Capital Allocators Episode Summary: CIO Greatest Hits – Endowments with Scott Wilson (WashU)

Release Date: July 21, 2025

Introduction

In this episode of Capital Allocators – Inside the Institutional Investment Industry, host Ted Seides engages in a profound conversation with Scott Wilson from Washington University in St. Louis (WashU). This episode is part of the podcast's 2025 Summer Series, which spotlights Chief Investment Officers (CIOs) from various institutional investment backgrounds. Alongside Scott Wilson, retired CIO Andy Golden from Princeton University Investment Management Company joins the discussion, offering comparative insights into their investment philosophies and strategies.

Guest Background and Career Journey

Basketball Roots and Academic Choices

Scott Wilson begins by sharing his unexpected journey from small-town Alaska to the halls of Grinnell College, where his basketball prowess earned him a place on the team. Reflecting on his athletic and academic decisions, Scott states:

"Ultimately decided I was going to go to college for academics and not just basketball... we led the country all four years while I was there and it was just a great experience all around."
— [07:15]

Transition to Finance

Despite an initial interest in engineering, Scott's exposure to the financial world during his sophomore year at Grinnell pivoted his career trajectory. An influential friend introduced him to investment banking, leading to internships at Paine Weber and an asset management firm. Post-graduation, he joined First Boston's Equity Research Group, where mentorship under notable figures like Michael Mauboussin enriched his expertise.

"When you're 20, 21 years old, you're just a sponge for that kind of stuff. So it was really a great experience."
— [11:50]

Global Experience and Endowment Leadership

Scott's career path took him through roles in Merrill's Global Growth Group, a stint in Tokyo as a derivatives trader, and eventually back to the U.S. to lead an endowment at Grinnell College. His international experience provided a unique foundation for his current role at WashU, where he emphasizes a concentrated, opportunistic investment approach.

Investment Philosophy and Portfolio Construction

Grinnell Endowment's Buffett-Like Approach

Scott highlights the distinctive investment philosophy of the Grinnell Endowment, influenced by legends like Warren Buffett. Unlike the traditional Yale model, Grinnell focuses on identifying exceptional individual companies and maintaining concentrated exposures to leverage long-term growth.

"Let's find great individual companies, great partners, and see if we can leverage those relationships to put concentrated exposure into individual positions that we can compound with over really long periods of time."
— [17:58]

Portfolio Evolution at WashU

Upon taking the helm at WashU, Scott undertook significant portfolio restructuring to align with his investment ethos. This involved reducing the number of external managers from over 100 to about 30, concentrating exposures, and integrating individual securities to enhance portfolio performance.

"We've probably turned over 70, 80% of the original pool... it's a very, very different looking portfolio than it was when I started three years ago."
— [21:28]

Generalist Team Model

Emphasizing a generalist approach, Scott's team avoids being siloed into specific asset classes or geographies. This flexibility allows for capital to compete across various opportunities, fostering a dynamic and responsive investment environment.

"Nobody's kind of married to any one geography or asset class. And we have people who have historical experience in privates or publics and tend to have more relationships there."
— [27:26]

Manager Selection and Due Diligence

Selective Partner Criteria

Scott outlines a rigorous manager selection process, prioritizing small, concentrated managers with long-term investment horizons. The team avoids systematic and macro strategies, focusing instead on managers whose portfolios align closely with WashU's investment goals.

"We're looking for people who have a long-term view... we typically stay away from systematic and macro."
— [22:50]

Bottom-Up Evaluation

The evaluation process centers on a bottom-up approach, examining individual investments rather than solely assessing managerial processes. This method ensures that each position contributes uniquely to the portfolio's diversification and performance.

"We're trying to concentrate our exposures in individual investments that completely idiosyncratic outcomes over some period of time."
— [29:51]

Co-Investing and Relationships

Building strong relationships with managers allows WashU to participate in co-investments and set up Special Purpose Vehicles (SPVs) for specific opportunities. This collaborative approach enhances WashU's ability to capitalize on promising investments without overextending its resources.

"We'll set up an SPV and still pay them, like they'll manage the position for us and fee and carries."
— [42:57]

Challenges and Team Dynamics

Winnowing the Manager Pool

Transitioning to a more concentrated portfolio required difficult decisions, including terminating relationships with managers whose strategies no longer aligned with WashU's objectives. Scott emphasizes the importance of team cohesion and collective decision-making in navigating these changes.

"We put in redemptions for almost half the portfolio in the first several weeks."
— [22:50]

Team Adaptation and Performance

Despite the initial challenges, the team's adaptability has led to enhanced portfolio performance. Scott credits the team's embrace of the generalist model and their ability to manage a concentrated portfolio effectively.

"The team has done just phenomenally well. And I think it's really added a ton of value to the portfolio over the last couple years."
— [28:18]

Investment Process and Strategy

Focus on Idiosyncratic Opportunities

WashU's strategy centers on identifying investment opportunities that are uncorrelated and idiosyncratic, thereby reducing overall portfolio risk while enhancing returns through concentrated bets on high-conviction ideas.

"We're looking for opportunities that aren't based purely on our macro view of the world. But for us to go above that, again, we would have to have a significant view of downside, really be comfortable with the underwriting process."
— [37:27]

Geographical Diversification

Scott highlights WashU's interest in frontier and emerging markets, where the team has successfully identified undervalued opportunities, particularly in regions like Africa, Bangladesh, and Russia.

"Emerging and frontier markets for us has been a big bright spot in the portfolio... Africa is probably where we're spending more time."
— [35:15]

Risk Management and Position Sizing

Position sizing is handled with an artistic approach, balancing the potential for significant returns against the ability to withstand downside risks. Scott notes that each position typically represents a meaningful but manageable portion of the overall portfolio.

"If we're not willing to put 1% of the portfolio in it, then like that's not a lot of conviction."
— [37:27]

Lessons Learned and Future Outlook

Understanding the Bear Case

Scott underscores the importance of comprehensively understanding the downside risks associated with each investment. This approach ensures that WashU can navigate uncertainties and maintain portfolio resilience.

"Make sure you understand the bear case on every investment... overestimating your ability to underwrite the downside."
— [51:14]

Governance and Autonomy

A supportive governance structure and board alignment have been pivotal in enabling Scott and his team to implement their investment strategies effectively. Autonomy allows for flexibility and responsiveness to market opportunities.

"Governance process drives so much. And the institution here has just been amazingly supportive."
— [46:16]

Commitment to ESG and Diversity

While not adhering to a strict Environmental, Social, and Governance (ESG) mandate, WashU integrates ESG considerations into its investment framework by seeking partners with aligned moral compasses and diverse leadership.

"Over a third of our partners, either in the US or even more internationally, are managed by people of color or female heads."
— [55:03]

Future Strategies

Looking ahead, Scott anticipates continuing with the current investment approach, focusing on concentrated, idiosyncratic opportunities without significant alterations to the overall process.

"I don't think we're going to do things much differently over the next five, 10 years."
— [52:38]

Personal Insights and Reflections

Hobbies and Daily Habits

Outside of his professional life, Scott cherishes activities like downhill skiing and fly fishing, which connect him to his Alaskan roots. His daily habit centers around continuous learning and staying intellectually curious about both his portfolio and global events.

"I always want to know what's going on, not just with the portfolio, but in the world in general."
— [56:30]

Pet Peeves and Life Lessons

Scott expresses frustration with inefficiency and unproductivity, emphasizing the importance of proactive problem-solving over complaining. A pivotal life lesson for him has been the value of listening over speaking and recognizing that success often hinges on interpersonal skills as much as on intelligence.

"Intelligence is only one small factor in people being successful... people who are really good at driving consensus, communicating ideas, great salespeople."
— [58:26]

Conclusion

This episode offers a comprehensive look into Scott Wilson's transformative approach to managing the endowment at WashU. His emphasis on concentrated, idiosyncratic investments, rigorous manager selection, and strong team dynamics provides valuable insights for institutional investors aiming to enhance portfolio performance through strategic capital allocation.

For more detailed discussions and future episodes, visit capitalallocators.com.