinner conversations. Back then there weren't 100 stations and streaming. We watched the news together. I enjoyed elections more so than the candidates. The campaign strategy. You had a certain amount of money, a certain amount of time before an election and a message. How do you marshal those forces around? What helped was that at that age 13 or so. When we lived in Chicago, I had a friend that was a kindred spirit. Someone that I still talk to today, 40 years later. We used to talk a lot about politics together. We studied elections. There was this one game. While other kids were playing video games, we were playing an election simulation game. Studying electoral maps from 1960 to 1992. Learned a lot about the evolution of politics in the political landscape, which came in handy as I started my career.
- [12:29]
Hank Sturmak
When did your interest in financial markets and investing kick in?
- [12:33]
Luis LeBoy
In college. I started mechanical engineering, following my father's path. Someone once told me I was great at math and science. So you becoming a mechanical engineer? In the end, I would probably do what he did, which is go into business. The plan was working fine until my junior year. I took my first class in economics. Everything changed. I felt like Neo in the Matrix. I could see all of the ones and zeros. The professor didn't hurt. He was inspiring. He would sit at the edge of that platform in class, the vein throbbing in his neck as he was explaining these concepts. He would lean so far out into the class, I don't understand how he didn't fall off the platform. From that, it didn't take very long. I switched to econ. Now I was following my brother's path. My brother Carlos. Econ into finance, sell side. The goal was to be an analyst. What I realized is how much mechanical engineering and econ had in common. Studying systems, studying resource management. What appealed to me about politics too. We spend a lot of time with allocators asking managers about their origin stories. Often the origin story has to do with I love stocks. Something to do with Warren Buffett. They were reading financial statements at a very young age. My interest in finance came from the top down. It was the politics, the economics. The one place where that made sense were very important drivers of return were in emerging markets. That's where I decided to launch my career.
- [14:00]
Hank Sturmak
How'd you get into the financial industry?
- [14:03]
Luis LeBoy
After college, I spent a fair amount of time interviewing because I wanted to start my career in Mexico. I was dead set to start in emerging markets. The resume that I had up to that point would fit in well there. My first job was actually at Dresner Bank Mexico. We were building out a research team. My job was to do one of the dailies and write about the political macro market events of the day. I was fortunate to have as a first boss Martin Benson. I credit him for really helping me launch my career. Two years into my time at Dresner, I walked into his office. And I told him I needed to move to the States. I just wanted to move back. He gave me a piece of advice that I still think about today. And it's a piece of advice I give people all the time. He told me I needed a story. My story was that I couldn't leave yet. I just hadn't completed the arc to be ready for my next job. My story is I wanted to be an analyst. I immediately taught myself accounting. I started to work on financial modeling. While I'm doing all of this, that's where I had an opportunity to meet Anna Marshall for the first time. She was traveling to Mexico to visit companies. She was traveling with Bear Stearns. My brother was working at Bear Stearns. I got a chance to join in with them. That was the first time that I had truly seen the whole puzzle come together of that top down, the bottom up, how it comes together to lead to investment conclusions. It was mesmerizing. Clearly, I had found my place. I went off after the visit. I called Ana and I asked her, what do I need to do if I ever want to work with somebody like you? Ana's advice was get your CFA. Anybody who knows Ana, 25 years later, that would still be her same advice to anybody starting today. I studied for the cfa, and when I passed Level one, I called her up to give her the update. As luck would have it, she was hiring. She invited me up to San Francisco. About a month later, I was moving to San Francisco to go work with her at Dresdner rcm. That was my first tour of duty with her. I worked with her for four years before I ended up moving to Everest capital. At Everest, I spent about 15 years. I covered Latin America. I was working in emerging markets, Turkey, parts of Europe, Africa. What was great about Everest is I invested across all asset classes. So now it was really broadening my scope. We were in equities, debt, commodities, currencies, often simultaneously. It really played again to those strengths. The top down defining the thematics, the macro marrying that with the bottom up. What stands out from all that time at Everest was how it started. It wasn't a linear move upward. Six months in, it's time for reviews, and Marco calls me into his office, tells me that I'm probably not going to have another review unless my performance improves.
- [16:39]
Hank Sturmak
How many years into being at Everest were you?
- [16:41]
Luis LeBoy
I was six months. I clearly felt I was over my head. Thankfully, even in that moment where I'm doing the internal calculations that I think I'm going to get fired and I had the wherewithal to ask him what he thought I was doing wrong. He saw me work every day. I asked him what he suggested. He gave me a piece of advice that I still think about today. You're trying to be right rather than make money. And our job is to make money. I didn't quite know what that looked like, so I asked him to explain. If I can visualize it, I can do it. At the end of the call, I stood up, trying to act confident. I said, marco, I can do that. He wasn't having some of this fake bravado. And he said, I hope so.
- [17:23]
Hank Sturmak
You have this heart to heart with your boss. Six months into joining Everest, you think you're going to get fired. How did you respond?
- [17:32]
Luis LeBoy
Eight months passed by. Lula had just been elected president. It's the early 2000s. Everybody thought that Brazil was going to devalue and default. I had this great benefit of doing this spectacular trip coordinated by Emmy Scheilt. We went and we met with the head of the central bank, the Senate, the leader of the House of Representatives. Then we met with the chief of staff of Lula in his office. I came back from that trip believing that the market was wrong. That contrarian person always looking for the opposite came in and I said, we need to own Brazil. We maxed out our limit in Brazil, and that just wasn't enough for Marco. We went to go put on an options trade. It was a structure that the market had to go up 20% in two months for us to make a 5 to 1 payout on our premium for the option structure. I still remember Marco holding his finger over the enter button before sending the trade. He looked at me and he said, are you sure? Of course I wasn't sure. But what I was certain about was that if I said no, I was likely going to get fired in four months. Before my next review. I clearly understood the incentive structure that was on the table. I said, absolutely, Marco. Within two months, the market went up 23%. We made our 5 to 1 payout on our options trade strategy, all the money on the cash trade. By the time of my next review, they had promoted me to partner. From almost fired to partner in 12 months.
- [18:57]
Hank Sturmak
15 years at an asset manager is a long time. Tell us about some of the various hats that you WORE in the 15 years that you were at Everest.
- [19:04]
Luis LeBoy
In addition to investing, I was part of a team where I was an analyst and a portfolio manager. So I was a decision maker as well. One of the things that I learned I Learned this from Ana early on is figure out how to add value on the team. Because invariably managers have bad years of performance. I figured if I added value, that one year that came, that was going to be the year that tested me, that I had a buffer. I had some other way that I was adding to the team. I marketed a lot. I'm an external thinker. Marketing served two purposes. You had the defense and the offense. The defense was protecting myself against the down year. The offense was that I thought a lot about the portfolio and how I was investing it in those meetings. I'm not sure if LPs at the time really always understood that I was working through ideas. While we were in our meetings, I worked on the EM team. I helped launch the Frontier Markets product. By the time that I was leaving Everest, I had just studied technical analysis to become a chartered market technician. I was introducing that as well into our process working on the Frontier Markets team.
- [20:09]
Hank Sturmak
What prompted the move from a direct investment seat to an institutional allocator?
- [20:16]
Luis LeBoy
It's funny. The first time that I got exposure to the endowment and foundation world, I was sitting in a meeting with our salesperson. I was listening to the LP talk about how the CIO wanted him in a seat for 10 years. I'm thinking, like, what world do we live in where someone can see 10 years out? I worked at a hedge fund. I was thinking in terms of year to year. I slowly started to learn more about the world because Ana was there. Ana and I, all this time over those 15 years, stayed in touch, and I got to know more and more about what she did and how they did it. It became intriguing. At Everest, our time horizon was short. I was longing for it. To expand that time horizon, to broaden out of emerging markets and Latin America felt like a natural step, the natural evolution of what I wanted to do, especially after I studied technical analysis.
- [21:07]
Hank Sturmak
Such fun serendipity to have those points of connectivity with Ana early in your career. Then in the latest transition from Everest to Hewlett, what was that actual transition like? How did you join the team at Hewlett?
- [21:18]
Luis LeBoy
On the personal side, I had just finished remodeling a house after torturing myself for a year and a half, when I say I literally had just thrown out the last box. My girlfriend and I, now my wife, we're hosting my parents and my oldest daughter. Saturday afternoon, I get a call from Ana the middle of a barbecue. We talk for a while and I hang up. I turn to everybody and I say, looks like we need to move. You had lived in the place less than a month, went to San Francisco. I interviewed with the team, got to meet everybody, which is great because they were helpful in just the ramping up and understanding what was ahead. Within a couple months, I was in San Francisco again, working with Anna at Heal It.
- [21:56]
Hank Sturmak
How did your time at a hedge fund inform how you approached your new job as an lp?
- [22:02]
Luis LeBoy
First, it's not just the time at the hedge fund that was helpful. It's the amount of time that I got to spend at Everest that was helpful because there's obviously the experience of the different asset classes learning how to invest. But Everest, what I learned was how to make a decision. It's the time that I got to spend at Everest where I I really learned the soft parts of an investment firm. I spent 15 years with the same team. Over those 15 years, I got to see the arc of people's careers. I got to see the arc of strategies initiate and close down. I got to see the arc of the whole firm. It was a gift to be in that one place. It's almost like watching a movie over and over. And every time you see the movie, you pick up something different. That's what it's like to work with the same people for a long time. I got to understand the nuances of culture of an investment team, how people's willingness to take risk changes over time, how my own willingness to take risk changed over time. When Everest closed and the whole team moved to rwc, I got to see how the same group of people, their energy changed, how a culture changed. And there was a lot of learnings. Because in the end, as allocators, we're sitting on the outside trying to understand what's happening on the inside and were left to fill in a lot of gaps. That experience of those 15 years gave me a lot of material to know, which questions to ask, where the tripwires are inside a firm.
- [23:27]
Hank Sturmak
How did your experience marketing at Everest inform how you wanted to approach manager selection once you joined an lp?
- [23:38]
Luis LeBoy
When you market a lot, a couple things happen. There's learnings that come from LPs that challenged me, that made me a better investor. As I was becoming an lp, I wanted to become one of those. I wanted to be helpful to managers. The marketing was helpful, but there's this little nuance between the two jobs. There's a difference in cadence, in decision making, even in the amount of research and analysis you do for every decision, you're calibrating that all the time. And I had perfected that for A high turnover world of direct investing. And when you move over to the LP side, you make many less decisions and you go much deeper in terms of analysis. You have to recalibrate that carefully. You can fall into the trap of making uninformed decisions or falling into analysis paralysis. That took a while. The marketing experience is helpful in that because as I started manager selection, it helped me to understand how to ask managers questions, dig through the presentation. In fact, I never even wanted to pick up the presentation. I understood it allowed me to get into the perceptual position of the manager more organically. Not ask questions trying to understand what they do from an outside perspective, but how it feels to be in the seat and sit on the other side of that table.
- [24:48]
Hank Sturmak
What were some examples of questions that you feel you took from that experience?
- [24:53]
Luis LeBoy
There's a great example. When I first started at Everest, we weren't necessarily known for the most stringent risk management practices. I took a meeting with a manager early on. I listened. I asked them about risk management. I noticed they hadn't talked about it the whole meeting. I asked them about how they manage risk. I got this long answer with lots of words and I realized that's the answer I used to give. He stopped him and I said, look, I don't think you realize I just spent 15 years marketing and I used to give your exact answer. What I'm picking up here is that you guys really don't have a very strong risk management practice. And he laughed and said, you're right. It actually let me cut through. I understood how to interpret what they were saying and put it into a question to help me break through, understand and ask questions with a layer of empathy, with an understanding of what are the different pressure points that they're looking at. The goal is to ask managers questions that hopefully create new thoughts. But you never want to come across like you're second guessing a manager. That's not our job. Our job is to understand them and to understand whether our strategies are aligned. A lot of my questions come from that perspective and I hope that that's the way it comes across.
- [26:04]
Hank Sturmak
How did you initially spend your time when you first joined Hewlett?
- [26:10]
Luis LeBoy
At first just questioning why I had made the change because I felt like I was drinking from a fire hose. For years I had the great benefit of stepping into a spectacular team. A public equity portfolio was mature and full of just really great managers. This is a portfolio that was put together by Ana herself. I was taking that over. So there was a great benefit to that because on the portfolio construction side, which is where I spent most of my time at the beginning, because we already had this built out manager set, we were shrinking the portfolio size, we were concentrating the portfolio. I understood Ana's philosophy of portfolio construction. She was my mentor. That's how I even learned how to build portfolios on the direct side. The only difference is I was learning context. I was learning what does it mean, managers instead of stocks, the different decision making that we have to make in that portfolio construction. What I learned in those first years is just understanding the philosophy, understanding how the different strategies came together. Having that ability was important because that helped inform the manager selection piece.
- [27:09]
Hank Sturmak
In those early years, when you're spending time on the portfolio construction side, what's an example of your role in a real decision that was made?
- [27:19]
Luis LeBoy
A good example of that is during COVID By the time Covid came around, I had been doing this a few years. Covid was the first time that I actually had a moment to step back. You're alone in your office, in your house, for months. We started to do deep dives into the portfolio. One of the things that we really started to focus on then we felt there was a transition happening in the market. I started to break down the portfolio. We ended up starting to reduce our exposure to, for example, value managers. We thought value would just be a tougher place to be going forward. I started making these presentations, these 10, 15 page presentations to entertain myself as I broke down the portfolio. That helped us in understanding where the structure was today, where we thought it was going. We had extensive conversations about that and some of the decisions we needed to make. And there it was, reducing some of the value managers that we had in the book, transitioning into a more quality, compounding portfolio that was becoming more prevalent at the time.
- [28:18]
Hank Sturmak
As you've progressed in your tenure at Hewlett, how has your allocation of responsibilities and how you balance your time changed?
- [28:30]
Luis LeBoy
The biggest change has been that at the beginning we had a larger manager roster and we were concentrating that manager roster. This is where the buy side experience came in. We didn't just look at it as managers, we also looked at the underlying companies. I started to build out spreadsheets that showed all the underlying positions that we had and we thought about as a portfolio of companies. As we started to get that core portfolio down to a certain size, then the shift starts to become over to manager selection. Because once you have a core portfolio, eventually, over the course of 10 years that I've been at Hewlett, you have life cycles of Managers and eventually you have to start searching for new managers. So I went from what was a very large mature roster. We concentrated it. Now we needed to go find the next generation of manager. Now I probably spend half and half of my time really in that portfolio construction which is so important. Getting the sizing right of managers and sizing risk correctly. But then it's also the flip side of sourcing those managers.
- [29:32]
Hank Sturmak
How much time goes into managers who aren't currently in your portfolio versus managers
- [29:38]
Luis LeBoy
who are an increasing amount of time. There's a tension there all the time. We want to give as much time to new managers as we do to existing roster. Getting what you have right is as important as finding that next manager. And that's always a tension in the portfolio. And that was even in the structure of what we were doing. We learned early on the mix of explore versus exploit exploit means we have this set of managers and we want to maximize the return of those. And that's the portfolio construction side. But at the same time, you constantly need a certain velocity of new ideas into the book. One of the structures that was changed over time was instead of just having one portfolio, what we basically broke it down was we had one core portfolio because we want to maintain that discipline of having a limited set of managers, then making room for new relationships. So as that structure changed and we started to increase the amount of exploit the velocity of new ideas. It takes a lot of time to meet managers and it takes a lot of time to triage and to get to know them.
- [30:40]
Ted Seides
We're going to take a quick break in the action to tell you about Morgan Stanley Investment Management. The best allocator manager relationships aren't transactional. They're built over market cycles through difficult conversations and around a shared understanding of what an institution is trying to accomplish. Morgan Stanley Investment Management has partnered with institutions for four decades across Equity, Fixed Income Alternatives and customs solutions with $1.9 trillion in assets worldwide. Learn more at morganstanley.com im morgan stanley investment Management is the asset management division of Morgan Stanley statistics as of December 31, 2025. All investing involves risk of loss. Views are subject to change, not investment advice or a recommendation. Copyright 2026 Morgan Stanley. All rights reserved. And now back to the show.
- [31:42]
Hank Sturmak
How does a new manager make its way into such a concentrated book?
- [31:47]
Luis LeBoy
That was the rub for a while. When you have a concentrated roster of spectacular managers, the hurdle becomes very high. One of the structures that I did is I broke the portfolio into two where I had this core portfolio and then you Carve out a piece of the portfolio for this next generation set of managers where the hurdle isn't lower. We're still trying to find the same quality or the high level manager. In fact, if you go back to my equation of make money rather than be right, those calibrate differently for the core portfolio than from the new manager set. You're giving yourself room to be more wrong there, so you're allowing a little bit more churn. Once we changed that structure, we gave ourselves room with what is the next generation portion of the book. You're lowering the confidence hurdle, you're not lowering the hurdle of quality.
- [32:34]
Hank Sturmak
What are the characteristics of the managers that you look for in that carved out structure? For new managers?
- [32:41]
Luis LeBoy
We have a whole set of characteristics that continues to evolve. We build out the set of characteristics and the reason why we do that is because one of the most dangerous things that happens is that you look for what you want instead of what you need. I'm a girl, dad. As much as I'd like to blame her for this. We watched reality TV and one of the shows we watched was Married at First Sight. The structure of the show Married at First Sight is that there's this set of experts that will pick out your mate for you instead of you doing it based on your attraction or the participants. It was done by a set of experts. There was a framework. I never forgot that because invariably these didn't work because people always went back to what they wanted rather than what they needed, which is what the experts were picking. I very much focus on that with manager selection. If I don't have a set of clear criteria ahead of time, I'm going to end up picking the shiny object that resonates with me. Then you're going to be introducing a certain factor, risk, which is your own biases into the portfolio. The criteria that we're talking about here, it's changed over time because it moves with the opportunity set. That's one of the things I think we do well, that we're flexible and we're adaptable and we're constantly looking forward at what we need from a manager. It's a set of criteria that has shifted over time.
- [33:58]
Hank Sturmak
I feel pretty confident that this is the first time manager selection has been comped to Married at First Sight on Capital Allocators. So thanks for that. Luis. How do you decide when to move on from a manager?
- [34:10]
Luis LeBoy
It's always such a hard decision. The cadence of decision making is so different in what we do. One of the things that I've Done. And we borrowed this from Annie Duke in her book Quit. We've put together what we call as a kill list for every manager in our book. We have what we call kill lists and key debates. It's basically a set of items that we are always looking at for every manager, whether that's new manager or existing managers. Areas where we're trying to gain confidence, where we're trying to understand if we have to redeem for a manager, we want it to be for fundamental reasons. We never want to be chasing performance. What ends up happening more times than not is that you end up redeeming from a manager because we're shifting our perspective on what's changing in the market. We have to redeem from a manager that otherwise I think is extraordinarily talented. And I wish them great success, but there's just no longer an alignment between what we need for the portfolio and what they deliver as a manager and their strategy.
- [35:07]
Hank Sturmak
Who is involved on the team in this entire process around manager selection for
- [35:14]
Luis LeBoy
the public equity portfolio? Ana and I are the ones that spearhead that. We're one team, one approach. This is the best part of our Monday morning meetings and it almost reminds me of dinner back when I was a kid. I love to share half baked ideas, share how our conviction or our confidence in a manager is changing and really put it out there for the team. Even though Ana and I are the ones that are making that final decision on a manager, we try and get the input of the whole team. Any decision that we make never comes as a surprise to anybody and potentially has the input of everybody. We're a small team. It's myself, Brett Johnson, Tom Mieczkowski as directors and Ana as the cio. Ana plays a pivotal role across all of our asset classes. So we have this natural sounding board with Ana. She's deeply involved with all of us. I get so much from Ana and that experience and those conversations and we meet the managers together.
- [36:07]
Hank Sturmak
I'd love to tap into that direct rapport you have with Ana. How much of that is informed by your previous working relationship and having known her for 30 years.
- [36:19]
Luis LeBoy
It was the second or the third day I started at the foundation and I was sitting at my desk and I heard her voice in the background and it was just the oddest feeling. I felt like I was 27 again. Felt like no time had passed. One of the great things of working with Ana is that we see eye to eye on the basic structure and philosophy of things. And it's not that we agree with Each other. There's no consensus thinking. One of the things Ana really prizes is innovation and evolution of thought and creative thinking. And I'm definitely contrarian by nature. We have that same base. We challenge and question each other and we riff well and brainstorm. That early time is great because it sets the base. This is why I wanted to work with her again. Ana leaves a lot of room for growth, a lot of room for you to run and to think. That's what works so well in the relationship. And that's part of the culture that she sets across the team as well.
- [37:10]
Hank Sturmak
What are some of the other philosophical commonalities that you and her share from an investment perspective?
- [37:16]
Luis LeBoy
We have a similar view on risk reward frameworks of managers. We were a manager together. We share a philosophy of building a portfolio. We share the philosophy of manager selection. That criteria that we've put together over time is a shared criteria that we've talked about. When we're selecting a manager, we break apart opportunity set and manager selection. The steps are we gain conviction on the opportunity set because we run as one team, one approach. Once we have an idea of the opportunity set like at Everest, we're looking across all asset classes. Where does this make most sense to invest in which asset class, if it happens to be public equities? Well, now we're going to get conviction on what's the right strategy for it. And then finally the confidence in a manager. Our approach is common. It's that top down approach and bottom up approach combined.
- [38:09]
Hank Sturmak
Where do you two see the world differently? I don't know.
- [38:12]
Luis LeBoy
We see the world differently as much as the timing of how we get there is different. I have the benefit of investing in public equity. I have the benefit of having a very short convincer strategy. I can see something and say, I love this, I want this, let's go get this. She is managing the weight of the whole portfolio and has to slow me down and move at a different pace. Japan is a great example of this. We started looking at Japan several years ago. We went on our first trip. We got to the Japan idea through technical analysis, through understanding a breakout in markets. We went to Japan together. I probably hear three words from the first meeting. I write in big font on the top of my computer, buy big, buy a lot. And I just turn into her and she laughs. Of course, it's not that simple. We spent a lot of time together getting to understand the market, researching it back to our roots, what we used to do in emerging markets many years ago together.
- [39:12]
Hank Sturmak
Did you buy big and buy a lot.
- [39:13]
Luis LeBoy
We have eventually bought big. We're invested in Japan. We did the work together. What's really great is we both have the hunger to figure it out. We both have that same background. And this is where we basically attacked the idea of Japan the same way that we did back in emerging markets where we wanted to get to know the market. We did all that work ahead of time before we surveyed our first manager.
- [39:34]
Hank Sturmak
I want to come back to starting with an opportunity set and having that inform where you dig deep. What does that mean? How does that come to fruition in pursuit of a new investment opportunity?
- [39:48]
Luis LeBoy
Japan example is a little bit different than most. There's very few times that there's an absolute new market that you're going to go into. It's important to understand how the structure of the market is changing and evolving and what's that impact on the whole opportunity set. And we spend a lot of time on that. That automatically is going to flow down to what are the strategies that we need? Then what are the managers we're going to select that we have confidence that can execute on that strategy within the changing opportunity set.
- [40:17]
Hank Sturmak
You talked about Japan as a previous example of a change in market dynamics that's informing specific opportunities set to pursue. What are other changes in market dynamics that you're watching today that could be something you lean into in the future?
- [40:32]
Luis LeBoy
I've been thinking about this and it's something that we had been structuring the portfolio around for a while. If I describe a market to you, I tell you this market has geopolitical risk, it has political uncertainty, it has social polarization, it's got policy risk. The market structure was changing and I asked you to tell me which market I'm describing. You would most likely say an emerging market, but it's not today. It describes any market that's out there. Once upon a time I went into Ana's office. This is back at rcm. It was maddening for a young analyst. The dollar was weakening, emerging markets were falling. And I asked her, is a strong currency or a weak currency good or bad for emerging markets? And she just said, depends on why. Which was un deeply unsatisfying answer for someone that still believed that the answers were in the spreadsheet. I wanted to put something into a model. What I actually realized many years later, and this is probably why this answer from her has stuck around for 20 plus years, is that my question was wrong. That's where I'm thinking a lot about today. Are we asking the right questions? About markets. Markets have indeed changed and all of those risks that I mentioned now describe any country in the world. Not just emerging markets and developed markets are somehow the bastions of the opposite of all of those things. Should we be thinking about the whole structure of markets differently? What does that mean for portfolio construction?
- [41:57]
Hank Sturmak
What is the right question to be asking you? Public markets focused institutional allocator on where the opportunity is going to lie in the short to medium term?
- [42:09]
Luis LeBoy
You have to start with all we are is changing. Once you accept that everything that we know and build our careers on is changing right now, you're going to start looking into different parts of the world and trying to find that answer. We found managers that invest in quality. We found managers that were managing disruption risk and was important in their process. That started to guide us into a certain set of managers.
- [42:37]
Hank Sturmak
What are the disruption risks that those managers are identifying and leaning into?
- [42:43]
Luis LeBoy
Technology is the obvious one. What's happened with technology? It's accelerated in this last year as AI is apparently going to eat the world. It's technology risk. It's everything that I mentioned is the risk. How are they thinking of regulatory risk? How are they thinking of macro uncertainty? One of the things I learned the most from technical analysis was the risk of curve fitting. The risk of over adapting to the past. One of the things we let go of is biases. We're questioning our biases. We're focused on what we need relative to what we want. Trying to think of the portfolio in a dynamic way rather than a checklist way of we need this much of each asset class and this is how you build the portfolio. Thinking of it dynamically and questioning ourselves that's made the difference. In terms of the managers and the risks, it's disruption risk in terms of technology, it's disruption risk in terms of regulatory, government intervention policy risk, geopolitical risk. Now value chain risk. Are managers spending the time to understand the tech stack of a firm across the world? It's no longer about tech versus the rest of the world. Old economy names are now going to differentiate themselves based on how they apply tech.
- [43:55]
Hank Sturmak
Even starting as early as your childhood and your upbringing and early interests through the entirety of your career. It's such an elegant combination of these experiences and skill sets that inform the seat you're in today. It's almost like a match made in heaven where you're doing these things that have built upon each other throughout your entire journey back to Martin. You clearly have a story and that is wonderful to look back and reflect on. Even as we're just having this conversation. Where do you go from here?
- [44:26]
Luis LeBoy
I value my relationship with Ana. One of the best things of working with her is it's captured in this example. Last year when we sat for my review, she essentially asked me, what do you want to do for the next five years? My answer was pretty simple. I said, I want to work with you. Which, by the way, she agreed. Thankfully, that was a good starting point. Second of all, I said, I want to be an excellent Director of Public Equities. I want to look at the world differently than others, innovate what we do, think differently, come up with different answers. The curiosity of continuing to attack this. When I studied economics, I had this moment where I wanted to be an econ teacher. The dream was alive for about five minutes until I talked to one economics professor that told me not to be an economics professor. The one thing I would love to do someday after all this is said and done, is to work with people that are sitting in my seat as a mentor, as a coach in some way, because I've been really gifted with all these experiences and a certain trajectory to my career that while you can't necessarily replicate it, you can build strategies around that of how to get to that final point, how to get to the learnings that I've been able to build over those years.
- [45:38]
Hank Sturmak
Luis, that's excellent. Would love to turn to some closing questions to wrap up. First, what is your favorite hobby or activity outside of work and family?
- [45:50]
Luis LeBoy
I've recently gotten into Formula one. We travel a lot for business. Ana wants us to meet managers and we enjoy meeting managers face to face. I was on a flight. The movie F1 with Brad Pitt kept popping up. I kept passing on and passing on, and finally I watched it and I loved it. I used to think Formula one was just a bunch of cars driving around in a circle. It's so much more than that. Once I got it, it was about strategy, psychology, these team dynamics that I didn't realize existed, these split second decisions that these drivers have to make. Once I watched it, I was hooked. I binged drive to survive. I've watched now documentaries on legendary drivers. I've got a book list going that I built together with AI. What really grabbed me, it wasn't the cars. I enjoy the cars, but it's the drivers, their personalities, the strategies. And in fact, the other day, Ana, who's a fan of F1, it was probably Sunday morning, nine in the morning after the Monaco race ended, I actually sent her a side by side comparison of two Legendary drivers Aytan Senna and Alan Prost and was comparing their driving histories. When they were Both drivers for McLaren, they had 32 races. I used all of the statistics and the language that we used to analyze investment managers and I had basically compared them to investment managers, which is probably about as nerdy as it gets.
- [47:11]
Hank Sturmak
You have definitely graduated from hobby to obsession.
- [47:14]
Luis LeBoy
It's definitely there. And it's bad enough because my nephew heard about it and he sent me his Xbox and I am not a video gamer, but I have to tell you, in our living room now, I have a wheel, pedals and I even bought the seed. And now I'm learning how to drive these things.
- [47:29]
Hank Sturmak
Maybe your answer to the question on what's next in the Future is an F1 driver. Never say never. All right, next question. Your biggest investment pet peeve.
- [47:38]
Luis LeBoy
This comes back to my time when I used to market. It's the overuse of buzzwords and jargon. Jargon less so because jargon what it feels like sometimes it's a secret handshake. I get. It's very industry specific language. It's buzzwords that do something worse. And I think they actually do a disservice to both the speaker and the listener. I was thinking about this the other day. The word quality, it's clearly a word that we all as allocators hear, especially public equity, a lot. It's very unfortunate because the minute a manager comes in and tells you that they invest in quality compounds, the part that we all don't realize is they've ceded control of the conversation now to the listener. When you use a buzzword like that, the listener is going to fill the gap in on what quality means based on their experience, based on their interpretation. Quality is a spectrum. It's not a fixed point. The worst case that happens that a manager uses the word quality and then another part of their process that they're describing doesn't align with that interpretation of quality for the lp. Suddenly the LP is now working backwards from a contradiction that they picked up. LPs have a very limited amount of time. If there's anything that doesn't align, well, in that first meeting, you might not get a second shot at it. It would be really unfortunate for a great GP and a great LP to not end up partnering just because of some missing understanding in the conversation.
- [49:05]
Hank Sturmak
All right, Luis, last one. What advice would you give to a young allocator that you wish you knew earlier?
- [49:12]
Luis LeBoy
I may have done this, but not deliberately. Make it your own model. Everyone that you meet Learn how every investor you encounter thinks, study their philosophies, their frameworks, their process. This is the important piece. When you meet a lot of managers, they'll start quoting Buffett and you see that they try and invest like Buffett. It's important to model parts of different investors, but never really adhere to their model wholesale because that's them. That's like a suit that's tailor made for that person. We're all different. This is what makes great PM's coherence. Their investment strategy aligns with how they think, their emotional makeup. That's the most important thing we look for with a manager is their alignment between their strategy and how they think. You borrow that process from someone else or you over borrow a model from somebody. You're adhering to something. It's not something that's internalized to you. It's more than just when we're evaluating manager. I think it applies to how you build your own frameworks in your life. Your edge as an allocator is yours and yours alone. Let it reflect how you think. Maybe if I had to can all this into like one little catchphrase, it was borrow freely and liberally from others, but in the end make it your own.
- [50:32]
Hank Sturmak
I love it. Luis, so grateful for your perspectives and for the conversation today.
- [50:38]
Luis LeBoy
Thank you. Thank you very much for having me, Hank. This was great. I enjoyed this.
- [50:42]
Ted Seides
Thanks for listening to the show. If you like what you heard, hop on our website at Capital Allocators where you can access past shows. Join our mailing list and sign up for premium content. Have a good one and see you next time.
- [50:57]
Luis LeBoy
All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of Capital Allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Capital Allocators or podcast guests may maintain positions in securities discussed on this podcast.