Podcast Title: How I Invest with David Weisburd
Episode: E181: Why Portfolio Construction Beats Manager Selection w/$7 Billion CIO
Release Date: June 30, 2025
Host: David Weisburd
Guest: T.C. Wilson, Chief Investment Officer (CIO) of The Doctors Company

1. Introduction and Guest Background

David Weisburd opens the episode by inviting T.C. Wilson to share his journey to becoming the CIO of The Doctors Company.

• Key Points:

  • T.C. Wilson began his career at Mercer in 1996, focusing on investment consulting and asset allocation.
  • He co-founded an institutional consulting group in Richmond, Virginia, which led to his involvement with The Doctors Company over 18 years.
  • In September 2017, Wilson became the first CIO of The Doctors Company, building an internal investment team that has grown the portfolio from $700 million to $7 billion in assets under management, with a $3.2 billion surplus.

• Notable Quote:

  • T.C. Wilson [00:04]: "We are at $7 billion in assets under management today and about $3.2 billion in surplus."

2. Distinguishing Insurance Companies from Other Allocators

David probes into how insurance companies, like The Doctors Company, differ from endowments and other institutional investors.

• Key Points:

  • Unlike tax-exempt entities, insurance companies are taxable and focus on meeting shareholder obligations without the need to distribute assets like endowments.
  • The Doctors Company consistently maintains a positive cash flow, never having to sell securities to pay claims, which provides flexibility in investment strategies.

• Notable Quote:

  • T.C. Wilson [02:33]: "We are not tax exempt, so we don't have those requirements. We are a taxable entity and really it comes down to what our claims are and what the severity is and being able to meet the obligations of our shareholders."

3. The Role of Surplus in Investment Strategy

The conversation shifts to the significance of the $3.2 billion surplus held by The Doctors Company.

• Key Points:

  • The surplus is a vital indicator of financial health, reflecting the company's ability to absorb losses and maintain solvency during periods of high claims.
  • From an investment standpoint, the surplus allows greater latitude in asset allocation, treating it similarly to an endowment model (e.g., 60/40 or 70/30 equities to debt).
  • A strong surplus enhances the company's reputation and attracts new members by demonstrating financial stability.

• Notable Quote:

  • T.C. Wilson [03:19]: "Our strong surplus is a competitive advantage. When it comes to attracting new members, members want to work with a company that's financially secure. And clearly, we're one."

4. Tax Considerations in Portfolio Construction

David asks how being a taxable investor influences The Doctors Company's investment decisions compared to tax-exempt entities.

• Key Points:

  • The company has a small allocation to municipal bonds for their tax-exempt income benefits.
  • High-turnover investment managers are generally avoided to minimize taxable events, aligning with the company's focus on compounding returns without frequent distributions.
  • The organization prefers strategies that allow income to compound over time, reducing the tax impact.

• Notable Quote:

  • T.C. Wilson [05:05]: "We don't want a high turnover manager. We want our investments to compound over time without excessive gains being booked, which could trigger tax liabilities."

5. Differentiating Asset Managers for Long-Term Success

The discussion explores what sets apart asset managers who endure versus those that offer limited fund options.

• Key Points:

  • Embracing innovation and expanding investment options are crucial for longevity in asset management.
  • Firms that adapt to the evolving investment landscape, such as the rise of ETFs and private credit vehicles, tend to persevere.
  • Providing regulatory support and understanding the specific needs of insurance companies enhances manager attractiveness.

• Notable Quote:

  • T.C. Wilson [06:27]: "Those that have embraced innovation and expanded their investment management options have persevered because the universe of strategies and investment options has grown significantly."

6. Portfolio Construction Insights

David delves into the specifics of The Doctors Company's portfolio construction strategy.

• Key Points:

  • The portfolio is divided into 80% non-value at risk (non-VaR) assets and 20% value at risk (VaR) assets.
  • Non-VaR includes stable, less volatile investments like US investment-grade bonds and Treasuries.
  • VaR comprises more dynamic assets such as public equities, real assets, and opportunistic credit, aimed at generating higher returns with controlled risk.

• Notable Quote:

  • T.C. Wilson [17:49]: "Our investment portfolio is constructed to achieve the best risk-adjusted returns with a focus on income generation. In our 20% VaR portion, we target 50% public equity, 25% real assets, and 25% other investments like private debt and opportunistic credit."

7. Private Equity Perspective

The conversation addresses private equity's performance and future outlook.

• Key Points:

  • The Doctors Company adopts a selective approach to private equity, focusing on established companies with strong cash flows and minimal operational disruptions.
  • There's a skepticism towards late-stage private equity due to market saturation and inherent risks.
  • The company prefers early-stage investments that align with its mission, particularly those impacting healthcare.

• Notable Quote:

  • T.C. Wilson [20:54]: "Our private equity definitions differ; we focus on established companies with strong cash flows and management teams aiming to enhance operations rather than overhaul them."

8. Emphasis on Innovation and Evergreen Funds

David inquires about the importance of innovation and the preference for evergreen funds in portfolio management.

• Key Points:

  • Innovation is pivotal for asset managers to stay relevant and meet the evolving needs of investors.
  • Evergreen funds are favored for their flexibility, allowing continuous investment without the constraints of fund lifecycle closures, thus simplifying reporting and liquidity management.
  • The Doctors Company values evergreen structures for their favorable redemption terms and ongoing investment opportunities.

• Notable Quote:

  • T.C. Wilson [23:32]: "Evergreen funds offer us the benefit of adding to a single investment over time with favorable redemption terms, aligning well with our need for liquidity and flexibility."

9. Risk Management and Portfolio Resilience

The dialogue shifts to how The Doctors Company prepares for market downturns and manages risk.

• Key Points:

  • The company prioritizes downside risk protection, aiming to capture a significant portion of potential losses while maintaining consistent investment philosophy.
  • During market highs, the portfolio's risk segment may underperform, which is a strategic choice to preserve capital during downturns.
  • The investment committee focuses on strategic asset allocation rather than reacting to short-term market fluctuations.

• Notable Quote:

  • T.C. Wilson [26:08]: "In 2025, when the S&P was down 19%, our portfolio only declined by less than 5%, demonstrating our focus on risk management and portfolio resilience."

10. Leadership Principles and Organizational Culture

David and T.C. discuss the impact of leadership principles on investment management success.

• Key Points:

  • Embracing principles like "extreme ownership," inspired by military leadership, fosters a culture of accountability and proactive decision-making.
  • Encouraging team members to speak up and prioritize team success over individual ego leads to better organizational outcomes.
  • Strong leadership and a positive organizational culture are as crucial as strategic asset allocation in achieving long-term success.

• Notable Quote:

  • T.C. Wilson [45:13]: "Extreme ownership means taking responsibility at all levels, which cultivates a team environment where everyone is committed to the company's success."

11. The Future of AI in Asset Management

The discussion concludes with predictions on how artificial intelligence (AI) will transform asset management.

• Key Points:

  • AI is expected to commoditize quantitative models, making sophisticated portfolio construction accessible to a broader audience.
  • Fundamental research will benefit from AI-driven efficiencies, enabling faster data processing and enhanced decision-making.
  • AI advancements could empower organizations to manage portfolios in-house more effectively and cost-efficiently, potentially reducing reliance on external managers.

• Notable Quote:

  • T.C. Wilson [39:31]: "Within five to ten years, AI will enable us to build and manage portfolios internally with the same sophistication as any external manager, substantially lowering costs and increasing efficiency."

12. Final Thoughts and Recommendations

David seeks T.C. Wilson's advice for asset managers aiming to appeal to insurance company investors.

• Key Points:

  • Asset managers should thoroughly understand the unique needs and regulatory environments of insurance companies.
  • Demonstrating a deep knowledge of the client's portfolio and providing customized investment solutions are essential.
  • Managers must avoid generic pitches and instead present well-researched, relevant investment strategies that align with the insurer's objectives.

• Notable Quote:

  • T.C. Wilson [37:46]: "Don't contact me without doing your homework. Understand our portfolio and present ideas that are directly relevant to our investment strategy."

Concluding Insights

T.C. Wilson emphasizes the paramount importance of strategic portfolio construction over manager selection, underscoring that asset allocation decisions drive the majority of investment returns. Coupled with strong leadership principles and a commitment to innovation, The Doctors Company exemplifies how institutional investors can achieve robust, resilient portfolios capable of weathering market volatility while pursuing sustainable growth.

Contact Information:
For further inquiries or to connect with T.C. Wilson, listeners are encouraged to reach out via email at T.C.Wilson@TheDoctors.com.