Capital Allocators – Inside the Institutional Investment Industry
Episode: CIO Greatest Hits: Endowments – Andy Golden (Princo)
Host: Ted Seides
Guest: Scott Wilson, Chief Investment Officer at Princeton University Investment Management Company (PRINCO)
Release Date: July 21, 2025

Introduction

In this compelling episode of Capital Allocators, host Ted Seides engages in an insightful conversation with Scott Wilson, the Chief Investment Officer of Princeton University Investment Management Company (PRINCO). As a successor to Andy Golden, Wilson delves deep into the nuances of managing a prestigious endowment, sharing his unique experiences, investment philosophies, and strategic approaches that have shaped PRINCO’s success over the years.

Scott Wilson’s Journey to Endowment Management

Scott Wilson's path to becoming a CIO is unconventional and inspiring. He began his career as a professional photographer, driven by a passion for artistic expression. However, his interest in organizational management and economic principles led him to pursue further education:

"[08:25] Scott Wilson: ... I applied to the only management program that would even look at an application like mine, which was the Yale School of Organization and Management..."

Upon completing his studies, Wilson transitioned into the world of investment management, starting at a small firm before moving to Duke University’s endowment. His tenure at Duke paved the way for his eventual role at Princeton, where he has been instrumental in shaping the modern endowment model.

Transforming Princeton’s Investment Approach

When Wilson joined PRINCO in the late 1990s, the endowment was a "victim of its own success," having built a robust track record without the necessity for significant change. Wilson spearheaded a transformation by advocating for a staff-centric decision model, empowering the investment team with full discretion over manager selections.

"[17:57] Scott Wilson: ... We are empowering you. I'm going to hold you accountable."

This shift was initially met with apprehension but ultimately proved successful, especially during the 1998 crisis and the subsequent long-term capital issues. Wilson emphasized the importance of education and communication with the board to ensure alignment and trust in the new governance structure.

Core Investment Beliefs and Asset Allocation

Wilson outlines PRINCO’s investment philosophy, anchored in fundamental business principles and a long-term horizon. Key tenets include:

• Contrarian Thinking: Investing against the crowd by buying what others are selling and vice versa.
• Use of External Managers: Leveraging specialized outside firms to manage diversified asset classes effectively.
• Long-Term Orientation: Focusing beyond the immediate future to build a portfolio that maintains advantages over decades.

"[25:25] Scott Wilson: ... we think beyond the long term because the real horizon is how long you can go with a large amount of discomfort without changing your path inappropriately."

Asset Allocation Framework

PRINCO employs a top-down, strategy-focused asset allocation model, divided into two primary buckets:

1. Policy Portfolio: The foundational long-term allocation based on valuation-independent frameworks and core investment beliefs.
2. Midterm Adjustments: Tactical shifts responding to market dislocations or unique opportunities.

Three Years Ago Asset Allocation:

• Domestic Equity: 10%
• Developed Markets Equity: 6%
• Emerging Markets Equity: 10%
• Independent Returns (Hedge Funds/Absolute Return): 25%
• Private Equity: 25%
• Real Assets (Real Estate, Energy, Timber, etc.): 19%
• Fixed Income: 5%

"[33:37] Andy Golden: ... what's the baseline, long term, independent of market conditions, asset allocation, what does that look like?"
"[33:49] Scott Wilson: Roughly, we have 10% dedicated to domestic equity... 25% in private equity... 19% in real assets..."

Over time, PRINCO has adjusted its allocations in response to market conditions, such as the excess overweight in private equity during the crisis periods, leading to strategic rebalancing.

Managing Specific Asset Classes

U.S. Equities (10%)

PRINCO maintains a concentrated position in U.S. equities, focusing on specialized sectors like biotechnology. This approach allows for higher conviction investments rather than broad indexing.

"[36:51] Andy Golden: ... how have you approached when you only have that much exposure to the U.S. what are you trying to accomplish and then how do you go about doing it?"
"[39:33] Scott Wilson: ... many of our closest friends invest with them [biotech managers]... we're concentrating on a sector that can be quite volatile but very distinctive."

Independent Returns (Hedge Funds/Absolute Return) (25%)

PRINCO’s allocation to hedge funds emphasizes long-term relationships with select managers who demonstrate consistent value creation beyond the median performance of the hedge fund space.

"[43:39] Scott Wilson: We believe that who matters a whole lot more than when you invest and may even matter more than what they actually do."
"[44:43] Andy Golden: ... how do you think about that whole notion of balancing size is the enemy's performance?"
"[45:05] Scott Wilson: ... firms scale a lot better than other firms... it's smart to manage strategy evolution alongside firm growth."

Private Equity (25%)

Wilson discusses the strategic balance between fee optimization and ensuring managers have sufficient resources to deliver excess returns.

"[48:55] Scott Wilson: ... optimize fees, not minimize fees. We want to ensure firms are capable of returning excess returns and avoiding fee structures that could tempt managers to prioritize asset growth over performance."
"[52:42] Andy Golden: ... how do you think about that whole notion of balancing size is the enemy's performance?"

Real Assets (19%)

Investing in real assets like real estate, energy, and timber provides diversification and inflation hedging benefits.

"[34:58] Scott Wilson: ... we actually have had outsized exposures to things compared to most investors, and in some areas, that can be particularly risky."
"[42:49] Andy Golden: ... whether it is cyclical and..."

Fixed Income (5%)

PRINCO maintains a minimal allocation to fixed income, focusing primarily on higher-yielding opportunities aligned with their long-term objectives.

"[31:21] Scott Wilson: ... to think about asset allocation a little bit differently. We very explicitly and intentionally divide our asset allocation decisions into two buckets..."

Investment Team Structure and Decision-Making

Wilson emphasizes the importance of cultivating in-house talent and fostering a collaborative team environment. PRINCO recruits primarily from Princeton, focusing on first-principle thinkers rather than those adhering to rigid investment recipes.

"[52:50] Scott Wilson: ... we're hiring one to three or maybe more kids out of college, primarily Princeton, where we have some unfair recruiting advantages."

Decision-Making Process:

PRINCO employs a “gang tackle” approach where major investment decisions involve the entire investment team. This includes a "bull bear session" where team members present and debate investment ideas, with assigned devil’s advocates ensuring rigorous scrutiny.

"[56:38] Scott Wilson: ... 16 investment professionals sitting around the table... some playing devil's advocate... everyone shows their votes simultaneously."

This method, developed post-Global Financial Crisis (GFC), aims to balance robust debate with cohesive decision-making, reducing the influence of political or emotional biases.

Adapting to Market Conditions and Managing Risks

Wilson discusses PRINCO’s adaptive strategies in response to evolving market landscapes, such as increased volatility in fundamentals and high asset valuations.

"[65:21] Scott Wilson: ... there's a lot of potential volatility in fundamentals in the world that doesn't seem to be reflected in prices. We recognize premiums should account for possible shocks."

PRINCO remains cautious, maintaining diversified exposures while being prepared to adjust based on emerging risks and opportunities.

Future Outlook and Strategic Focus

Looking ahead, PRINCO aims to continue leveraging its strengths in managing long-term, diversified portfolios while fostering innovation in investment strategies. Wilson highlights the importance of staying adaptable and maintaining strong governance to navigate future market dynamics.

"[63:46] Scott Wilson: ... we're pretty circumspect about top down stuff. We're focusing on building a roster of managers and ensuring stability in our investment processes."

Closing Thoughts and Personal Insights

In the concluding segment, Wilson shares personal anecdotes and reflections on leadership, career advice, and life lessons. He emphasizes the value of following one's genuine interests and the importance of resilience and adaptability in both professional and personal realms.

"[70:46] Scott Wilson: ... follow your path that has a real natural attraction to you and iterate on it. Learn from diverse experiences to develop a detached yet passionate investment ego."

Key Takeaways:

• Empowerment and Governance: Transitioning to a staff-centric decision model empowered PRINCO’s investment team, fostering accountability and trust.

• Strategic Asset Allocation: PRINCO’s diversified portfolio, anchored in long-term strategies and contrarian investments, aims to achieve above-market returns while managing risk.

• Talent Development: Emphasizing in-house talent cultivation ensures a cohesive, innovative team aligned with PRINCO’s mission and values.

• Adaptive Strategies: PRINCO remains vigilant and adaptable to market changes, balancing disciplined investment approaches with tactical flexibility.

Scott Wilson’s leadership at PRINCO exemplifies a blend of disciplined investment principles, adaptive strategies, and a strong organizational culture, positioning Princeton’s endowment for sustained success in the dynamic landscape of institutional investing.

Notable Quotes:

• "We are empowering you. I'm going to hold you accountable." — [17:57] Scott Wilson
• "The real horizon is how long you can go with a large amount of discomfort without changing your path inappropriately." — [25:25] Scott Wilson
• "Who matters a whole lot more than when you invest and may even matter more than what they actually do." — [43:39] Scott Wilson
• "Investing is a science, craft, and an art." — [61:48] Scott Wilson

For more insights and in-depth discussions with leading investment professionals, visit capitalallocators.com.