Capital Allocators – EP.470

Guest: Jay Ripley, Head of Investments and Deputy Managing Partner, Global Endowment Management (GEM)
Host: Ted Seides
Date: November 10, 2025

Episode Overview

This engaging episode of "Capital Allocators" features Jay Ripley of Global Endowment Management (GEM), a leading $12B endowment-style OCIO. Host Ted Seides and Jay discuss GEM’s approach to identifying and backing emerging managers across private equity, venture capital, and hedge funds. The conversation covers Jay's transition from GP to LP, what makes for successful manager selection, the evolution of independent sponsors, strategic portfolio construction, and how GEM maintains its edge in a rapidly changing institutional investment environment.

Key Discussion Points & Insights

Jay's Background and Career Path

• Military Upbringing and Tolerance for Uncertainty
  • Jay shares how moving frequently as a military brat built his ability to tolerate uncertainty and discomfort.
    • “Being willing to sit with discomfort is something that a lot of folks struggle with. That upbringing has been helpful for me...” (07:22)
• Early Finance Career
  • Started in investment banking at Wachovia during the pre-GFC boom and crash, providing valuable insights into risk and business cycles. (06:11-08:51)
  • Moved to Stonepoint Capital (private equity), where he focused on financial services and worked closely with owner-operators, developing a partnership-driven mindset. (08:53-10:43)
• Transition to GEM
  • Sought an owner-operator role with exposure to broad investment opportunities; GEM’s structure as an independent, employee-owned firm appealed to him. (12:41-14:12)

LP Perspective & Manager Selection Philosophy

Transition from GP to LP

• Surprised by Aggregate Returns
  • “Ground level observation... brilliant people...[but] the aggregate level of results that were net to an LP were more in accordance with what you expect from the market. There really weren’t the outlier results.” (14:16)
• Discovery: Excess Returns Come From Early/Emerging Managers
  • “If you wanted to do that, you needed to go early and you needed to back emerging managers. And so that was a real narrative violation and surprise for me...” (16:16)

GEM’s Systematic Approach to Emerging Managers

• Buyout Manager Selection
  • Emphasizes the apprenticeship model: “We think that as a general rule, we need to have an opinion on the firm you came from to have an opinion on you.” (17:12)
  • Maintains active cataloging of firms and ongoing mapping for potential spinouts.
  • Focuses on identifying those with differentiated skill and a culture of “asymmetry.”
• Sourcing Managers
  • Dedicated investment sourcing team leverages broad networks, including alumni, placement agents, and other intermediaries. Deals often refer back to earlier GEM-backed managers. (19:31)

Spinouts and Independent Sponsors

• Who Leaves to Start a New Fund?
  • Distinguishes ‘risk takers’ who always intended to spin out from ‘opportunists’ reacting to changing economics or fund prospects. (19:53)
• Supporting Independent Sponsors
  • Recognizing barriers for long-tenured professionals (no track record portability, LP relationships non-transferable), GEM developed a dual program:
    1. Earn high returns in a less efficient market
    2. Co-invest pre-fund to underwrite intangibles: “Willingness to walk away from deals...correlates strongly with long term success.” (26:36)
  • The path for many is: deal by deal → demonstrate skill → raise fund one. (22:34)

Attributes of Successful and Unsuccessful Managers

Success Factors

• Narrow Initial Focus: Encourages new managers to start with a niche/swimlane:
  • "I would go the other way, I'd go narrow to start…out of the gate, there are thousands of you out there. You've got to have some way that you can differentiate yourself." (29:40)
• Enduring Partnership Mindset: GEM values managers with a long-term attitude towards LPs rather than pure deal hunters. (31:05)
• Resilience and Transparency: Particularly emphasized when investments go sideways. (34:43)
• Diligence & Network Building: Especially for venture, the durability of the manager’s network is critical.

Pitfalls

• Overstating Breadth at Launch: New managers trying to cover too many industries at first dilute their pitch. (29:40)
• Transaction-Oriented Sponsors: Pure “deal finders” lacking operator skills or partnership mentality often move on when things go wrong. (31:07)
• Co-Investment Assumptions: Jay warns against LPs assuming co-investments automatically deliver better outcomes, seeing efforts to “double fund size” as potentially distorting. (64:27)

Venture Capital and the Power Law

• Different Life-Cycle Dynamics: In VC, early networks decay quickly—especially for operator-spinouts (i.e., fund 1–3 at “Airbnb alumni” funds), so ability to renew deal flow and relationships is essential. (35:55)
• Fund Sizing & Ownership Discipline: Pushes back against raising larger funds without increasing meaningful company ownership. (35:55)
• Persistence of Results: Less persistent in VC, especially micro/seed—success tends to be idiosyncratic rather than repeatable. (40:49)
• Portfolio Construction: Generally, GEM aims for about 60% buyout, 40% venture in portfolios, reflecting both return and liquidity characteristics. (42:29)

Public Markets: Hedge Funds & Long-Only

• Approach Mirrors Buyout: GEM backs day-one launches; looks for fund economics, liquidity terms, and direct manager access as keys to early investing. (47:03)
• Hedge Fund Strategy Focus: Tends to favor concentrated, long/short stock-pickers over larger pod shops; especially values short-side alpha (vs. closet beta). (50:14, 51:14)
• Long-Only Challenges: Fewer opportunities due to lower tolerance for benchmark underperformance and already strong index returns. (52:42)
• Endowment Model Wisdom: Early LPs have the power to add capital as top performers reveal themselves—a core advantage of being early.

Portfolio Construction and Top-Down/Bottom-Up Balance

• Diversification and Flexibility:
  • "Our portfolios are going to be a mix of mid and large cap, small buyouts and then some independent sponsors as well. We have some loose targets that we use, but…we don't want to be so prescriptive..." (44:17)
• Area of Interest Process:
  • GEM uses annual planning to set exposures by sector/theme, but avoids swinging portfolios wildly. For example, technology vs. life sciences in venture, or adjusting sector concentrations based on manager pipeline. (56:20)
• Manager Roster:
  • Generally maintains: 15 approved independent sponsors/incoming; reups with 15-20 managers on both buyout and venture sides. (46:22)

Staying Ahead: Prepared Mind & Use of Technology

• Signal Detection:
  • GEM is exploring AI and automation tools to process deal flow faster and maintain a “prepared mind” as inbound manager opportunities increase. (58:20)
• Challenge:
  • "I've been a little disappointed. It feels like the promise [of AI] has outkicked the solved problem." Jay awaits the day AI fully automates CRM tagging and note-taking. (59:33)

Owner-Operator Mentality & GEM’s Independence

• Fulfillment & Agency:
  • "It's been as rewarding as I anticipated...The beauty of having a small, independently owned partnership is that we can quickly come to consensus..." (60:19)
• Vision for GEM:
  • Jay aspires for GEM to stay independent, research-focused, and true to its roots, resisting the push to grow for growth's sake or diversify away from its core. (61:48)

Notable Quotes & Memorable Moments

• On Endowment-Style Investing:

  • "Any good endowment style investing starts with a good emerging manager program." — Jay Ripley (00:00, 47:03)

• On Navigating Uncertainty:

  • "Being willing to sit with discomfort is something that a lot of folks struggle with. And I'm not saying it's easy or I always am able to do it, but that upbringing has been helpful for me..." (07:22)

• On the Real Returns of Private Equity:

  • “Ground level observation is brilliant people...Then the aggregate level of results that were net to an LP were more in accordance with what you expect from the market. There really weren’t the outlier results.” (14:16)

• On the Risk of Chasing Scale in Venture:

  • "We see that they want a bigger fund size, but they don't want to buy more ownership. And that's like saying, hey, I want to start paying 15 times EBITDA for companies, but this company will grow really large and so it'll be okay. At some point that math will break down." (35:55)

• On Differentiation for Spinouts:

  • "Go narrow to start...because out of the gate there are thousands of you out there. You've got to have some way that you can differentiate yourself." (29:40)

• On Co-Investment Hype:

  • “I've been surprised in many cases that there's an assumption that [co-investment] is better…If it produces an outlier return, it's likely that one deal drove that. If you'd start from a simple basis, the idea that the one of those 10 was the one you co-invested in is not likely.” (64:27)

• On the Power of Agency:

  • "The big thing for me is you can just do things. The world will bend to your will in a way that you wouldn't expect if you have a viewpoint..." (67:48)

Timestamps for Important Segments

• 00:00 — Jay’s opening: Why emerging manager programs matter
• 06:11 — Jay’s career beginnings; lessons from banking and private equity
• 14:16 — Transition from GP to LP; surprises in private equity returns
• 17:12 — Sourcing and selecting emerging buyout managers at GEM
• 22:34 — Building GEM's independent sponsor program: why, how, and what to look for
• 29:40 — Advice to spinouts: focus, not breadth
• 35:55 — How venture manager selection differs from buyouts; evaluating networks and power law outcomes
• 42:29 — Portfolio construction: buyout vs. venture allocations
• 47:03 — Public markets: approach to day-one hedge fund investing
• 51:14 — Challenges and philosophy for long-short and long-only allocation
• 56:20 — Top-down vs. bottom-up manager selection
• 58:20 — Use of technology and data in sourcing
• 60:19 — Owner-operator mentality; fulfillment at GEM
• 61:48 — Looking ahead: GEM’s independent vision and enduring focus
• 64:27 — Investment pet peeve: the myth of co-investment value
• 67:48 — Life lesson: "You can just do things..."

Conclusion

Jay Ripley's frank, insightful discussion provides a practical blueprint for endowment-style manager selection with a people-focused and innovation-driven philosophy. He highlights the vital advantages of backing emerging managers early, the importance of nuanced partnership evaluation, and the agency afforded by remaining a nimble, independent investor. For allocators and investment professionals seeking competitive edge in both private and public markets, this episode is packed with actionable wisdom.

[Compiled and summarized by podcast summarizer AI. Episode transcript and all attributions are verbatim from the original recording.]