← How I Invest with David Weisburd
How I Invest with David Weisburd
E177:How a Small Endowment Invests like Harvard w/Rip Reeves
00:46:33
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- [00:00]
A
You overlook the LSU University systems and you've decided to go with an OCIO with Cambridge. Why did you make that decision?
- [00:10]
B
One of the reasons for an endowment to use the OCIO model, and not just an endowment, but any kind of pool of money, part of it is size. No disrespect to about a billion dollars, but when you're running a pool of money that's about a billion or 2 billion, you generally don't have the type of funds to attract the type of talent that you would want in order to run the portfolio. And exacerbating the relative small size of our endowment at the moment is the fact that we're in Baton Rouge, Louisiana. Again, no disrespect to the finance professionals in Baton Rouge, Louisiana, but it's very different from the type of pool of folks that I can work with or attract when I'm in New York City, when I'm in Boston, when I'm in Chicago, when I'm in London, which are the places that I've spent most of the past 40 years. So it really allows us as a relatively small pool of money to get the type of top notch research and resources that a Cambridge and Associates can bring to the table. So it basically is a stronger team that I could afford to put in place internally and I basically rent to them and all the hundreds and thousands of people that work globally for that institution.
- [01:33]
A
So you're able to have a world class team even being in Baton Rouge. Talk to me on the allocation size. Is having a billion dollars an advantage in being able to access more interesting funds or is it also disadvantage?
- [01:47]
B
No, I would say another aspect or advantage of the OCIO model. Again, for someone, generally speaking, if you're looking at say I would say less than $2 billion. The OCIO model, regardless of the type of pool of monies that you're managing, can really. There's a very strong case for it. And again, especially if you're not in a financial hub like a New York or a Boston or London. So what we've basically done is the ability to access various types of investments is a huge advantage by using an OCIO model with Cambridge because we are some of the allocator, some of the allocation sizes that we might end up trying to invest in, we'd just be too small. Our bite sizes would be too small. So what Cambridge allows us to do is they'll call and combine several, several portfolios like ourselves and then go out and do a bigger chunk as well as possibly get discount pricing because of Volume. So it is a massive significant advantage from our perspective that we're going to have access to various types of investments, especially in the alternative and private sector, that we likely wouldn't have access to on our own.
- [03:06]
A
Your portfolio allocation is 40% stock, 30% bonds, 30% alternatives. It suspiciously feels like very round numbers. How did you come to this? And walk me through the rationale.
- [03:18]
B
Those are, those are fairly general allocation guidelines. And it basically stems from what is known as the endowment model, which was the idea that came out of David Swenson, who was the CIO at Yale's Endowment. I think he probably started in the mid-80s. And as a fun fact, Dave Swenson is a member of the Institutional Investor Investment hall of fame. The 40% stock, 30% bond, 30% alternative is the general idea for the endowment model that was, I would offer is a bit of an uptick or an evolution from what was called originally the pension model, which was 60% stocks, 40% bonds. Given the excess liquidity that many endowments enjoy relative to other pools of money such as insurance money, pension plan money, whether you're corporate or public, there's certainly the opportunity, if you think the relative value is there for an endowment, to give up some liquidity in order to get higher levels of income and higher levels of forecasted return. And that's basically what this model does. One of the things that we've done at LSU Endowment is to put very wide guardrails around those 40, 30, 30 type general neutral points. And, and one of the reasons for that is as a former portfolio manager, I always wanted more flexibility than less flexibility because that allowed me as the person making the buys and sells in the portfolio. It gave me more flexibility to use all the really great resources of the various companies that I was a portfolio manager at. When you tend to put more restrictions on a portfolio manager, it kind of restrains the ability to bring the best attributes of the company to the market. So we have put those as very general rules and to your point, very, very suspiciously round numbers. But we've got pretty wide guardrails that Cambridge can play in.
- [05:28]
A
These guardrails serve as a useful framework for you and the investment committee and to really be able to articulate your strategy both internally and externally, while also not being these arbitrary constraints that you put on, especially short term fluctuations in the market. Sometimes it makes more sense to own more stocks, less bonds, and vice versa.
- [05:49]
B
And one of the things that I learned early when I made the switch from a portfolio manager where I was responsible for every granular detail of every portfolio that that was mine or that I was entrusted with when I switched to become 20 years ago to a chief investment officer. You had to kind of step back because your role is a little different. And one of the things that I started to do, which we're certainly enjoying and giving Cambridge the flexibility to do in the case of the LSU endowment, is to allow them, since they're on the front line, let them make the determination to your point of whether we should tweak the allocation to the private equity sector versus the hedge fund sector versus the bond sector versus the equity sector. So like right now, one of the things that certainly is a bit of a trend is we've got a little bit of a migration going on out of US public equities to international equities because of the outperformance for the past several years of us versus non us. You're similarly seeing a lot of conversations, which as an ex bond portfolio manager and bond trader, really warms my heart. You're seeing a lot of conversations and endowments on the fixed income public fixed income market. Prior to 2022 and since the global financial crisis, interest rates were effectively near or at zero. You even had some countries like Japan and Switzerland that had negative government rates. So now with a 5% increase in fed funds during the calendar year of 2022, fixed income also look all of a sudden looks a little interesting. And specifically to a lot of your college endowments, you can get returns on the fixed income high grade fixed income sector that is greater than this, than the general liquidity spend of a lot of these endowments of like 4 to 5%. So you know, we want to make sure that we give our portfolio investment team enough flexibility to bring their best ideas to our portfolio. But at the same time, we are 100% responsible for the asset allocation of the portfolio, for the management of the risk, the management of the performance that is 100% our responsibility as chairman of the investment committee.
- [08:12]
A
It certainly doesn't make for the best cocktail discussion. Your portfolio allocation. People love to say we're in Sequoia, we're in Citadel. That's much, much, much more sexy. That being said, there's been several studies. The Most seminal studies, 1986 by Brinson, Hood and Bbauer, titled Determinants of Portfolio performance, that analyzed 91 U.S. pension funds and found that 90% 90 of their performance could be attributed to their portfolio construction, not their manager selection. So 90% is a pretty large number and yet, you know, it's a Very unsexy thing to talk about or, you know, it's not the number one thing that would come up in casual conversation, yet it seems to be where the returns come from.
- [09:04]
B
That doesn't necessarily surprise me when I first saw some of that data. From the standpoint of the following. When you put together a portfolio investment strategy, the number one, the absolute number one priority should be what are the circumstances of the pool of money that you're managing? What is its purpose? How much liquidity do you need? What are you supporting? And if that portfolio, if that portfolio construction is married to the purpose of the portfolio, and not just the purpose of the portfolio, but the objectives, that should be from a governance standpoint, detailed by the governing body, whether it's the board of directors or the investment committee or the executive committee of the company, if that's all done correctly. What I will share with you is one of the things I. One of the things I learned when I switched to the CIO role after 20 years of being a bond portfolio manager. The number of times that I went into a finals presentation and it was me and our company and two other companies likely, and we give the pitch and I would leave that presentation. And there was palpable chemistry between us and the people that, you know, the company that was interviewing us, every one of their objectives was exactly what we felt our competitive advantage was. And I'd walk out and I think, oh, we so have. This was in the bag. And then I get the phone call and they go, we picked, we picked somebody else and here's why. And it always seemed like those, those, those reasons that we weren't picked were just so minuscule. But then when I became a CIO and I was on the other end, the other end of that, if we decided that we wanted to put an allocation of 5% in emerging market debt, you know, in our bond, in our bond allocation, it was so hard. There were so many good emerging market bond managers out there by the time we got to the final three. The good news is I couldn't make a mistake. There was no way to make a mistake. There's just so many, I think, very talented managers out there that it doesn't surprise me that it's less about the manager and more about the actual allocation.
- [11:24]
A
Double click on that. So you had this roadshow and you basically had these three finalists. First of all, how did you decide who came, who went into these last three final managers?
- [11:35]
B
Well, you would go through the RFP process, the request for proposal. And so typically, once you make A decision as a CIO on what your allocation is going to be to a, to a particular general part. So in our case, we're looking at, with the 40, 40, 30, you're looking at 40% general allocation goal for public equities, 30% in public bonds, and 30% in alternatives. I'll offer that we're a little higher on the alternatives, a little higher on public equities, and a little low on bonds and our actual allocation relative to that. But again, if I decide that, let's go back to the emerging market debt manager or allocation. Once we have decided that's something we want to do, we will then go out and do interviews, basically with all the people that claim to have an emerging market bond product. And then we'll send out a questionnaire that says, what's your name? You'd write David Weisberg. Who's the company you work for? How long have you been in business? What does your team look like? What's your strategy? Show me performance, risk metrics, all that kind of stuff. And then we'll basically look through all these answers from these interviews. And it generally is pretty easy to call it down to probably six or seven. It gets more challenging when you want to get to, like, the final three or two or three. But to have six people come into your office to do our presentations, it's a bit much. So it tends to be pretty easy to get it down to like six or seven. But then it gets a little challenging to get to a smaller number for the finals. But it's analyzing and reading the responses to your RFP questions, it's easy to.
- [13:21]
A
Get to the six or seven. Is that performance driven? Is that qualitative based on the answers? Why is it so easy to get those six or seven?
- [13:29]
B
Because they're usually in some cases, for example, when I was CIO at an insurance company, the insurance company that I was CIO for last was offshore domiciled in Bermuda. So if they, if the company didn't have an offshore vehicle that I could, that I could invest in, you know, from, from a, from a, from a regulatory standpoint, I could eliminate them. So there generally are some things that you just go, no, nah, that doesn't work for us.
- [14:02]
A
You're sitting at your IC and you have six or seven qualified managers. How do you call that down to three?
- [14:12]
B
That's where it gets a little challenging. And that's where judgment. And that's where, I mean, there are some questions that you can ask where I'd say, you know, this is Just as much art as it is science. You can look at the information all day long. You can also, in this case, when you're adding another partner, investment partner to your stable of managers, what can also come into play, which has absolutely nothing to do with the quality of the product that manager XYZ is offering? If, for example, I have a lot of big, what I would call big global asset managers in my stable, a g Sam, a JP Morgan, a BlackRock, a Pimco, adding another big boy to the quote unquote to the stable of managers might want to get someone who's maybe a little more nichy and just smaller to help round out the stable of managers. And that, and that unfortunately has absolutely nothing to do with the answers to the GRP questions. So you tend to start to look at tangential things relative to instead of just the actual numbers. And it's not just about the performance numbers. A lot of it is the reputation and what you know about the people that are running it, how they are set up, if it suitable to you. Is there going to be one portfolio manager who's also going to be the client service manager, or are two separate people? You know, you can look at a lot of different factors that are not necessarily specific to the actual product that they're managing. But the short answer, your question is it's kind of difficult. You got to bring judgment into the.
- [16:01]
A
So there's aspects of your own portfolio construction, what's in your portfolio and also the qualitative factors. What do other LPs, what do other managers say about this specific manager? So there's both kind of internal and external considerations.
- [16:17]
B
And that goes a long way because you've, you, you, you, you've been in the industry long enough to where you can do an interview with somebody and go, go, I really, really like that. That's just seemed like a perfect fit. And then you start to live with the person. You go, ooh, I didn't see that, didn't see that. You know, so I can talk to other managers. And that's one of the great things. I could go to an event and rub elbows for a day or three, two or three days with 40 other insurance or endowment CIOs and go, hey, David, how are you working with this? What are you doing with that? What do you think about XYZ manager? I saw we're thinking about hiring them. Those are very, very valuable pieces of information to see, to experience other people's experience or to have access to other people's experience with those same People.
- [17:13]
A
My favorite definition of reputation is what people say about you behind your back.
- [17:17]
B
Yeah, very similar to, you can tell more about someone's character, about what they do when people aren't looking. One of the things I always did, and we made it part of the investment policy at my last CIO job is part of the investment policy was a yearly review of every asset manager teammate in our stable. And I purposely made it that we had to go to their office for that meeting for several, several reasons. One, it was the easiest way for us. You know, when the CIO comes in and other people on, on the team I would bring with me, they would roll out everybody from the CEO of the company generally to the person that's, you know, getting the coffee, so to speak. And it was always very interest, had a dozen people in the room, how the senior people worked with the junior people. It would tell you a lot about the culture of the place. The other thing I religiously did is if the meeting was at 12, I would purposely go at 11:40, you know, I'd go 15, 20 minutes early and just sit by myself in the waiting room. Because you would see people coming from the hallways, you know, in twos and threes. And you could tell a lot about the culture of a place by the conversation that was taking place that they didn't think anybody was hearing to kind of your point. And I just thought that was always very valuable qualitative information to get about our partners because these are our partners.
- [18:52]
A
What's a great conversation when you're a fly in the wall within an organization?
- [18:58]
B
God, I love working here. Something like that. This is the greatest job. Or if they just seem happy, they just, you know, they, they, you know, it's, it's a positive conversation as opposed to, you know, somebody coming out and swearing like that, you know, sob, blah, blah, blah. I mean, because you'll hear it all, you'll hear all of that.
- [19:18]
A
If you're a quant, quant trader with AI facial recognition, you would be kind of measuring the, the ultimate mood of the office. Do you subscribe to this idea of you go to their office, you have them come to your office and then you grab a beer. Or today it would be a non alcoholic, non alcoholic drink with the manager. Is that useful to get different environmental context to a manager?
- [19:44]
B
Absolutely. All the above. All the above. Because you'll, you'll see all sides of these people. I mean, it's interesting. I'll go back to what we were talking about a little bit before David. I think my Gut's pretty good, but it's not perfect. There have been several times when I've interviewed someone and just literally came home and told my wife, Susie, you know, who knew I was interviewing, oh, my God, I love this guy David, who came in the office. I mean, he just. I want to be, as you know, I want to be his mentor. I want him to come work for me. He's going to be great, get you in. And all of a sudden I realize you're a weirdo. You're not a very hard worker. You just, you pulled a wool over my eyes. And again, I always approached my asset managers that we hired. These are my partners. You're, you know, you're not working for me, you're working with me. And so I'm going to be as transparent as possible with you. And therefore, you know, not everybody's going to be that open as I tend to be. And so by going and having a beer with them, definitely not an alcoholic, because that tells you a lot. Going to a game with them.
- [20:53]
A
Sure. Not a side effect.
- [20:56]
B
And, you know, one of the fun things about here at LSU is it's very easy to get people to come down for a football game, for a basketball game, for, you know, anything sports related. You go to something like that and spend four hours with someone, you have a much better feel for who they are and what they are than when you're in a very scripted and rehearsed, in many cases, 30 minute presentation. When everybody's in a suit, you just see different sides of people. And if these people are my partners and they are my partners, I want them to enjoy the relationship as much as I do because the work will likely take care of itself because I am that confident in the governance and how we are set up in our investment policy. So it is absolutely a partnership. And the more venues and variety of exposures that I can have with these folks and vice versa, the better. And then the more they know about what we want and what our objectives are.
- [21:59]
A
Do you ever use your wife Susie as a secret weapon? As a, like, you got a football game, you're talking to somebody else, you're having her talk, talk to the manager and his or her partner.
- [22:11]
B
Absolutely. She, she's, she's also someone that I will go to a lot with. You know how when you're, when you're, you're working on a presentation and you've been looking at it for a month solid and I'll, you know, I go, I gotta get a fresh set of eyes and ears on this thing, I'll go present it to her. And Susie is, got tons of wonderful qualities. She's not a finance or investment person. So if I can, if she gets it, when, when I try to explain it, I'm like, okay, good job, good job. So I absolutely use her sounding board for a lot of that stuff.
- [22:44]
A
Obviously Susie's not in finance, but I love this like bifurcated like a three year old child. And the best first principles thinkers on the planet will get the same questions, which is why? Why do you do this? Oh, it's finance. Why, where does the money come from? Oh, it comes from this. This is best practice. Why is it best practice? So you just keep on asking why. Sometimes these heuristics are from, you know, the 80s or the 90s that just been passed down in the industry without, without giving second thought.
- [23:15]
B
And just as an example, this morning I went and had her look at about a 10 page deck that's going to be going to an investment banker, you know, through some institutional investor projects that we're working on. And the very first slide she goes, oh, you're missing a semicolon here. I'm like, I never saw that. And I think I'm pretty good at, you know, proofreading. So just goes to show you, fresh set of eyes and ears is worth a lot.
- [23:39]
A
You mentioned going to a football game and meeting with a manager. How much room, if any, is there for a manager to open up about his or her life to the lp? And at which point in the relationship is that appropriate?
- [23:54]
B
I know you talk to some of my friends as well, would say that boundaries are, I tend to be very open. I'm just of the belief that the more I share with you and you know how I think, the better job you can do in this partnership of ours. So if anything, I am certainly guilty, more guilty at times of overstepping what is possibly appropriate and not. It will blur the lines. I will speak for myself. I will certainly get uncomfortable when the conversation gets really personal because I just don't think that's appropriate. But talking about general knowledge about your family, your kids, those kind of experiences, trips, yeah, it's again, I'd say that's art, a little bit of art. And it's going to come down to your judgment.
- [24:58]
A
And you're the CEO of the Institutional Investor, one of the greatest brands in our industry. How did that come about? And tell me a little bit more about the Institutional Investor.
- [25:11]
B
Although I've only been in this role as CEO for two years, my relationship with the company goes back to 1982, which was my last, my senior year of undergrad here at lsu and then I did MBA right afterwards and I took my first investment class. And given that I'm old enough, I don't think you remember the days when we didn't have phones and iPads and so forth and we read magazines. And so I was told by one of my investment professors to start reading Institutional Investor magazine. And I can genuinely say that I've probably read it just about every month since then. And then the whole time I was a portfolio manager and working on the trading floor at Salomon Brothers in the 80s, it was one of the monthly must reads. My appreciation and respect for the magazine is pretty long standing. And then when I became a cio, it was probably my second or third investment committee meeting with the board and the chairman of the committee said, I want you to go and do. And again, this is probably 20, 20 plus years ago, he said, I want you to go do a research project on hedge funds and whether or not we should invest in them. Well, at the time, if I had to guess, there were probably, I don't know, 10, 12, 15,000 hedge funds out there. And it's not like there was a directory that said, here's all the hedge funds and here's what they do. And we didn't have a consultant. I didn't have the luxury of having a consultant like Cambridge. I started to drown in one hour meetings with various hedge funds. And I was whining to a friend of mine, Mark Silverstein, who just last year retired as CIO of Sampo Insurance, which was endurance. And I was complaining to him about how I was draining. He goes, hey, why don't you come do an ii, you know, institutional investor event? And I go, they do events. And he goes, yeah. He goes, you'll meet 40 of them in two days, you'll be able to speed date them. So I went to my first II event in March in dc. It was for insurance companies. I was the CIO at insurance company and it was the most effective use of two days I could have imagined. I probably went home with 30 business cards of hedge funds that I had met. We ended up not doing an allocation to hedge funds, by the way, because I couldn't prove, I didn't get comfortable with. I couldn't get confident that the diversification characteristics of most of the fund of funds type approach was going to do what we wanted to do, wanted it to do. So we ended up not doing it. But I got hooked on the quality of the CIOs that were there, the quality of the asset managers that were there, the seniority. I mean, most of the allocators that are at any of our events are the actual decision makers, the CIOs like myself. If anything, I would share that we are focused on what's called the next gen next generation to get the people below the actual decision makers so that we can increase and expand the community that we serve. But it has been, and I've got other examples, like I remember I went to an I event for pension plans when I was given the pension plan to manage at an insurance company. Not our general account, the pension plan. Putting the framework of what the investment choices for you and I as pension participants for the company. Piece of cake. I do that all day long. But then I started getting asked questions like, well, should we have a default to a target date fund? Should we allow loans? If so, how many? What percentage of the underlying balance? And these were all very administrative questions that had nothing to do with picking asset classes. And I was way over my head and had no confidence in those types of. So I called up my II relationship manager and I said, kat, where can I go to an event that has a bunch of corporate pension plan CIOs so that I can ask every stupid question under the book? And I literally went to that event, spent two days asking every dumb question imaginable. It was an incredible use of my time, an incredibly efficient way to get information and get educated on something that I needed to get up to speed on pretty quickly given what I was tasked to do. So it's an incredible opportunity to bring together the best and brightest on the asset management side, the consulting side and the allocator side in a very private and safe space. It's Chatham House rules. Everything that we do, you can pick and choose whether it's a single family office event, an RIA event, an insurance event, an endowment foundation event, you can pick whether you want to do it in Europe, Middle east or Asia Pacific. We are truly a global platform of about 100 individual events managed out of various offices throughout the world. And regardless of what type of money you're managing, who you're managing it for, what geographic location you're managing it, there's an event you can go to. And I have found it invaluable to my career over the past 40 years, as in as a portfolio manager, a trader and a chief investment officer, I cannot put a price tag on what it's meant to my career. I mean, I tell the young kids that go to these events, you know, who are sometimes a little rolling their eyes, like, why do I have to be here? And I go, if you promise me that you will go away from this with one or two friends, new, new, new friends in the business over the course of 10 or 20 years, you're going to look back at this and go, I've got some serious long friendships that are doing the exact same thing in many cases that I'm doing. And they will, they will, will totally help you be better at what you're doing.
- [31:34]
A
Thank you for listening. To join our community and to make sure you do not miss any future episodes, please click the follow button above to subscribe. What are the different types of events?
- [31:42]
B
And it's going to change primarily because suitability and the circumstances of what, of what you're managing, what is for. So for example, right now I will say if you look at the global public equity, public bond and alternative market, not quite half, but close to half of all of the assets that are out there, I'd say 45ish percent, 40 to 45% are US domestic. So by economies of scale, the US or the North America market is quote unquote, the largest. And so you have more allocators, more asset managers, more asset AUM assets under management here. And so that provides us the ability to be a bit more granular in how we approach events in the US market. So for example, we will have events that are just insurance only, just corporate pension plan only, just public pension plan only, only endowments and foundation only single family offices, multifamily offices, RaaS. We will have peer to peer meetings that have just CEOs of asset management firms, just the IT people of asset management firms, just the legal people, the HR people. So every kind of way you can slice and dice either the private wealth or the institutional market, we've got something for you as well as just peer to peer where you'll have 40 people who do nothing but legal work for asset management companies. In a room talking about all the challenges of being the chief legal counsel of an asset management firm, what an opportunity to rub elbows with the best and best. I mean, if you looked at the 100 top asset managers ranked by AUM, we've got memberships and relationships with 90 plus of them. Now it's a little different when you look at Europe. One of the things that you need that's unique about Europe is that they tend to be more language or geographic based. So we'll have A Nordic event, we'll have a French event, we'll have a German event. It's a, it's a. You know, there are some trends going on in the market that we are very, very sensitive to in continuing to evolve how we service the asset management consultant and allocator community so that we can remain as relevant as we are, you know, as the only global ecosystem of its kind. But you've got a trend of what we're seeing of the globalization of asset management. So what I mean BY that is 10 years ago at managing a global portfolio, I had to have someone like one of the big boys, the blackrock, Pimco, you know, JP Morgan, a GSAM in my stable of managers because they're the ones I could go to to say, hey, I've got to go put a portfolio in place in Japanese Yen. Well, they have an office there so they can facilitate and execute that for me very well. Well, we're finding managers in New York and other places throughout the country, throughout the world, quite honestly that are 20 billion, 25 billion, no disrespect to 25 billion of AUM, but they have clients all over the world, world, but they're not large enough necessarily to have an office in London, have an office in Tokyo, have an office in Hong Kong or Singapore. And so using our platform is a huge benefit to some of these quote unquote smaller and medium sized managers because we do have the global platform. So that's one industry trend going on. Another one is the collusion of what we normally thought of as the public market, public bonds and equities and the alternative market, hedge funds, private equity, private credit, private mortgages, infrastructure, massive limit partnerships, a lot of the illiquid space, the allocator as well as the asset managers are now both looking at all of that as basically one market. And last but not least is a similar collusion of what was originally thought of as completely separate. On the retail side of private wealth versus the institutional side. Our private wealth, single family, multifamily and RIA members and partners are looking at the allocation of their pools of money exactly like our institutional investors are. So all of these investors and asset managers are starting to kind of just blend in together. And we've got to continue to have our memberships and our events cater to that so that we can remain as relevant as we are. That's a lot of fun. It's a big puzzle. It's just like putting a portfolio strategy together. To me you're managing a puzzle.
- [36:37]
A
You see thousands of These GP LP interactions and relationships forming. For a GP that goes to one of your events or meets an LP for the first time, what is the best practice in terms of how you go about building that relationship?
- [36:53]
B
One of the things that is part of with our asset manager and consultant members and partners is that it is, you cannot be basically in people's face. The last thing that we want for our allocator, our allocator relationships is to come to one of our events and you've basically got to walk the hall of all these. Like if you go to a really big convention, you see people with a big old ass bag and they're going up and down every single, you know, booth and getting popcorn from this person and everybody's pawing at you. That is absolutely not what we, what we deliver. It is absolutely not what, what we're all about. We're about a very understated, very white glove, very relevant topics of conversation, community. So when you come in, it is very much part of the, the, the fabric of how we operate that you are going to be pretty laid back in it. This is a very uber professional environment. So best practices to use a. Be cool, just be cool. You know the relationship is going to take off or it's not. You can't, I mean the reality is you can't force something like that.
- [38:18]
A
So you want to be cool. You have a great conversation. When should you follow up? Just tell me about best practices. You've seen some of the best in the world do this, this. What do they do?
- [38:27]
B
One of the things that we do at our events is to try to make what we call experiential. Experiential events. So for example, we were, I was at a single family office event in Lausanne. If I said that right on Lake Geneva in Switzerland. It was just an awful place to have to go. So we did about a three hour right before the evening dinner. We did in the afternoon about a two or three hour event where we, the 120 people at the event split everybody up in groups of like six or seven and we went to a beach on Lake Geneva and you had to, with your group, you had to build a raft. And then we had a raft race. I can't tell you when you went. When I went to the, the dinner that night and we gave out awards on who won, who got the booby prize for the crapp, you know, because a couple of the rafts fell apart during the race. People were laughing and giggling like third grade school kids for two, three hours at the Dinner about how much fun it was. And you can't put a price tag on building on having that type of an experience with an allocator. If you're, if you're an asset manager, you literally, you cannot put it. Well, I mean, you put a price tag on it because you pay to come to the event. So there is a price tag on it. But, but that, that's, you know, and it's, it then makes a follow up email or phone call or request for a meeting so much easier. It's a warm call as opposed to a cold call. And again, that is invaluable. And I will also offer that what we're seeing since COVID you know, if you were a salesperson at an asset management firm, you're based out of Chicago and you fly to New York for a day, you could easily, before COVID had five meetings in a day day. You could do a breakfast meeting, you fly there early, do a breakfast meeting, a 1030 meeting, a lunch meeting, a 2:30 meeting, a 3:30 meeting, catch a plane. You can't do that now because half those people are working from home and they're not going to invite you to their house for a meeting. So coming to one of our events, I'm finding certainly since COVID when I still was a cio, a little less luxury and a little more necessity. And so we want to continue to build on that. But the best practices are to come to one of the events, participate in all the things that we offer, which includes table sessions where you'll be given, someone will get up and do a geopolitical presentation. And then there'll be a question, two or three questions that are sent out to the audience. And you'll have 150 people in the audience. And then everyone at your table has to do a 20 minute discussion on that question. And then we go around and poll things. You're at a table with six or seven other people that are which, half of them, or at least half of them, if not more than half of them, will be CIOs if you're the asset manager. And what a really valuable opportunity to make connections with people. And some people will be fried up and say, I have no interest in an emerging market bond allocation. None. Well, okay, as a salesperson, you just got some valuable information. I'm not going to waste any time on that guy or girl because they have no interest in buying what I'm trying to sell, sell. So it's valuable information one way or the other.
- [41:56]
A
How many touch points are typically between GPs and LPs before an LP allocates to GP and over what time period?
- [42:05]
B
Oh, David, there's such a wide range of possibilities on that. I can give you examples where GP has never met an LP and got an allocation just because of the strength of the product. Yeah, there have been, there have been, there have been managers that I've hired where I called them to introduce myself because I got, I got, I, I had information on what their product was. A good example at, at my prior, at my last CIO job, when I got to the company and I was 11, 12 years there, the portfolio was 100% public equities and public bonds. When I left, it was 35% alternatives illiquid because we had a ton of excess liquidity that we didn't need. And so we thought that it was worthwhile going into alternatives that were liquidity constrained where we could get increased yield, increased forecast of return, a lower realized standard deviation of returns so that you can imagine how well that plays in the asset management, stochastic and deterministic modeling that you can do. I knew from some of my endowment and corporate pension plan meeting conferences that I had gone to some of the names of some of the players that were very well respected in the illiquid space. So when we were ready to start having those conversations, there were two companies that I had called that I didn't really know well. I mean, I knew the company names, but I didn't know them well because they were in the, the all they were in the liquid space. I was always a public bond guy and a public equity guy. I literally called up the salesperson and said, hi, my name's Rip Reeves. You know, I'd like to talk to you about, you know, your private commercial mortgage product. So those, those, they don't happen often, but they do happen. And then there are other times where I know people who have spent 10 years managing, you know, forming a relationship before they got in at bat. So there's every, every potential range on that.
- [44:19]
A
What is the best practice for somebody that joins institutional investor? How could they benefit the most from the platform on the GP side?
- [44:26]
B
Be as, as upfront and knowledgeable and communicative about what it is you want to get out of it. Obviously, the simple answer to that is I want to get more aum. But if you're, or if the strength of your company is public equity, you probably wouldn't want to be signing up for something that doesn't have a lot of public equity, allocated allocations and CIOs you ask a lot of questions from us because we know our platform better than anybody and we can put custom packages together for you to fill what your need is. But again, like with the GPLP relationship, if a lot of people are walking around, you know, holding all their cards close to their vest and not being very open about what they want, what they need, it makes it much more challenging for the other side to try to guess what it is that they're doing. So just be open with what it is that you want, what your goals are. Just because of the global nature and the economies of scale of what we're covering and how we're covering it, you know that we can come up with.
- [45:35]
A
Something to fit I've really enjoyed this conversation. How could people learn more about Institutional Investor and find out more about how they could potentially benefit suseinvestor.com and how should people follow you?
- [45:51]
B
Follow me yes Repreve Listen to the David Weisberg podcast. I'm on LinkedIn audience note.
- [46:02]
A
Unfortunately, I'm not getting paid for this podcast, but I will take payment in LSU in Death Valley football tickets. So I will take you up on that and look forward to meeting Susie and having you meet Jessica as well. And you can see if you still like me at that point.
- [46:21]
B
I'll talk to you later. Thanks David.
- [46:23]
A
Thanks for listening to my conversation. If you enjoyed this episode, please share with a friend. This helps us grow. Also provides the very best feedback when we review the episode's analytics. Thank you for your support.