Christy Hamilton (3:29)

Honestly, it was when we first talked about the White Paper. So pretty soon after I joined Kaya going over the TPA approach. I think at that point everyone had already met with the organizations that had agreed to do the paper with us. And so it was me getting up to speed on this because I'm going to talk about this more in a bit, but one of my first knee jerk reactions was, well, we did that too. So when you think about the four pillars of it that we've come up with, I know you and I have talked about this, John. I think the initial thought process was we do all of those things and then the more I learned about it and the more depth I got on the topic itself, I realized, okay, well not exactly. And that all of this stuff actually exists on a spectrum as we know. So I think it's an interesting shifting mindset for me, which we'll cover in a bit after we share with everybody what all of this means. But again, my initial was oh, this isn't new, this is just a repackaging, but it's really not. What about you?

John Bowman (4:18)

I think new packaging is a good way to put it. And that progressive discovery over the last two and a half years. And we're going to walk through that experience with you listeners today. But I found in that light a lot about this background segment. In some sense I've been rehearsing this episode in my head for a year and a half. But here's the approach I plan to take. I'm going to first take you back and bring you on our adventure rather than answer the question I just posed. Christy, I want to bring you into the experience and perhaps I'm a bit self absorbed in my own delusion here, but I think you're really going to learn from and enjoy the narrative through the eyes of how we encountered and have we discovered and we found out a lot of this information and got a better understanding, a more crisp understanding of what TPA really is. Oddly, what this means is I'm not going to define TPA in a proper thorough sense until a little bit later. So on the contrary, I want you to discover along with us the meandering, uneven, unexpected journey that we took and the fellowship that joined us on this quest. Now, certainly I'm going to be dropping a lot of breadcrumbs on this expedition, so if you aren't familiar at all with the concept of tpa, you're going to have a pretty strong architectural rendering, you might say, of what it is even before we fill out and flesh out your understanding later. But I'll make sure we circle back and tighten up our understanding in preparation for our discussions. And that discussion, by the way, a little bit later will be with Ben Simile, who is the CIO of Future Fund, and he was one of the authors Future Fund and Ben explicitly of this paper. And Jane Bach, who is Head of Investments for Asia and also a KAIA Board member, I should mention at wtw, who was also a contributor. So before we do that though, let's get started and relive the last year and a half or so. And the adventure begins in a Starbucks, of all places, in Singapore in the autumn of 2022. And I had just arrived from a few days in Sydney where I had met with i3 the Investment Innovation Institute, which is an Aussie media and content producer for institutional investors. And by the way, short side note, for all you listeners, what Woter and Teek have done with that outlet is outstanding. So I'd highly commend the i3 podcast and their editorial work regardless of this particular topic. But anyways, based on that discussion, I had read a fascinating interview on the plane to Singapore that they had recently conducted with a gentleman by the name of Chum Sui Chang who was the recently appointed at the time head of Total Portfolio Strategy at gic. And this topic was an interview about total Portfolio approach. Now, to be clear, as Christie just said, we had heard the vernacular at that point a growing buzz on the topic and what did it really mean to have a holistic view of the portfolio? Well, of course we all do that. But there were a few lines in this interview that started to strike me and really pluck an interest. And those were the following. First, there was a very clear condemnation of strategic asset allocation's main shortcoming. Chum said in that interview, quote, Most SaaS are blunt, focusing on broad asset classes and their historical performance. However, today we face several policy and macroeconomic inflection points that could significantly change the trajectory of markets. End quote. Second, there was also this assertion that TPA in particular gives them clear investment goals and allows for competition for capital amongst all investment opportunities. And we're going to unpack that quite a bit here in a few moments. And as a result of these two realities in the interview, given GIC's long term preservation mandate, they believe GIC believe that TPA gives them an edge in delivering those outcomes over traditional strategic asset allocation models. Now, the interview goes on to say that despite all this, that nearly nobody was doing this, perhaps five to six funds in the whole world, and that was it. So, Christie, I was simply arrested. That's a long flight, so there's plenty of time to be arrested by your reading on the plane. The reality was one of the largest and most respected capital pools in the world in GIC, estimated to be over a trillion Singh, or about 800 billion US, commencing a very disruptive transition to TPA that takes a lot of courage and foresight. So these were very bold claims that took my understanding of a total portfolio perspective to a whole new level. And here was my main revelation, and this is part of my answer. If Christie were to have asked me the same question on what I thought of TPA previously, TPA in my mind suddenly shifted from no longer just derivative overlays to allow for dynamic tilting of the portfolio, nor was it just a holistic risk management function, which I've come to realize are what you might call two artificial forms of total fund management that are often cited. This model that I was hearing for the first time was an evolution of the entire portfolio construction process as we know it. It wasn't necessarily throwing everything out, but it was a huge evolution along a continuum that was starting to take place. So I'm arrested, I arrive in Singapore and chum is gracious enough to spend a lot of time with me in that said Starbucks, walking me through the tenets of this approach. And the most memorable moment of that meeting was when he described TPA as what he called the fourth realm of portfolio construction evolution. And this gets to my continuum point I just made. These realms weren't chronological stages necessarily, but I would say these are my words, not his, but progressive levels of model sophistication that we've experienced over the last 50 years or so. So first, he said was the Norwegian model, which is largely 60, 40, or even in some cases 80, 20, pure public exposure to equity and fixed. Basically they own the whole global market on the public side. And then second, of course, the Endowment model. Now this was incubated, as we said in a prior episode, by the ford foundation over 50 years ago through a grant to the Common Fund. But obviously it came of age under David Swensen's leadership at Yale and most people actually use the Endowment model interchangeably with what they call the Yale model. And the Endowment model expanded the opportunity set well beyond public equity and debt to include substantial private capital and hedge fund allocations. Thirdly, this led to the Canadian Model or the Maple Model, which built further on those diversification benefits of the Endowment model by also empowering the CIO office and staff with much more responsibility and insourcing world class investment talent to the organization. And now as Chum went on the fourth realm, TPA borrows and builds on all these strengths that we've just described in those first few realms, but it liberates the team to design a portfolio that better represents their investment thesis for the future by harnessing all the talent and contributions towards the total portfolio instead of traditional asset class silos. And in the end, the headline the MIC Drop moment for Chum was that GIC thinks that they can harvest 200 to 300 basis points of outperformance versus the traditional SAA approach. So again, I used the word arrested a few moments ago. I continued to be just intrigued. I'm running out of adjectives to describe my intellectual interest, but here we had a few of the most revered asset owners in the world claiming a superior way to deliver long term investment outcomes. And yet there was very little written content, discussion at conferences, formal education or any authoritative white paper that defined this. So if there was such a thing as Content Alpha Christie, this would be it. A topic that was perhaps game changing, aggressively challenged the status quo of nearly the entire establishment. And it was hidden as all good Alpha is in the dark, undiscovered corners of global dialogue. This is the native environment, of course, where Alpha sprouts and where value added thought leadership has its origin. So all of that left me inspired, but with this dilemma, a dilemma on what Kaya's role could be or should be on this topic. What do we possibly have to add with these folks in the room to this conversation? And here's where we came out from our humble beginnings, maybe 21 years ago. Kaya's MO really has been to press the industry forward to build awareness and transparency for formative strategies, you might say, modern capital allocation techniques and evolving trends, all importantly while remaining vigilant in protecting the interests of the investor. And that's why our new brand campaign Next is Here was less a signal defining a new path, a change in strategic course, but rather a bold decree of who we've always been and why we're so different from other professional bodies and credentialing organizations. And it was just that next is here DNA of Kaya that convinced us that every once in a while there's this generational movement or transformative change in the profession that obligates us Kaya to embolden our voice to meet that mission and that brand identity. And that's why I wrote in the executive summary of today's piece that hopefully you read that we believe TPA deserved the mobilizing oxygen that Kaya's global convening power could bring to the topic. So with the help of introductions from chum based on that GIC Starbucks meeting, we began a global roadshow to recruit to see if we could pull together a bit of a team to write this paper. So we were first led to Charles Hyde. Charles is the head of Asset Allocation for New Zealand Super. And by the way, I should give credit to where credit is due here and say that New Zealand super is where all of this really started. All the way back in 2001. After extensive parliamentary debate, New Zealand super was set up to begin pre funding future superannuation or pension payments to its citizens. So imagine that the government had the foresight more than 30 years before outflow payments would even begin to start preparing for it withdraws. Shockingly, even today are still over a decade away. They won't begin until the2030s and won't be material until the2050s. So just a great case study in looking forward from the government. Well, after a setup phase including about a 2 billion initial funding from the government, the fund hired a gentleman named Paul Costello who was running the Superannuation Trust of Australia at the time. And he was brought in to be New Zealand Super's inaugural chief executive. And given the very long time horizon and liquidity drag, as I just mentioned, there wasn't a payment due for decades literally on the portfolio. Paul worked with the board and they call their board the Guardians at New Zealand super, which I think is the coolest thing ever. It's even better than the Avengers. But the Guardians to provide the staff with investment independence to construct a portfolio centered on maximizing total return with an allowable risk tolerance. And all this is going to sound very familiar as this episode progresses and these more simplified levers for portfolio construction eventually metastasize into the standard TPA toolset we now call reference portfolio and absolute return goal, which again we'll get back to later. So Paul, by the way, was recruited a few years later back to Melbourne, where he previously worked to be the first CEO of another fund in our company of Adventurers, Future Fund. So we'll get back to that story in a minute. But Charles Hyde, back to this discussion. He taught us that TPA is more what he called a, quote, state of mind than a uniform process or policy. And he underscored this idea of competition for capital I mentioned a little bit ago from Chum's interview with the idea that every marginal dollar of capital is competing for attention at the whole fund level. And as such, organizational silos around asset class specialty, trying to fill up their buckets, determined through the strategic asset allocation exercise, was a complete antithesis to the way they think. So they were intently focused on maintaining the broadest possible lens to assess the true opportunity cost of every decision. And by the way, I love this because it rhymes with a slogan from that very Next is Here campaign that I mentioned because we use this phrase, everything is an alternative. And that's exactly what competition for capital within a TPA framework is meant to do. Everything is an option. And New Zealand super, by the way, is nearly 50 billion US today. So that was New Zealand Super. We next traveled to Toronto, number two on our list. And we were welcomed by Jeff Rubin and Derek Walker of CPP Investments. And Jeff and Derek run the one fund strategy and total portfolio design for the $450 billion pension fund. And CPP was set up in 1997, so it's the oldest of our company here by the government of Canada to invest the proceeds of individual and employer contributions for all of its citizens. But from a tour through historical annual reports, it wasn't until April 1st of 2006 that the reference portfolio and total Portfolio approach were introduced. And literally in each subsequent annual report from 2006 to today, that approach has been further and further refined and advanced. It has evolved every stage and every year since then. Jeff had, by the way, the most succinct definition of anyone we spoke to when he said, quote, TPA is one unified means of assessing risk and return of the whole portfolio, end quote. However, there's another big inflection point just before we leave CPP and their evolution about 10 years ago, so the mid teens that played a hugely influential role in how they specifically execute. Again, this is a continuum of a set of variations on a theme on total Portfolio approach there up in Toronto. And that is the timeline when Andrew Ang, currently BlackRock's head of Factor investing, enters the plot. And some of you might recognize that name as he is now synonymous with factor investing lore. But Andrew at the time was a very well pedigreed and published academic at Columbia for almost 20 years. But he also regularly consulted with large asset owners, one of which was CPP and then the early 2010s. Into the teens, Andrew spent some time as a resident consultant in Toronto, helping CPP reimagine portfolio construction with a factor lens instead of an asset class taxonomy. And shortly after this and just before he joined BlackRock, Andrew published his seminal article as well as a book on that same subject that has gone on to play a role at almost every TPA shop around the world, displacing the SAA buckets that all of us are used to. So we spent a good portion of a morning with Jeff and Derek, who helped us understand their investment process with that very prominent use of factors. Thanks to Andrew. And Jeff articulated his expectation that everyone would eventually be traveling up what he calls this factor pyramid. This is all within the context of tpa. And this departure from asset classes and this direction of travel he articulated for the industry starts from pure mean variance optimization or basically traditional saa, to factor aware, he called it, to factor adjusted and to finally the fully enlightened state of factor optimize, which is where their destination is. Up at cpp, we also spent some time outlining the typical impediments to adopting tpa, namely inertia related to governance, culture and compensation, and how they've tried to overcome some of those challenges. And that's going to become a big, big sub theme again as we continue this conversation. So our last stop, Future Fund in Melbourne with Ben Simield. Now, I've mentioned his name. He'll be on this show in this episode in just a little while. At the time he was the deputy CIO of portfolio construction. But I must insert here, Ben was promoted to CIO in the midst of this project and we got to ask ourselves, Kristi, is that just a coincidence? I don't think so. I'd like to think we had something to do with this big promotion. I'm going to imagine that and we'll ask him this, that we put Ben on the map. I say this in jest, it's absurd, but I'm just going to rest in that. Nonetheless, circling back to our history, you might remember I left you a little cliffhanger listeners, that when I was crediting New Zealand super to have probably been the first place that the original seedlings of TPA were planted. I'd say it, it was at Future Fund where this really flourished. I began to say that only a few short years after New Zealand launched their Super Fund, the founding CEO Paul Casello was poached and moved back to Melbourne to be the founding CEO of Future Fund, Australia's sovereign wealth fund, designed to strengthen the Commonwealth's fiscal position as this population aged in the coming decades. And in Paul's formative development of the Future Fund, he partnered deeply with the consulting and investment advisory team at wtw, who also had embedded TPA tendencies and instincts at the time, even though the language and the jargon hadn't really developed yet. And the head of the Australian practice from WTW working with Paul at the time was a guy by the name of David Neal. Now, interestingly, about a year into their work, Paul hired David to be the Future Fund's first cio. And it was their leadership duo where the reference portfolio and the absolute return goals that Paul had started at New Zealand super fully crystallized with the cultural and governance elements for the first time. And it began resembling today's modern total portfolio approach. So, sadly, Paul passed away in 2018. But if you're interested in naming a founding father of tpa, I think Paul, with a huge assist from David Neal, would have to be about as close to that person as you could get. So back to our chat with Ben at today's $190 billion future fund, he stressed that TPA thinking was threaded throughout every decision, forcing investment teams very intentionally to think about the application to the entire portfolio rather than just their own asset class. And most importantly, the more dynamic opportunistic approach that is TPA allowed for a portfolio. And I love the way he put this, that much better represented the secular view of the staff and board on where the world was going versus where we've been, which is what SAA anchors to compensation at the Future Fund has also been restructured around meeting that total portfolio goal. And last thing I'll mention here very explicitly, I want to underscore this because this is much more semantics to Future Fund, but they prefer the phase joined up portfolio to describe this entire movement as they believe it not only distinguishes from the counterfeit versions I alluded to earlier that aren't fully tpa, but it more deeply humanizes and I love that the importance of alignment and unity of talent, incentives, processes and decision making that TPA requires. Now, what I haven't mentioned as we've sequenced through these four relationships and the multiple discussions of these asset owners is that shockingly, fulfillingly, each one was thrilled to participate in authoring and founding asset owners. Now, what I haven't mentioned as we sequenced through these four relationships and multiple discussions is that shockingly, fulfillingly, each one was thrilled to participate in authoring and developing a definitive summary of tpa. That was elusive, as I mentioned earlier. So we had our four enterprising and founding asset owners on board, representing over 1.5 trillion in AUM. Just thrilled with that. But our little fellowship needed one more additional player. The discovery, and I would call it that, of WTW's prominent early role I just described, particularly across Asia Pacific, in working with funds of various shapes and sizes to transition to TPA was a perspective that we thought was missing. In other words, in addition to complement these case studies at these Big four funds, an unbiased voice elevated beyond a singular personal experience that could speak to lessons learned, common pitfalls, decision trees, successes, failures, and the conditions upon which TPA might be right for you. The reader, the listener, we thought would be a great addition. So WTW's Jane Bach, head of Investments for Asia Kaya board member, who I've just mentioned is a guest today, agreed to write our critical closing piece that helps bring all these lessons from the asset owners to life and so sojourners, that closes out the journey itself. And I hope, as I had expected, that you were able to live vicariously through that retold experience and it was as enjoyable to you as it was to us. Kristi, you alluded to this a moment ago. You came in midstream. I think these four asset owners had given us their nod. We had broke the huddle at that point and said yes, let's go team. But I have to imagine this adventure taught you a lot of things too. Having come in midway through the process.

Christy Hamilton (24:34)

I will start by saying, and I say this repeatedly and I always want to just caveat this at the beginning. Managing capital is not astrophysics. It is not rocket science. It is not brain surgery. But if it's done well, it is involved. And I think that by its very nature of that involvement and just lessons learned, there are a lot of endowment model organizations who have naturally incorporated these TPA like practices by necessity. When I look back at a lot of organizations I've worked with, both in a advisory role on the consulting side and also as an asset owner or as an lp. When I looked at the four parts of tpa, I would think, well, we had governance, I looked at the portfolio holistically. I think about things in term of competition for capital. One of the great examples of this was I never understood why we have a private credit bucket. I think that private credit should actually have to compete with equity. And I think that anytime that you're breaking out private equity and public equity, I think that you're doing it wrong. Because I think that those two things are relative to one another. Sometimes the opportunity set's going to be better, but ultimately the equity side rolls up into the same risk category to me, or at least that's the way that I think about it. So I never really like breaking things up by buckets anyways. I think the one that I would pause with, that I'm still wrapping my head around is the factor analysis and the factor pyramid. I've always been a bit skeptical because when I take it to the absurdist point, there is no alpha, right? If you can tinker with it and be like, oh, well, this came from here. But ultimately it's, well, it is alpha, because if you couldn't get that access without this other person, then ultimately there is value add there that you can't get in the broader market. And then also I would think, oh, well, we had culture too. We tried to really align everybody's incentives with the broader incentives of the portfolio. But what I came to, and John, you were really instrumental in this, is that ultimately you can do all of these things, but if you are rolling up your portfolio view to a strategic asset allocation level and that is how you manage it internally, then you are not doing the same thing as tpa. And it is very different just in the way that you approach the portfolio or that the organizations that we work with approach the portfolio. And I finally kind of realized that just the ultimate roll up is actually one of the biggest points of tpa. So I think a couple of other things or a couple of other notes that I would like to make that I found really interesting about all of this. And I have a blog post coming out about it, hopefully around the same time as everything else drops. But I started looking at it and thinking, okay, well, if it's just a matter of roll up, what difference does it actually make? And ultimately, I think what you end up with is a portfolio that's a little bit more geared to growth and that shows up in the numbers. So one of the things my blog post is going to cover is I looked at it like, why is this important? Why should anybody care? Why should any endowment manager or CIO actually care what an organization on the other side of the world is doing? And it's because over the past five and 10 years, they've added 200 basis points over the top 100 Nacubo list in terms of performance. So I'm going to break that down a bit. And I think that there's a lot of reasons for that. Obviously there's always going to be caveats when you compare organizations. It's not going to be apples to apples. But again, thinking through the growing pains that our industry has, I love at the very least that the TPA organizations have looked internally at what they need and what their organizations are trying to accomplish and built a portfolio around it versus just taking a stock endowment model, quote unquote or strategic asset allocation model off the shelf and trying to make it apply to their hospital or to their pension or to their sovereign wealth fund. Because ultimately, when you look at strategic asset allocation, if you are an organization that uses SAA and you're just using an average of the past 30 years and not really looking forward or thinking about how the needs of your organization or the performance expectations of your organization, that you're even doing SAA wrong, and maybe incorporating some of the TPA stuff would help. I think that anytime that you have a perpetual pool of capital that you need and you have the resources to make great portfolio decisions, to estimate things, to be able to vet and actively manage active managers that can add those things to your portfolio, I think, and also just being ingrained in the culture of the United States and particularly that strategic asset allocation, there are great components of that. But ultimately I think that historically we've done a horrible job of just taking those things off the shelf and saying, oh, the endowment model works for pensions or oh, the endowment model works for healthcare, or the endowment model works for this super niche foundation when it just doesn't. So I really do love that asset management exists along a spectrum. And so from very pure saa, which is basically bucket filling in a lot of ways, to pure tpa, which is not doing that at all, and to really look at the portfolio holistically. I mean, I borrow a comment from my husband and say he likes to talk about dining a la carte from people's best ideas. And I think that both groups can do that with each other, particularly given that TPA organizations have done so well.

John Bowman (29:24)

You said so many good things there. If I had to oversimplify why folks are even considering a change, and I tried to talk a little bit about that with the Chum article and replaying some of the highlights of these initial introductions we had with the asset owners. But it's what you said. We tend to over bucket. And it's not that as with any model, the Canadian model, the Norway model, the Endowment model, tpa, they are neither good nor bad in their essence. But we tend to exaggerate and emphasize certain things that bring rise to shortcomings and failures. And as a result of saa, we have over bucketed and really constrained ourselves. And that's what I think most of this response is to. And I think also speaking of, and I'm going to talk about this in a minute again, artifacts or apparatus that enters our psyche related to SAA alpha and beta definitions, even themselves, like what you said earlier, I think just as overweighting certain betas from an asset class perspective can give rise to alpha, if you want to think about the definition that way, overweighting certain betas to factors can give rise to alpha. So I think that's the rewiring process that we need to go through. So I love those comments there. Before we move on to our guests, I did as I promised, want to rewind and actually put some finer points on the definition itself of total portfolio approach. As I said, I hope listeners, as you're reflecting and digesting that you've got a pretty good idea. There's probably still a few moving parts and dots that aren't connecting fully. So I just want to quickly touch on that before we invite our guests in studio. And I think the best way to do this is to contrast TPA with what the very large majority of us have grown up with, which is strategic asset allocation. To equip us for this discussion with Ben and Jane so since the arrival of modern portfolio theory in the early 1950s by the legendary and now late Harry Markowitz, we have been sturdily anchored to this philosophy when constructing portfolios and MPT's most tangible heir, strategic asset allocation and all of its apparatus, mean variance optimization, efficient frontier benchmarking, alpha beta definitions, not to mention our organizational charts, compensation structures, academic coursework. Kaya is guilty of this and performance reporting have perpetuated this worldview in recent years. However, partly because of the members of this illustrious company that we've put together, SAA's embedded weaknesses have begun to be exposed. I mentioned the over bucketing, but these would include a tendency to breed silo behavior or unhealthy competition for resources and attention, or unrecognized duplication or disjointed risk exposures across the portfolio and difficulty in managing the capital pool holistically around a view of the future, as I think Ben said. But system inertia is Deep and investment management is no exception. As I like to say, SAA is the water we swim in. And the path of least resistance is simply to operate within the machinations of what's familiar to all of us. That's human nature, but it's also most comfortable if you're sitting in the CIO seat. And it's on this point that I want to highlight some great work on this exact subject. A woman named Suzanne Duncan and I cut our teeth together as young professionals at State Street 25 plus years ago, and she became a real friend back in the mid to late 90s as we found our way and stumbled through this crazy industry as fresh grads. And she went on to really carve out a wonderful reputation as a researcher and thought leader at what was then called IBM's Financial Service Practice. And then State street had the wisdom to bring her back to lead what they called their center for Applied Research. Now, we ended up working together on a few of these signature reports when I was at CFA Institute. But regarding this point of a fish doesn't know they're in water, I was reminded of a brilliant publication Suzanne led that they called the Folklore of Finance. How Our Embedded Beliefs and Behaviors Sabotage Success. I love that the report states that, quote, folklore is the collected learned lessons of all that have come before. And it provides a heuristic, a mental shortcut for the quote, right ways to think or behave, end quote. So the problem is they go on to say is that folklore, particularly the unconscious portions, are flawed and psychologically paralyzing. And she named some of these entrenched beliefs that rhymes with the motivation behind this entire TPA report. These artifacts that she calls them, that get in the way of our innovation and our client first mentality sometimes are, and this is going to sound very familiar, the over reliance on benchmarks, asset classes, market cap, weighted indices, VAR models, style boxes. So Suzanne, if you're listening, I owe and we owe a great deal to you on how we frame this episode and report through your work over a decade ago. So we've linked to a couple of those reports in the show notes. I would encourage you to check them out. They are evergreen and they are prophetic in many ways. So given all this anchoring tendency we suffer from, I think the best way to define TPA is to distinguish it from saa, as I said, and the default position for which most of our listeners approach this discussion. And I want to make that comparison across three marks. Three big differences, categories of differences, governance first, portfolio building blocks second, and culture third And a quick disclaimer before I jump to the first because perhaps the most important element that Christy touched on, and I've alluded to in trying to get your arms around this new approach, is that it's critical to state that first of all, TPA is not a monolithic methodology that can be applied off the shelf. Rather, it has both hard and soft elements that create a spectrum, a continuum, as we've said, of process variations. Jane Bach had this great quote in the paper to punctuate this point. She reminds us that, quote, TPA is not a specific model with a singular destination, but rather a range of approaches that can be tailored to the unique needs of different asset owners, regardless of their size or complexity. End quote. So there's no uniform checklist, nor is this podcast or the Thought leadership paper itself meaning to represent an instruction booklet that walks you through how to assemble TPA at your organization. It's not necessarily even a commendation that you should move immediately to this. It's a discovery process and it's a list of questions and potential benefits for your consideration is the way I'd best put this. So as I describe our journey at each participating story, even these leaders have flavors of tpa. New Zealand super and cpp, you might remember, stood up the reference portfolio concept very early, but took several years over a decade in some cases before that, marinated enough to embed it deep into the investment process. Future Fund had the benefit of what I'd like to say being born that way from the beginning, given the learnings and empowerment that Paul Costello and David Neal brought. New Zealand Super, Future Fund and CPP either never had a policy portfolio meaning asset class, weights or ranges, or they've since abandoned it. Gic, on the other hand, maintains a long term North Star as they put it, policy portfolio even though they continue to transition to more of a reference portfolio thinking. And as you heard me describe, CPP uses deep factor analysis to construct portfolios ex ante where the others use it more as a check and ex post. Some of these plans are farther along in revolutionizing compensation around the total portfolio than others. So all of this to say is that there is no right way or single switch to pull. This is a multi year process that takes change management, courage, patient leadership, intimate alignment with the board, and really strong communication. And even from these iconic pioneers this has been much more evolutionary than revolutionary. So with that, briefly these three main marks of differentiation versus saa. First, as I said, governance. Bensonield has a great quote in the paper that states that governance is the Means by which this entire structure is held together. Without a right sized and healthy governance structure committed to this, the whole thing is really going to crumble. So, so important to get this right. It's where it starts. In fact, I wouldn't move any farther if the discussion with your board fails or stumbles along. In a TPA environment, the board or investment committee typically shifts towards two very simple tools to govern and exercise their fiduciary duty. The first tool is a quantified metric that defines the plan's risk budget. So rather than an asset allocation map with ranges of acceptable exposures that boards are traditionally conditioned to approve and to manage and to oversee, in this case, the risk budget is often called a reference portfolio and it's typically an expression of the plans or the fund's tolerance of equity like risk that they can handle. So for example, CPP's reference portfolio is 85, 15, 85% equity like assets. New Zealand super is 80:20. Now obviously this is a function of the time horizon of the purpose of the fund and the liability streams. And in these particular cases, I want to be clear, these are near perennial sovereign pensions, so they're able to accept much more volatility and draw down risk than other more temporal funds. For example, and Christie mentioned this pensions already paying benefits or endowments that provide a significant portion of the University's operating budget. You'd obviously need a less aggressive risk budget, but I think the concept holds up. Whatever is decided, as long as this risk budget is maintained and honored at the portfolio level, the asset class buckets are not important, or at least they're much less important. The second tool on this governance side, in addition to the reference portfolio, is what I call the goal of the fund. How do you measure success year to year and cycle to cycle? Well, in most cases, boards and the investment teams are used to extensive performance measurement processes where the fund is compared to some blended passive equivalent of your policy portfolio, your asset allocation, as well as maybe passive benchmarks for each asset class. And in some cases Kristi mentioned a Kubo, maybe even a peer group, we tend to go a bit crazy with benchmarking. Again, this is another relic or artifact of our SAA wiring. TPA takes a very different view. Because risk exposures transcend asset classes in assembling the portfolio, and because the risk budget allows for much more flexibility, benchmarking against a traditional SAA passive portfolio no longer really makes sense. So as such, most of these funds have moved to an absolute benchmark of core inflation plus a return. So for example CPI plus 3% could be a bogey that many of these funds are in the ballpark of the excess return on top of inflation yields a real return expectation that reflects both the risk appetite and the long term liquidity and growth expectations for the underlying beneficiaries. And these by the way I should mention are also typically multi year blended goals. This is not a year to year horse race. That is important to understand too. And again, I'm going to borrow from my friend Suzanne's great work when she was at State street and this was a different report that preceded the folklore one I cited earlier. This one was called the Influential Investor. This is in the summary of a 2012 publication. So again 12 years ago and they were confronting the reality of the data they had gathered in preparation for this report survey they had conducted. And the data suggested that our industry suffered from a gap between investor expectations and what we delivered to them as clients. And get this, our flawed hyper benchmarking mentality came up as part of the mismatch. The report says our research shows that now is the time for a new definition of performance, one that is highly personal to the investor. Success or failure will be measured by models that focus on the long term sustainability of returns defined in terms of value to the investor and articulated with full transparency. In the future, the investor will be the benchmark, end quote. So in other words, I love this. The true and only benchmark that matters must reflect client needs and investment outcomes and absolute return goal rather than an academic capital market expectation exercise that we typically go through. So instead of this asset allocation, governance and TPA is usually manifested in a reference portfolio and an absolute return metric. So as you might imagine, this means that TPA boards, on balance, much more deeply empower the CIO office versus the traditional SAA model. So that's governance. And it is, as Ben said, the fulcrum on which success depends. Second, which blocks do we build? What are the blocks that you're building this portfolio with? As you've already picked up, the fully expressed TPA models do not determine asset class weights, then assign those allocations to their asset class teams and then ask them to fill it up. At its essence, TPA requires each unit of portfolio allocation to earn earn its place by committing to investing each marginal dollar in an optimal way. So as we mentioned, while they must abide by the guardrails such as liquidity, risk, budget and resourcing, the fundamental discipline aims to ensure that the very best investment ideas are reflected in the portfolio at any given time, regardless of Asset class. So some of you might be wondering at this point, as I did, as I continued to peel back this onion, how do you reconcile the risk budget with the collection of best idea strategies at any given point to measure whether they are breaching the constraints that the board is meant to be overseeing? Well, we're going to talk a bit with Ben about how this works in practice. But it requires each current and prospective investment or manager, each strategy that you're incorporating to be disaggregated into its component parts of equity and fixed income, like exposure. Remember the 8515 or the 8020. Every strategy needs to be disaggregated that way and then summed up. All those are mapped up to the portfolio level to determine whether you're in line with the overall guidance from the board. And some have this middle step, as I mentioned, where they are first mapped to a factor exposure and then ultimately up to the reference portfolio. Now, as you might imagine, this is far from a perfect science. So I think about my old world. A long only IFA equity mandate or a core fixed income fund. Each of those fit very cozily into this binary segmentation. One is equity, one is fixed. But let's be honest, some assumptions need to be made on much more complex strategies. Like let's take for example distressed private credit. What do you do with that? These are equity kickers and those types of loans for the underlying portfolio companies that give it more of a hybrid equity debt exposure. And it maps to typical fixed income factors like interest rates and credit risk. But it also perhaps to some growth equity factors like momentum if the economy turns around. And some of those call options on the equity are exercise. So despite its lack of precision, that's the whole point. No longer is the institution at risk of unintended bets because you've stuck a very complex strategy in a bucket or duplicated exposures that typically plague the more siloed SAA team structure and process. You've got a much better grasp. Even if there are assumptions and mistakes made in how you disaggregate. You understand your bets and your exposures much better with this top down approach at any given time. And then third to finish up culture. So I mentioned governance, I mentioned the building blocks and then culture. If governance was what we call the fulcrum on which success depends, culture is the oxygen that gives it life and vitality. The CEO must nurture a collaborative to borrow future funds. Words joined up culture across the investment teams. The most important and difficult step to codify this change is what New Zealand super calls the state of mind. This is the soft, ordinary, everyday hand to hand combat of winning hearts and minds and communicating consistently around the primacy of the total fund to change behavior. Gic, you'll read in our report, writes about their one GIC mantra and CPP has off sites around its one Fund culture that obligates a realignment of investment team structure, middle and back office sophistication, organizational policies. As I already mentioned, compensation frameworks to align all activity incentives to the overall portfolio. A few of these funds actually have created very structured compensation schemes that combine both specific role or asset class performance with a portion based upon the performance of the overall funds. After all, as I think it was Steven Landsberg that wrote people respond to incentives, the rest is commentary. So we have to realize that compensation schemes often lead behavior and I'll close with this point. Sometimes I feel like this show is a partial advertisement for the Thinking Ahead Institute. We've mentioned them probably on four of the eight episodes so far, but the reality is they write wonderful research on important topics that very few other people are covering and TPA is no exception here. We've actually linked to their TPA content hub in the show notes and there is all kinds of research and info there. That was another vital source for both this episode and our whole journey I described earlier. So anyway, one of the charts they provide for those considering a transition is what they call a TPA Best Practices Checklist. We actually included this image in our thought leadership paper as well, but it outlines 13 best practice areas that are key to a migration to tpa. So things like risk budget framework, absolute return implementation, governance model, all things we've mentioned. And then it rates each of those practice areas on two dimensions, difficulty and importance, and there are only two. Just to underscore my point on culture, there are only two of the 13 that got the highest rating for both difficulty and importance, and those two were organizational design of team and culture aligned around long term one fund mindset. So said differently, you need to have the right people authentically living the total portfolio way. And that is not easy, but perhaps worth the hard work in the end on behalf of clients. So there you have it. There is our journey, my attempt to create some clarity around defining the differences here. And Christy, I will hand back to you for some final thoughts before we invite our guests into studio.

Christy Hamilton (47:31)

So I really appreciated that commentary, but as you were saying it, one of the things that I kept coming back to was there are definitely people out there listening right now who can't transition quite yet from strategic asset allocation for whatever reason, whether it be an unwillingness to do so or just it's so ingrained in the culture. And honestly, one of the things that popped into my mind while you were talking particularly about governance is obviously this is a structure that's not really tested legally in America at this point. And when I think about the fact that as a board member you can delegate responsibility of day to day management, but you cannot delegate responsibility of oversight, there is a comfort level with SAA that it's tried and true. And if our legal system has shown us nothing else, it's that sometimes it creates some of the most backward incentives. For example, with all of the lawsuits against defined contribution plans and over fees. So now everybody's basically only worried about fees versus building a plan that's best for their employees. There are all of these instances. So even if you have a block out there and you don't know how this can be applied, I just have three things that I wrote down based on John's points in particular and just some of the things that I've learned. And the first one is just ask yourself, why do we do this process or this thing or this structure or this portfolio management concept this way? And if your answer is because that's the way it's always been done, then reconsider if that is the best thing for your organization. So whether that be your governance structure, how you bucket things, for example, how you look at the portfolio holistically, how you look through analysis, just really ask yourself, is our current process that we do under strategic asset allocation serving us well? The second one is the way that we break down our strategic asset allocation. Are our buckets just lip service for the board? And I say this because quite honestly, having been in this world extensively and having worked with some of the smartest investors and been friends with some of the smartest investors, I know that sometimes the board gives you a mandate that 10% of your fund needs to be in fixed income. And all of a sudden that fixed income bucket goes from just deflation, hedging assets to high yield. It's got a lot of private kickers in there now. You got some distressed, you've got things that aren't necessarily deflation, hedging. And then in a 2008, you wonder why the heck your portfolio didn't withstand. The same thing happened, honestly in the wake of 2008 when we had low rates, the Barclays AG, the duration of that just exploded and everybody was just like, oh, it's okay. We have the ag, but when you really looked at your risk exposure of what was incorporated in the Barclays ag, it was not at all functioning in the way that most people would have assumed their quote unquote fixed income bucket was functioning. So just do a quick gut check, look through, and then do a deeper analysis, look through of what your buckets ultimately hold and if they actually hold what you think they hold. And then the last one on culture. Are there wedges in your compensation structure that create in groups or out groups that aren't intended? And I say that for example, because right now private equity is very big. It's a big part of your portfolio, obviously needs to have a lot of underwriting. You want to compensate your people on that team. Well, however, if you're dealing with maybe your hedge fund team that maybe isn't getting as much love or whatever, just making sure that there isn't a drastic in group and out group. Even if you have asset class specialists or investment type specialist specifically, you can still add value even if it's not part of your portfolio. One way I love to look at this is I think that people who really love fixed income just think differently from the rest of us. There is a level of risk analysis that just really maps nicely because I don't think that people who are more geared towards growth analysis necessarily have that, I don't want to say skillset, because I think that the skill set exists. It's just that muscle isn't as strong as say, somebody who knows that the top amount that they're ever going to earn is the coupon on their bond or the total payoff relative to the price. So just being mindful of the fact that even making sure your compensation structure is such that it's not just rewarding people for the dollars and cents they put into the portfolio, but the fact that they do add value from a Dell's advocate perspective, from an overall management perspective, from a mentorship perspective, and that you're not creating in groups and out groups with your compensation plans.

John Bowman (51:36)

So much wisdom there. I love those three questions. Those are brilliant. So I think you just wrote another blog there. And back again, continuing with the JRR token theme of the episode. I think those are extremely helpful and actually I think very much a segue to Jane's piece on are you ready? And what steps are first and what are the baby steps that are appropriate. So thank you so much for that. We are going to leave it there. It is time to bring in Ben and Jane. But first, as promised, as we've been moving through, cycling through many of the Franklin Templeton alternatives managers. We are thrilled to have Roger Baston who is the head of their digital assets capability. So stay tuned for halftime and we'll be back after that with Ben and Jane. Welcome back to Capital Decanted and I am joined as promised now by Roger Baston. Roger is executive Vice President and head of FT Digital Assets, Franklin Templeton Digital Assets, that is. Roger, welcome to Capital Decanted.

Roger Baston (52:39)

Well, thanks for having me and listeners.

John Bowman (52:42)

As I've mentioned, we are taking a bit of a tour through all of the FT Alternatives managers and just delighted to speak a little bit about digital assets on this episode. Roger, why don't for those of us that aren't as familiar with what you guys do in the space in the asset class, tell us a little bit about the business and the types of strategies that you guys employ.

Roger Baston (53:02)

Thanks for that. Look, there's several things that we're doing at Franklin Templeton as it relates to digital assets and I'll break those apart real simply. I think we came to the space specifically because we were looking at how we might be able to utilize public blockchain infrastructure in operating just asset management, distributed ledger technologies and other word choices used for blockchain technology. And we knew that asset management was filled full of lots of ledgers. So there might be something to be doing here that we can be attentive to. So as we found a use case for using blockchain inside of the transfer agency transaction record keeping system wrapped around a mutual fund itself, we began to have a lot of understandings about potential future use cases outside of asset management for these public blockchains. So really the journeys have been threefold. One is building some infrastructure within the organization that we could deliver some tried and true products and strategies. We have an on chain money fund known as Benji specifically that we have been working very collaboratively with the SEC for a period of time and we've been building infrastructure around offering that product to customers and clients. And then this idea that these public blockchains and the tokens that they represent some tokenomics for the blockchain value that may be accruing due to projects like ours that are built on these blockchain rails means that there's probably just this giant new potentially asset that can be blended into clients portfolios over time. So we've been building advice. It's a rapidly dynamically moving environment. What is a digital asset needs to be filtered in order to focus in on what are the real capital growing opportunities where there's value. And so we've been building a pretty deep and robust investment team, understanding and filtering and offering advice around portfolios of digital assets and cryptocurrencies that can be woven into and alongside of portfolios for clients who see this future network investing opportunity come alongside of their asset allocations. And really the last thing that we've been doing is all of these blockchains are representative of networks and we are operating nodes on those networks. We want to be part of the networks definition. If you operate a node on these networks, you're wrapped into understanding it more. We think that's an important lens for us to offer advice. The fact that we're not only just building and blockchain technology and have an understanding of that, but we also operate nodes in the networks. All that comes together for this idea that there's advice inside of this burgeoning space that we intend to offer for our global clients.

John Bowman (55:24)

Well, really interesting set of activities that I'm sure listeners will find very interesting to pursue. More. Roger, maybe just speaking of the sec, obviously listeners would be most familiar with the recent news on ETF approval, but how should the average client think about including digital assets from a portfolio context? Is this for everybody? Are there certain client profiles you would suggest would be a better fit for incorporating this asset class into their long term retirement asset pool or institutional capital pool?

Roger Baston (55:56)

I think there's a really thematic thing going on here. There are business models that are being created as a result of all of this telecommunication, piping and computer hardware and software. And these are investments specifically in networks. They're not investment platforms, they're investments in protocols. And again we've seen really interesting and we think lots of use cases for these public blockchains and these are innovations that are going to continue to come forward. So there's going to be a number of different investment opportunities. But for sure there's a thematic story going on here and that's important because I think some of these themes play into other things that are happening. Thematic investment things that are happening. Everybody knows magic words. Over the last year, ChatGPT and AI introductions, blockchain technologies will synchronize with AI. Now all of this is like a lot of immature markets, pretty volatile space. So there are things to be attended to and to begin to layer in investments. But these are long term opportunities and you need to be patient inside of that. These aren't necessarily income producing opportunities, but what we have seen is when you weave at least the historical risk adjusted returns of these assets alongside of others. It helps create better outcomes, but it's not going to be substituting. I think what it's really complementary most is actually in those high tech investment part of an investor's portfolio. These blockchain networks are complementary and may be subject to some of those other tech related investments that are also similar types. So that's how we're talking to people and we're talking to those who are interested in investing now for long term benefit.

John Bowman (57:26)

Roger, I think you said it well. I'll underscore this idea of patience and long termism for the benefit of ultimately investor outcomes. So well put. Roger, real pleasure to talk to you, albeit briefly and thanks for the great work you're doing at FT Digital Assets and Listeners. I'd encourage you to check it out and we will be right back with the rest of our program. Stay tuned. Well, welcome back and as promised, we are joined now in studio by Jane Bach and Bed Semild. Thank you and welcome to Capital Decanted. We spent a lot of time, Ben and Jane, walking through the history and interestingly and part of the reason very intentionally, that we wanted you two on as our guests was that there is very early history and interwoven history of Future Fund and wtw. And I think that makes for really interesting listening and retrospective. And so I thought maybe I would start with Jane to provide a bit of a flyover to start us off to level set a little bit. When you think about TPA and its evolution over the last couple decades from those historical stories we would have told in the last segment from the early 2000s, how have you witnessed and observed the understanding and awareness and adoption with your client base? How has it changed in that time frame?

Jane Bach (58:43)

It's an interesting question because I can't really pinpoint the exact year that I heard the term total portfolio approach actually coined. But the predecessor of that thinking had always been available observable through the work that we were doing with the large funds. But even they themselves, I don't think necessarily use the word TPA in house. You did refer to some interwoven history. I think it's fair to say that at least at wtw there was a shift from asset class buckets to what we called risk premia in the 2005-2010 period. And I think that became even stronger after GFC. So when we observed what happened to markets, the trauma of that time helped us to become even more convinced that it was important to look beyond asset class buckets and to look at risk premium. So that Thinking, I think, had always to some extent existed, but hadn't really been codified the early history that we're talking about. So David Neal, who was, I think, the first CIO appointed the Future Fund, had actually worked at WTW prior as the head of Australia, and had worked closely with Roger Irwin in the UK prior to that. So a lot of the thinking around things like governance, culture, investment beliefs, I think I can see the roots of things that we think are very important at WTW also taking hold in Future Fund as well. But David was involved with the government in setting up the Future Fund. He was one of the consultants that was advising the Australian government at the time. And then later on he was appointed to cio. So I do feel that he did bring some of what he learned, but certainly he made it his own. And I don't think that Future Fund is completely described by the early thinking at WTW either. In fact, I wouldn't say at that point either of us were using the term tpa, but for me, it crystallized even further through further adoption, because through recollection, if I'm honest, I think it was really Future Fund and David Neal and my conversations with him, where the One Fund emphasis was the strongest out of all the funds that I was talking to at the time. This view that looking at the fund as one fund was extremely important, linked to incentives. It was at the time the only fund that I had seen that was emphasizing total fund outcomes for bonuses, as opposed to departmental outcomes. So that in itself was quite unique and something that fascinated me as a consultant and an observer. But by the time we hit around 2018, 2019, we could count based on annual reports and the language that was being used, around 18 funds that were, as we saw it, adhering to a total portfolio philosophy. That was the beginning of our survey back in 2019, as you'll recall. Maybe I'll stop there, but for me, I think rather than it being very definitive, it didn't just happen. It has evolved through collaboration and sharing between funds, but also because they have good reason to believe that this gives them a competitive advantage.

Christy Hamilton (61:44)

So Ben Jenk mentioned a lot of these shifts and such, and I think one of the things that makes your fund truly different is that you guys were in fact, born with tpa. And even though that's transitioned quite a bit, you didn't actually have to endure what others might see as significant disruption that comes with transitioning a culture and processes and governance from a more strategic asset allocation framework to a TPA approach. And I really loved your nomenclature of calling it a joined up approach to distinguish how what you guys are doing is so different from maybe others masquerading as TPA or SAA specifically. So what does it mean in your view to be fully joined up?

Ben Simield (62:21)

Firstly, I really enjoyed that you used the term endured just then. Is it that horrible? I think as a leader I'd be saying we could enjoy this transition, but maybe it is endurable. Secondly, just listening to Jane's answer and hearing that Tails Watson became committed to this post gfc. We were established just before the gfc, which suggests to me that they were foistering a trial balloon on us, which maybe I'm less excited about now. But you're right, we do use the term joined up. We used to use very strongly, again to Jane's comments, the term one team, one portfolio. So strongly that it was on all our coffee mugs. Still is. I've probably got one around here and that has moved on to this joined up portfolio in a way to distinguish it from the generalized nomenclature of a total portfolio approach. My boss, CEO and predecessor Raf used to draw up a description of what a joined up approach meant. And he would have asset classes on one side of the page and decisions on another side of the page. And in the middle he had this cartoon fight with all arms and legs askew and dust flying and whatnot. That's never how it felt to me. It just felt like a playground for curious people who wanted to know about things that were outside of their specific domain and be able to incorporate all of that into their decision making in a way that was enormous reward for breadth and less so for narrowness. And I still feel it is largely that way.

John Bowman (63:52)

Jane, you talked a little bit about the evolution that these things didn't just happen, I think were your words that there were seedlings planted and they kind of grew and matured and in some degree adopted vernacular. That seems so common now, but that was all through a process of two decades really. And similarly, sometimes we talk to endowments and foundations or US pensions and we describe some of these dimensions of tpa. One fund approach culture designed around whole outcomes, client based outcomes governance that is empowering the CIO office and ensuring that they've got flexibility and then factor analysis, you might recall as one of our big dimensions too in this paper. And they will often say things like, well what do you mean we do all that? Of course we do all that. So I'm curious, as you've talked about, 18 funds now are very explicitly using this language, I'm sure there's a whole bunch that are on the journey as well. So what are the measuring sticks or litmus tests that you use as you engage with these clients or prospective clients to differentiate it from our traditional endowment model or SAA type approach?

Jane Bach (65:02)

It's all fair in some ways because any trending topic, say, let's take. Well, trending might be a strong word, but anyway, ESG for instance, you will have many, many, many different shades of that across every organization. I would be surprised if somebody said they didn't think about it at all. And from that point of view, you could say that TPA isn't as widely accepted as that concept. But I take the point that we also think of our portfolio from a holistic point of view. So how is that different from a TPA approach? But I think the starting points are different. And you also talked about endowments, remember that in the paper I talked about how a lot of the initial or the genesis of the driving need for why people decided they need to take a different route from the conventional was around delegation. And whilst all of us will have delegation needs, I'd argue that the endowment side already had quite a bit of delegation in some way, maybe more so than others, and they've evolved. Nobody can actually fully defined the endowment model, but it is characterized by a high degree of allocation to alternatives. You could argue that it is a more bottom up focus, whereas I think the traditional conventional SAA you could argue is a very top down focus. I see total portfolio approach as a marriage between the two things. Not to say that they're a combination, but in any case, people who aspire to a total portfolio approach are trying to solve for a problem. And I think that is the difference. Because in an SAA approach you are still solving a problem, but it's not so much a fundamental problem, it's an allocation problem. I think with total portfolio approach, oftentimes you're trying to address a more existential problem, whether that's a performance problem or a role definition problem. But in any case, you are basically adopting this approach, which can be something that needs to be endured, something that is quite a challenge to change from the status quo. You're doing that because you feel that that is the only way you're going to be able to achieve your mission, because you don't think you'll be able to achieve your mission with the traditional approach. I think the genesis of it might have come or stemmed from slightly different reasons in each case. But when you actually talk to Practitioners today who are implementing, why not go the easy route? Do what everybody else is doing. Why make your life so difficult? Oftentimes it will come back to, we still believe that this is the only way we're actually going to meet our objectives.

Christy Hamilton (67:26)

Kind of an interesting thought. And I think one of the things I keep coming back to in all of this, and I think one of the things Jane and Ben, that you both touch on, is that there isn't a checklist for how to do tpa. With that said, Ben, it seems like one of the defining characteristics of TPA is that the Board oversees a risk budget or some reference portfolio instead of this traditional asset allocation model. How does this impact or change the relationship between staff and the board? And then also how does it change those corresponding responsibilities and expectations when thinking about this approach?

Ben Simield (67:56)

So I think it changes significantly. So if I am a board member at a regular asset owner with an saa, I think my job is relatively easy. So my Head of equities comes in, you look at what their performance is against a benchmark, you decide if they've done a good job, that benchmark is really well understood, their objective is really well understood, you cheer them or you chastise them and then you repeat. So then my Head of Private Equity comes into my head of interest and in the discussion with our board will often look and sound very different, but the default will almost certainly be, well, how do I measure you? And the pushback is often, well, you don't, actually. It's really hard. I'll give you an example. Say I was the head of alternatives, which in our world is essentially hedge funds. And the hedge fund portfolio is a large part of the portfolio. It's unusual in the Australian context to be such a large part of the portfolio. And I used to describe it, and still would, as skeleton key for achieving the mission of the total portfolio. But it could be molded into whatever profile we thought was appropriate. Now, I had to decide what that was, and I had to decide that based on a thousand conversations with external stakeholders and internal stakeholders, and then I had to communicate that back to internal stakeholders, including the board. So there was no reference to, here's what I want my benchmark to be, and you should measure me against that. It was just an ongoing discourse to explain why we hold this portfolio, why it is structured in this way, how we're thinking about performance in this portfolio, how we're thinking about manager performance in that context. So there's more trust required, there's more insight required, there's more Curiosity required. And there's more derivatives, quite literally sometimes, but it's less linear and it requires a deeper engagement into the mission of the fund and the investment process than a relatively simple asset class head. Now. Next asset class head. Next asset class head. Total portfolio performance versus an SAA and some peers. Done well, done poorly. Great. See you later. It doesn't resemble that in any tiny way.

John Bowman (70:04)

Ben, I want to stay with you on this point on the distinguishing characteristics. And by the way, you mentioned your prior role in the opening segment. I just need to repeat that you're the only one of our team, our fellowship, as I called it, that got a big promotion in the middle of this project. And I just want to say I doubt that was a coincidence. I'm going to take a little bit of credit for that first. So congratulations on that, which is an overdue moment of the discussion. But in addition to this idea of governance shift in the dynamic that maybe the biggest process hallmark of TPA is this idea that we wrote a lot about. And actually Charles Hyde at New Zealand super wrote this section. But you and I have talked a lot about this egalitarian competition for capital, this idea that every marginal dollar is competing against every other marginal dollar, not just within the preordained asset classes. And I have to imagine, just as I was when we first talked, that this is really hard to visualize when you're coming out of this natural muscle memory of filling an asset class bucket. So you can pick any example. The one that comes to mind for me is, let's just say that you've got a distressed credit manager idea, competing against a long equity portfolio, competing against a port, a real asset port in Sydney. Can you bring us into the room? How does that discussion debate decision actually happen?

Ben Simield (71:21)

It's much more complicated than that because if those assets were all available at exactly the same time, that would be a relatively easy discussion. But you have to be able to compare both in the cross section and the time series. So then it gets really hot. And that's the forever challenge. So we spoke about Dave Neal. Dave Neal. One of his things was that this approach is inefficient by design and you need to embrace that inefficiency. And I think that's where the endure comes from or the this is hard comes from, and it's meant to be hard. I reject that completely and I differ from others on this. I think it's where the beauty and the love and the curiosity and the reward is. But I get that it takes more time and you have to think about more things and you have to have many more conversations. So the in the room part of that is really in the room. That's only the tip of the iceberg. But the iceberg part involves many, many more meetings. And those meetings are also. I am the head of hedge funds, but I'm going to a meeting where we're talking about buying a port and we're talking about engaging with a private equity manager and we're talking having a big macro discussion about what we think the long term trends are in the world. And we're trying to think about what the risks to growth and inflation are and where those risks are coming from and the probability of those risks happening over the next X years. Once I've had 150 of these conversations, I might have some sense of how everyone is thinking about the total direction of the portfolio and the profile of potential assets that might be useful for the portfolio and how that might sit within my field of expertise. So again, I'll use hedge fund example because the ones I know best, but there is a very significant allocation in there historically to a very, very defensive long volume manager. Now that thing, if I was just measured on a direct objective like you have to be cash plus three or something, I would never be able to hold that. There is no way I would recommend it. And I would also never be able to size it in a way that's appropriate for the total portfolio. So even if I decide I wanted a little bit of it for whatever reason because I had a view on the direction of volatility, there is no way because that thing is going to lose money most of the time I can't possibly hold it. So now, because I've had all of those discussions and I'm aware that obviously we're an asset owner, so most of the asset classes are leaning into some risk premium and a lot of that might be illiquidity risk premier. And there's growth and inflation risk and there's interest rate risk here and there's credit risk here. And we're getting more than enough risk at the total portfolio level. And what we actually need is an ability to be flexible and lean into opportunities if and when they come along and whatever. So after all of those discussions I can now go to the IC and have a sensible discussion around. Well, actually I think this thing, even though I expect it to lose money most of the time, is the best asset for the portfolio and the best thing that I can bring to the portfolio. And by the way, I think it should be this big and then the IC can have a discussion about that. That conversation just doesn't happen in another model at all. You never get there. So for the in the room thing, the in the room thing happens up there when I'm having that IC discussion. But actually it's 40 rooms and 150 discussions before you get to that room.

Christy Hamilton (74:39)

It does seem, based on Ben, your comments, that it is much more in depth and very different from the traditional endowment model, just based on what you just said and as well as some comments that Jane has made about it. But Jane, your section in the paper was just really fantastic and I thought served as a means of adding guardrails and maybe even warnings, I would say, to prospective TPA adopters. You specifically noted that much like any model, TPA is not a monolith and that it's a range of approaches. And also I think another really great point you made is that it's not for the faint of heart. It's going to take courage, particularly given the adoption curve of it at this moment. But it also takes persistence and it takes change management leadership, particularly those who have to transition. What questions with that in mind, should leaders be asking themselves to determine whether a transition to a more TPA approach or to TPA completely is right for them and their organization?

Jane Bach (75:30)

I think this is true for many human endeavors, but it takes courage to do something outside the norm. It's a little bit easier when you have role models, which we have now. Kudos to Future Fund. But if everybody in your peer group is benchmarking relative returns, is doing top down policy, saa, you would have to have a pretty strong reason to deviate from that path. And in Asia at least, where a lot of these pools of capitals are managed by governments or state owned, let's say sometimes that separation is much harder because you also have to think about politics. And very much in those types of cases, the risk reward spectrum is a bit skewed out of your favor, more towards risk rather than return. So actually sticking out is more risky rather than getting ahead. You won't be rewarded as much for getting ahead. So it's an interesting one, but it doesn't really make it that conducive to say, innovation. And anything that's different from the other or the rest of the 90% is essentially innovation, even if it's not completely new. I think that doesn't mean that there are not elements of this that you can take. And I have actually seen funds in our region, GIC being one of them, that had a more traditional approach and have since moved on to a total portfolio approach. And that is a massive change management exercise as you can imagine. You're changing many things. You're changing the way you're doing strategy, you're changing the behaviors you're expecting of your people. You're also having to change their investment beliefs in a sense. And so all of these things actually do require a strong leader. It's not something that can be, in my personal opinion, it can't be done really on a bottom up basis with people at the working level suggesting the change. I think it does have to have very strong leadership support to go forward. But I think we all resonate with the problems it's trying to solve. So to just give you a few examples, we talked about delegation. How many funds have you talked to who would say that maybe their IC or their board doesn't understand this new asset class or doesn't understand the market dynamics that are driving the returns and the risks from that asset class? Basically, the people that are having to decide the policy allocation to such asset class are maybe not fully equipped. I'm sure you've heard comments like that before. So that's the delegation problem. Let's take another problem. How many of us have complained about how my OPIC we can get when teams are just focused on their relative returns and they're not seeing the bigger picture. The fund might not have actually been able to meet its actual purpose, the reason for why it's there in the first place. But hey, we beat relative benchmarks, that we're good, that type of attitude, it does come up from time to time. The total portfolio approach is a way to potentially address that issue because it is focusing on whole outcomes, the whole portfolio outcome. Another area would be how many people complain about decision making, the time it takes and lack of flexibility to incorporate something that's new, that doesn't really fall neatly into a particular asset class bucket. Take private debt for instance, where it might be across real estate, across infrastructure, across private equity, across, across different elements of the credit team who takes ownership. Again, in many cases you end up with a solution that's not quite the right fit because you don't have the ability to have a single language where nobody cares where it fits. They can just go on with their day job because somebody is looking after the overall risk that's embedded. They're looking through the asset class label. And so all you need to really do is focus on whether from a pure investment thesis point of view, it still makes sense. So I'VE talked about three different things, but these are pretty common problems. So I think maybe the way to think about it, to make it a little bit more accessible is yes, it sounds scary because Jane, you just told us it's a big change management process, but change management can happen in phases. I think you just need to be very clear why you're doing it and what the intent is. So I think it needs to come from a place is does my current process model, does it meet my purpose? If it does, fine, no need to change. But if any of these issues that I've just talked to you about are actually issues in your organization, is it not worth thinking about taking the first step towards addressing that through maybe a different approach that others have pioneered? And you don't have to do it all at once. It can be as simple as starting to think about how do we bring that culture or at least that thinking at our senior leadership level at least, for instance, or how can we enhance communication so that people are not just focused on their silos. So it can be baby steps potentially, but obviously the greatest impact would be if there is a more deliberate and well thought through plan. And indeed I believe that GIC did take some pretty major steps to be able to make that shift. So that's maybe a good example that we can all learn from as well.

John Bowman (80:18)

Indeed. And Jane, you didn't quite say it like this, but I loved your articulation of the ultimate destination here, which is perhaps TPA provides the most intimate alignment of fund and people and purpose. Not always, but I think it does get closer to that nirvana, which is what I think every CIO and board wants to do, is ensure that purpose flows through the veins of every one of the investment professionals. So those are my words, but I think a really good summary there. Ben, I want to ask you a similar question because obviously as a practitioner, early adopter beacon, that future fund of this, you've had a lot of experience with this evolution. I'm sure there's been mistakes and lessons learned along the way, both within the walls of Future Fund. But also I imagine you get questions and people are seeking counsel all the time. And so I have to think you've got a great mental file folder of all these false starts and what could go wrong if someone were to come to you listeners listening now, what advice would you give these individuals that are considering this type of transition?

Ben Simield (81:20)

Well, there are infinite and if my starting point was different right to the start of this conversation, it would be clearly a much harder conversation. So let's start with the most obvious one. Most people don't start a financial career because they're desperate to be poor. So generally they want to be incentivized for something and directly financially incentivized for the work they are producing. And so you come to our place and you have to have extreme levels of trust in the person at the desk next to you that they are just as motivated, interested, hardworking, collaborative, clever as you are. Or else you'll probably start thinking, well, hold on, why am I getting paid in the same way as they are? So fostering that culture, that culture of trust and collaboration and joint interest in an industry that is not set up like that and does not form like that, that's really challenging. And if your own firm, whatever, ass, I don't know, wherever you are, is already in the other direction. And by the way, it's easier. So again, to the previous, it's much easier to just point at something and say beat it and then I'll pay you for that. Heaps easier. But you cannot do this investing if that's your starting point, if that's what you're incentivizing. So there is a significant cultural shift that would be required that even within the model, even within our model, where we started here, there is just an ongoing and forever conversation. And there's a conversation that has to happen across the asset class teams. There's conversation that has to happen between the economics portfolio construction portfolio design integration teams and the asset class teams. There's conversations that happen between all of those teams and me. There's conversations between me and the board, there's conversations back from the board. So there is this never ending tributary network system of conversation that gets to an outcome that's very now difficult to attribute to any one person or team or whatever. And so again, I find that motivating and inspiring, but many don't. The feedback that we get and the most dominant feedback we get from our teams is can we please do more of this collaborative stuff? So to Jane's question before, where does private debt fit? Does it fit in credit? Does it fit in hedge funds? Does it fit in? The answer in our model is who cares? And the answer from our team is can we work on this together? Because actually I find I learn a whole lot of stuff when someone from the property team and someone from the economics team and someone from the portfolio construction team and someone for the credit team and someone from the private equity team all go to the same meeting and apply their various lenses and histories and education experience to this problem and I found that cross pollination ends up in a better place. But the better place is also an individual selfish thing that I get smarter and I learn more and it's really super interesting for me. So that's not a direct financial incentive, but it is a life incentive. It is a quality of work incentive. It is a this is enriching to me somehow incentive. And that is fundamentally different, but it's still motivating.

Christy Hamilton (84:42)

Funny that you say that because I was about to frame my next question to Jane in the sense of what's the actual value add? And I think that that is such a great point at which to start. Even beyond the relative outperformance is just the richness of the information that is shared across the organization and the way that it's done. With all of that said, I put on my practitioner hat at the onset of this and given the hardships that must be endured as one transitions, I say in jest and the implementation risks associated with this of being different from your peers. One of my questions initially was just what's the point? Why would you change? And I think Ben, you point out a lot of really great positives that come from it. Although also I will add that we have found both from Thinking Ahead Institute who came up with some analysis that showed that TPA organizations deliver between 50 to 100 basis of outperformance relative to strategic asset allocation. And my research as well based on the organizations that were part of this white paper also have beat Nikubo top endowments and universities across multiple time periods by a hundred plus basis points in some cases. There are many things that we could point to as to why this happens, but it seems as though there are differences in culture and governance and a more active focus on developing a portfolio of best ideas. But Jane, what is your interpretation of that expectation of either outperformance or just relative to a target, like meeting the target of the organization itself? How does that work in your experience and is that your reality?

Jane Bach (86:07)

I'm going to try to answer that from a hard strand mentality and a soft strand mentality. So on the hard strand side a question back to you would be do you believe that alpha can be had in having the ability to run your portfolio in a more flexible and dynamic way? So that agility factor, does that add value or not? Because if it doesn't add value, why bother? Or another way to frame the same question is do you believe that the strategy function has any value to add? Because if you don't, then you can just stick to a static policy and not worry about it. Maybe another way to frame total portfolio approach, and what I've at least observed is the ones that have embraced it full on tend to have bigger strategy teams, more resource, they put more love into the function that is going to actually help the whole organization. See, because when you are on the hedge fund allocation team or the real estate team, unless you're coming together, and that is a human contrivance, unless you're actually coming together, what you're seeing is just one part of the market having that function, or a strong function that is bringing people together, but also providing analysis data and essentially trades trade ideas between your asset class and others or between specific investment ideas. Does that add value or not?

John Bowman (87:22)

All right, well, in this final close, I thought I would maybe ask you, to both of you, if you don't mind, to talk a little bit about the secondary effects here. What will be the implication for the overall system? So if we're right, if we continue to see acceleration and adoption for all the reasons we discussed, hard and soft, what will this mean? Or what should this mean? Maybe is a better way to phrase the question for GPs, for consultants, for education, what needs to adapt for the orbit around you to really grow up and mature into a TPA mindset? So, Jane, maybe I'll start with you.

Jane Bach (88:00)

So I'm going to be controversial and say I actually don't think it's necessarily going to proliferate because I almost see it as a third wave, a hurdle that only the best are going to achieve. And I don't mean that necessarily in a prohibitive way, but we are talking about skills that need to join up. We're talking about not solving one technical problem. But if you were to try to compare this to like a human being, instead of fixing a broken arm, you're basically trying to reach a different level of fitness. Or if you're talking about a surfer, yes, all of us can learn how to surf to a certain degree, but to actually be able to catch the big waves, you need to invest quite a lot more. And I think to some degree, the level of organizational cohesiveness that's actually required to pull this off with the mastery and grace that it needs is a significant endeavor. At the same time, I think there are. What would you call it? There are ways to cheat a little bit. What I mean is that there are probably some elements that are easier to adapt than others. So that's where I would encourage people to start, really, because there are still benefits, even if you're just an average human being, there are benefits to going for a light jog every day. I feel the same with certain elements of tpa. There are going to be benefits, even if it's not 100 basis points in just having enhanced communication between departments or having a mechanism in place whilst it doesn't solve for everything or doesn't require fancy modeling or adoption of a factor approach or any of that stuff. I think there are ways that you can create mechanisms to be able to catch some of the asset classes or the ideas that come through that are falling through the cracks to actually address some of those issues. But in terms of making it part of your identity, your edge, I think that's something that maybe, if I'm being optimistic, maybe the top 20% can get to, but maybe not the top 50%. So that's how I see it.

Ben Simield (89:52)

I was also going to be controversial and say a very similar thing to what Chain did. So now it's so boring. But look, I think it's structurally entrenched in a different model and it's very difficult to remove that. That. So if I think about the structure of the academy, historically there has been much more cross pollination across disciplines and increasingly due to objectives, incentives, whatever else. I can study economics without studying international relations, I can study history without studying a language, I can study philosophy without doing anything else. And there's reasons for that. It's more efficient. But the 40 and widget maker process design has proliferated through thinking jobs and it's entrenched all the way from that level. So by the time you get to hiring a senior finance person who's been in that model for their entire career, devolving into something else is really challenging. So I think it is a hard job. I think changing the whole system is for sure optimistic. I agree that maybe you cherry pick the bits and pieces of this that you feel like you can actually implement and if that's just more conversations, a different way to physically structure your office, who's invited to meetings, how you run those meetings, even if it's just that, I think that would be something actually.

Jane Bach (91:15)

And it has to link to things that are real. It can't just be conceptual, so it's subtle. Things like changing the way people are incentivized, that's usually a fairly big project, but doable. You can increase the weight towards total fund goals, for instance, but I think at its core, really, because whilst Ben earlier talked about how we don't have a strategy team, we have strategists but I actually think that's just a different way of solving for the same problem. You are basically putting strategy into your allocators. You do have a big strategy team because your whole team is now basically a strategy team in a sense. What I'm trying to say is that a total portfolio approach is basically saying that you want your people to be able to think across the total portfolio, to be multi asset, to be multidisciplinary, to be able to hold more than one thing in their minds. You would argue that an organization that has more people like that who are multidextrous is going to have a competitive advantage. So even if it might seem like a huge task, you can see pathways forward to actually say, well, what do I do if I want my team to be able to understand strategy, if I want everybody on the floor to understand relative risks across every asset class, to not just care about their silo? There are definitely ways you can do that without having to go through a complete transformation one step at a time.

John Bowman (92:30)

As you said earlier, baby steps, be realistic. Leadership change and change management literature suggests just that you've got to build momentum and get people on board first before you cross the raging river. So, listeners, we're going to have to leave it there. Jane and Ben, thank you for your leadership on this paper, for enlightening both Christy and I along this journey, and then so many individuals through this paper, this podcast. We are grateful for both of you and thank you for joining Capital Canton listeners, stay tuned for the Last Step. Welcome back to Capital Decanted to the Last Sip. And listeners, that was a long one. So I think all of us are both energized and exhausted. So maybe this will be more like a last chug, Christy versus a last sip. But what's on your mind? We exhausted the history. I think Ben and Jane were massively helpful in bringing to life and teasing out some things that I think even we were still scratching our head over. But where are you on this whole topic?

Christy Hamilton (93:33)

I think one of the biggest things that I appreciated about their comments, and I can't remember if Ben brought this up first or Jane did, but just that it's not for everybody. I mean, much like the endowment model is not for everybody. And so I thought that that was a really thoughtful way of expressing something because a lot of times when people come up with these new ide, it's like, oh, mass adoption to the moon. So I think it was just the realization that it's great for some organizations, not so much for others. It's on a range and frankly I think one of my key takeaways is if you function as an endowment model with a strategic asset allocation, you really should be incorporating some TPA stuff. You should be looking at the portfolio holistically, you should be doing look through analysis. And frankly I question as to whether or not you are being a good fiduciary if you you aren't just like I think on the TPA side, there are parts of strategic asset allocation that just are so embedded in our system that they have to be a part of your reports at times so that you can explain things in a way that people understand that you've got this. So I think that the key takeaway for me is that it's not an either or and that there will be some organizations on the polls that function better within each model or framework, but that it doesn't have to be or one or the other. It can be I see the world through this lens but with this tent, if you will, or this other way of looking at things, what about you?

John Bowman (94:45)

No, I completely agree that continuum spectrum variation, pick your cinnamon that came up over and over again. Add a couple reflections just starting with maybe the very last question that we asked them. This one may be the one area I disagree a little bit is that even if the adoption doesn't take off, even if as a result of it not being for everybody, this is just really hard to get your head around. Really hard to move the Titanic of governance towards this to get comfort level with having less levers from a fiduciary standpoint and doing it a different way. Even so, if people are thinking much more at the total portfolio level than traditional SAA GPs need to adjust the way they think about pitching and relationships and the fit of their strategy. So if there are GPS listening, I think this should influence the way you think about your conversations with perspective and current LPs because they likely are no longer thinking about this fitting into a small predetermined puzzle piece of one bucket. They are thinking about it in a much broader sense, even if they don't call it TPA or don't even recognize the vernacular yet. So that's the first thing. And I think consultants, WTW aside, these folks do an amazing job of finding great managers, but their entire taxonomy is bucket based. That's how they've grown up. So I do think some transformation there is important, or at least there should be a parallel track of this type of thinking. The other thing that came to mind and we didn't really touch on it, other than Ben alluding to his 150 conversations. And I know that was a little bit hyperbolic to make his point, but to have 150 conversations and to have this rubbing shoulders. And what do you think, Mr. Macro? And what do you think, Mrs. Private Debt? And what do you think, Mr. Real Estate? And then we bring that to the investment committee, I think is what he called it. You have to be working together physically probably a lot. And this is not even a Covid hybrid statement. It's more of a distributed versus centralized model. And Future Fund and New Zealand actually take a very active view of all being in the same place. Whereas CPP and GIC have distributed models around the world. And it's interesting, the latter two, I think they would both say, are less far along on the transition. So it'd be interesting to watch. Can you actually deliver this and execute this in a healthy manner with a distributed talent map across the world? These are always trade offs and there's no perfect way. But it just came to mind as Ben was talking. They are very convicted about everybody being in the same building to be able to manifest all those conversations and put that holistic vision and investment thesis together as a result of all the dialogue. So I think quite interesting. Just contrast.

Christy Hamilton (97:28)

Agreed. And something that's definitely important in an age post Covid where offices are more distributed.

John Bowman (97:34)

Exactly. So how are they going to do that? So just yet another challenge impediment headwind to all of this. We never said this was easy listeners, to say the least, which is why we're talking about it. All right, well, let's get to our final fun question. And this one I'm actually really excited about because I love, I happen to know the answer to yours, but we picked How'd you Meet yout Spouse? And it has a very podcasty theme to it, so I'm gonna let you go first.

Christy Hamilton (98:01)

So my now husband, he was working at an investment office for a university, state university and started following me on Twitter. And just because I was posting a lot of content about endowments and endowment management and I happened to go on friend of the show Ted Seide's podcast. Also a good personal friend in real life of mine and somebody who I really like and respect. But podcast went great and apparently he heard my voice and was like, wow, she sounds cute. So my husband heard me and was just like, wow. Didn't really think about anything. But then randomly he started following me on Instagram or somehow Instagram got involved in this and I liked A photo of him because he was wearing a tux. And I was like, oh, he's really handsome. I don't know who this guy is, though. And then he slid in my DMs in Instagram. But it wasn't like a hey, girl message. It was like a very thoughtful. I later found out he really went through it because he's like, this girl's got over 30,000 followers on Twitter. She can light me up if I'm an idiot. Which made me laugh because I just thought that it was a very sweet consideration and something I had never really thought about in the age of social media and being able to easily screenshot things. So I think the most hilarious part of this was I didn't actually follow him on Instagram, so his message just sat in my unread, separate folder for those of you who get how Instagram works for two and a half weeks. And he just thought that I was ignoring him. And then out of the blue, at five in the morning, when I was checking my Instagram while on another call about macro while I was working, I messaged him. And then, yeah, he was in Kansas City at the time. And so we did long distance for a couple of years and then got married in November, and the rest is history. And now we have a baby on the way. I was going to say again, it's gotta be done in a respectful and thoughtful way, but it's actually funny because I've talked to friends now, and it is the millennial way. And it's almost, like, weird to talk to people in real life now. But what about you and your wife?

John Bowman (99:41)

So we'll be 27 this year. 27 years this year. In a couple months. So we both played sports in college. And just to be clear, I don't want to equivocate. She was an All American, went to the national championship in field hockey. I rode the bench in basketball. So I'm not suggesting any level of similar talent, but we both happened to be on a team, let's put it that way. So there was the athletic dining hall, and we were both there after practice, and I was with my team, and her team left her. So she was the only one left, not the adjacent table. Now, Christina was an All American. Everybody knew who she was. Beautiful. And I was this loser freshman at the time, and everyone knew her name, nobody knew my name. And my friends started saying, I'll give you 20 bucks if you go sit with her. Another one's like, I'll throw in 20 bucks if you go Sit with her. I'll throw in 20 bucks if you go sit with her. Actually, probably it's more like five, but it got to 40 bucks. So I walk over. Never met her in my life. Terribly intimidated, knew that she had never seen me, and I said, listen, my name's John. I play basketball. My buddies just offered me 40 bucks to come talk to you. I'll split it with you if you act halfway interested for five minutes. And she still jokes that she never saw that 20 bucks. But it was that conversation that led to the first date, and that was about 30 years ago and been married 27. So there you go.

Christy Hamilton (100:56)

So Luke slid into my DMs. You slid into the seat next to her.

John Bowman (101:00)

This is old school, like dining halls and real life conversations. Yeah.

Jane Bach (101:04)

Aw.

John Bowman (101:05)

So there it is.

Jane Bach (101:07)

That's very sweet.

Christy Hamilton (101:08)

I did not know that. I think you owe $20 plus 27 years of interest.

John Bowman (101:12)

Yes, indeed. Which is starting to really add up in recent years.

Christy Hamilton (101:17)

Oh, that's awesome. Well, congratulations. Early anniversary. That's quite a feat and really amazing.

John Bowman (101:22)

Starting to sound legitimate, so. Yeah, we're proud. We're proud. Well, so much fun, Christie. I learned a ton, both in the preparation weeks before this and throughout the writing the paper, as I know you did. And then, of course, to make good friends and to ask their counsel live with Ben and Jane was just a blast. So fun on this quest, this unexpected journey, as we called it. Christy and listeners, we will see you next time on Capital Decantive.