Podcast Summary: E125: Co-CIO Alifia Doriwala on RockCreek’s $16 Billion Edge

Podcast Information:

• Title: How I Invest with David Weisburd
• Host: David Weisburd
• Episode: E125: Co-CIO Alifia Doriwala on RockCreek’s $16 Billion Edge
• Release Date: December 31, 2024

Introduction

In episode 125 of "How I Invest with David Weisburd," host David Weisburd engages in an insightful conversation with Alifia Doriwala, the Co-Chief Investment Officer (Co-CIO) at RockCreek. The discussion delves into RockCreek’s investment strategies, market outlook, and Alifia’s personal journey in the investment world. The conversation offers valuable perspectives for institutional investors and those interested in advanced investment strategies.

RockCreek’s Overview

David Weisburd: “What is Rock Creek?” [00:34]

Alifia Doriwala: RockCreek manages approximately $16 billion in assets, functioning as a multi-asset and Outsourced Chief Investment Officer (OCIO) solutions business. The firm caters to endowments, foundations, and pensions with assets under $2 billion that lack internal investment teams, alongside delivering multi-asset solutions for a diverse clientele [00:36].

Client Solutions and Customization

Alifia emphasizes the importance of tailored investment solutions, stating, “We don’t believe that there’s a one size fits all” [01:04]. RockCreek addresses varied client needs by investing across a range of asset classes and focusing on niche areas aligned with specific client themes. For instance, managing a venture capital portfolio for a corporate pension with an emphasis on innovation in the aviation industry showcases their customized approach [01:04-01:54].

Market Themes and Outlook

IPO Market Prospects

Alifia expresses optimism about the IPO market, noting, “We think the market might start to pick up in terms of the IPO market” [01:59]. She highlights that portfolio companies are preparing for public offerings and anticipates increased IPO activities in the coming year.

Mergers & Acquisitions (M&A) Activity

She anticipates heightened M&A activity, especially with a new administration potentially fostering favorable conditions. This expectation aligns with the broader positive outlook for RockCreek’s existing portfolio [02:20-03:26].

Private Markets Trends

Alifia is particularly excited about opportunities in private markets, citing sectors like biotech and healthcare beyond traditional telehealth. She underscores the role of technology and innovation in enhancing access and opportunities within these sectors, making them ripe for investment [02:20-03:26].

Interest Rates and Inflation

David Weisburd: “What’s your view on interest rates?” [04:32]

Alifia Doriwala: She anticipates a low to stable interest rate environment in the next one to two years, driven by decreasing inflation. However, she remains cautious about potential long-term inflation spikes, which could lead to rising interest rates. Therefore, monitoring the yield curve remains crucial [04:32-05:28].

Government Policies Impact

Discussing the impact of governmental changes, Alifia notes that while new agencies like the Department of Governmental Efficiency (DOGE) may influence certain sectors, the primary drivers affecting interest rates and inflation remain tariffs and trade policies. She highlights the significance of trade agreements with countries like Canada, Mexico, and China in shaping inflation trends [05:28-06:22].

Alternative Investments in Endowments and Foundations

Alifia outlines that typical endowments and foundations allocate 20-30% to private equity and venture capital, and up to 35-40% when including illiquid real estate and real assets. This strategic allocation supports their long-term sustainability and steady distributions [07:08-07:58].

Public Markets Opportunities

Alifia expresses enthusiasm for opportunities in the public markets, particularly favoring active management over passive strategies. She believes that active management will regain prominence as the market broadens out, allowing for selective stock picking in sectors like energy, pharmaceuticals, fintech, and financial services [08:11-09:48].

Investing Strategies: Active vs. Passive

The decision between active and passive investing hinges on the perceived alpha potential within specific market segments. Alifia explains that while U.S. equity markets are highly efficient, making active outperformance challenging, other geographies and sectors may offer greater alpha opportunities. This strategic approach allows RockCreek to optimize returns based on market efficiency [09:09-09:44].

Hedge Funds Insights

Alifia discusses the nuanced role of hedge funds in institutional portfolios. While family offices invest around 6% in hedge funds, institutional investors like endowments and foundations may allocate 10-20%, depending on their strategic needs. She differentiates between hedge funds focused on hedging versus those capturing alpha through strategies like equity long/short and quant methods [13:30-15:35].

Career Insights and Personal Reflections

Reflecting on her career, Alifia appreciates the diverse experiences in investment banking and hedge funds, which have shaped her approach to due diligence and investment strategies at RockCreek. She emphasizes the value of being dynamic and flexible in today’s ever-changing market environment [12:00-17:32].

Sharpening the Saw: Continuous Learning

Alifia underscores the importance of continuous learning and staying open to diverse perspectives. “The best way you can be CIO is to get all, take all that information in, look at the data, be very data driven” [17:41]. She highlights the role of RockCreek's board of macro thinkers in enhancing their investment process and maintaining adaptability [17:41-18:58].

Conclusion

The episode concludes with Alifia Doriwala sharing her experiences and insights into managing a substantial asset portfolio at RockCreek. The discussion highlights RockCreek’s strategic approach to diversified and customized investment solutions, an optimistic outlook on emerging market trends, and the critical balance between active and passive investment strategies. Her emphasis on continuous learning and adaptability provides a compelling narrative for institutional investors seeking to navigate complex financial landscapes.

Notable Quotes:

• Alifia Doriwala [00:03]: “It is so much about talking to as many people as you can and being open to different perspectives… reading as much as you can as well.”

• Alifia Doriwala [01:04]: “We don’t believe that there’s a one size fits all.”

• Alifia Doriwala [02:20]: “It means that the market next year is really going to start to open up both in terms of an IPO market, but also… a lot more activity or potential prep for activity in the M and A space.”

• Alifia Doriwala [04:32]: “We’re fairly constructive that we’ll be in a similar interest rate environment to where we are today.”

• Alifia Doriwala [08:11]: “Active management in the public markets is really going to start to be the place you want to invest in versus passive.”

• Alifia Doriwala [17:41]: “The best way you can be CIO is to get all, take all that information in, look at the data, be very data driven… and think about the more qualitative aspects of what's going on in the macro environment today as an overlay.”

This comprehensive summary encapsulates the key discussions and insights shared by Alifia Doriwala in her conversation with David Weisburd, providing valuable takeaways for institutional investors and financial professionals.