Podcast Summary: "How I Invest with David Weisburd"

Episode 217: How to Manage $15B: Insights from Sacramento County's Pension Fund

Date: September 24, 2025
Guest: Brian Miller, Senior Investment Officer, Sacramento County Employee Retirement System
Host: David Weisburd

Episode Overview

This episode features an in-depth conversation with Brian Miller, who oversees the $15 billion Sacramento County Employee Retirement System (SCERS). Drawing from formative experiences at Tuckman Grossman Capital and eight years running SCERS’s $6 billion public equity and absolute return portfolio, Brian shares lessons in long-term value investing, navigating market cycles, and building resilient portfolios. The discussion flows from Brian’s career journey and philosophy, to practical implementation strategies for institutional portfolios, and practical advice for upcoming investors.

Key Discussion Points & Insights

1. Early Career and Lessons from Tuckman Grossman (00:53–08:22)

• Tuckman Grossman’s Foundation and Approach

  • Founded by value investors Mel Tuchman and Dan Grossman (who worked with Warren Buffett in the early days).
  • Managed over $12B for institutions like Yale, Stanford, and Rockefeller.
  • Four-person investment team, single-strategy focused—a "great time for active management."

• Consistency and Long-Term Value Investing

  • Tuckman’s edge lay in consistent, long-term strategies:

    "They followed a really consistent approach over long number of years... finding what you do that you can be successful at and then staying consistent with it."
    —Brian Miller (03:18)

  • Focus on letting investments compound and not being swayed by short-term market shifts.

• Client Quality and Performance Feedback Loops

  • Having top LPs (like Yale or Stanford) can stabilize firm capital and even offer opportunities during downturns.
  • "The fact that the firm was able to deliver really strong performance helped... that leads to great clients... it builds on itself."
    —Brian Miller (06:18)
  • During financial crises, liquidity needs from LPs create both challenges and opportunities for managers.

• Illiquidity Mindset in Public Investing

  • Quoting Rahul Mugdal: “Buy public positions that if the stock market closed for five years you'd want to hold."

2. Navigating Crises and Behavioral Challenges (09:22–11:39)

• Tactical Rebalancing in Downturns

  • In crises, managers and allocators must often sell assets at a loss to take advantage of deeper value elsewhere—emotionally difficult but sometimes necessary.
  • Allocators rely on diversification to create liquidity for rebalancing ("pockets of liquidity") during market stress.

• Behavioral Discipline

  • The discussion highlights the emotional challenge of realizing losses to pursue greater future opportunity:

    "The difficult behavioral thing during a crisis is you have to sell some things for a loss in order to buy other things at higher discounts... which makes you have to realize the loss in parts of your portfolio, which is behaviorally difficult."
    —David Weisburd (09:22)

3. Value vs. Growth and the Changing Small Cap Universe (11:39–18:59)

• Is Value Dead?

  • Fama-French three-factor model's relevance is questioned. Are small-cap/value premiums still valid?
  • Mega-cap stocks have performed due to real earnings/cash flow growth; small cap universe has structurally changed (fewer public cos, more “fallen angels” or private-market rejects).

• Market Structure Evolution

  • Fewer quality small-caps listed; many good companies now leapfrog straight to mid-/large-cap at IPO or remain private longer.
  • "There are fewer [quality] of them in the market. So it's fundamentally different asset class."
    —David Weisburd, summarizing Brad Conger (14:53)
  • Potential for small-cap alpha for active managers but difficult for the asset class as a whole.

• Public/Private Crossover Strategies

  • New vehicles (e.g., from CO2) invest in both public and private small companies.
  • Less crossover in classic private equity, as operational levers are better suited for private ownership.

4. Transitioning from Manager to Allocator (19:14–27:46)

• Shifts in Perspective

  • Moving from detailed stock analysis to evaluating managers' processes and philosophies.
  • As an allocator: focus shifts to portfolio-level decisions, manager “fit,” and cross-asset implementation.

• Diligence & Manager Selection

  • On-site visits and deep dives into manager decision-making processes are essential—especially for active, fundamental managers:

    "It's been invaluable... you need to go visit the managers and really spend time with them digging into the details."
    —Brian Miller (24:06)

• Efficiency and False Positives/Negatives

  • Over time, targeting a short-list of relevant, high-quality managers is more efficient.
  • “The most effective allocators focus on preventing false positives and let false negatives go through the crack... Their job is to make sure there's no mistakes...”
    —David Weisburd (25:01)
  • Consultant input and staff-driven process provide balance and “safety rails.”

5. The Importance of Process and Investment "Rootedness" (28:44–32:15)

• Staying Rooted in Investment Theses

  • Behavioral traps—selling too early without conviction or understanding.
  • "It's very important to root yourself in why you're doing something... especially in your mind, you really have to write it down."
    —David Weisburd (30:55)
  • Process documentation and clear rationale support discipline during periods of underperformance.

• Detecting Style Drift

  • Evaluating when manager performance is due to market factors, vs. a shift in their approach or philosophy.

6. Building and Managing SCERS’s $6B Public Equity Portfolio (32:27–38:44)

• Strategic Allocation and Active Management

  • Initial split: 50% domestic, 50% international; now use more global strategies and ACWI benchmarks.
  • Passive core (50% of US equity), remainder actively managed. Active sleeves have outperformed.
  • "I think active management still has the ability to [add incremental returns]..."
    —Brian Miller (33:13)

• Manager Count: Diversification vs. Focus

  • Balance between meaningful allocation size and not overdiversifying ("don't just re-create the benchmark").
  • "We consolidated in areas where we had overlap... to open up homes for new managers elsewhere."
    —Brian Miller (34:17)

• Sizing and Risk Management

  • Allocation size must be sufficient to impact performance but not create outsized risk.
  • Prefer focusing on downside volatility over just “tracking error.”

7. Behavioral Challenges in (Re)Balancing and Allocating (38:29–41:49)

• Rebalancing Discipline

  • Selling outperforming segments (like US or international) can be emotionally conflicted, but necessary for long-term portfolio health.

• Sub-allocation Nuance

  • May reduce aggregate exposure to an asset class but simultaneously allocate more to certain managers within it, based on performance or opportunity.

8. Absolute Return Strategies at SCERS (41:49–46:10)

• Role and Strategic Function

  • Absolute Return (7% of portfolio) is designed for positive, uncorrelated returns, not just as a “risk mitigator,” but alpha with low beta/low correlation.

• Examples and Expectations

  • Strategies: event-driven, macro (systematic/discretionary), market neutral, multi-strat, equity long-short (market neutral), volatility/fixed income arbitrage.
  • Not just public equities; some private-market and derivative-based strategies included.
  • "Delivering a 5 to 6% return with low volatility, with low downside, good risk adjusted returns certainly fits the bill for us..."
    —Brian Miller (45:07)

9. Leveraging Technology for Portfolio Management (46:10–48:09)

• MSCI Tool Usage
  • CASA (an MSCI platform) allows cross-asset, top-down and bottom-up portfolio transparency: by geography, asset class, sector.
  • Enables efficient, targeted diversification and “knowing what you own.”

10. Career Advice and Philosophical Closing (48:09–51:29)

• Continuous Learning and Forward-Looking Mindset

  • "Be a continual learner... look into what the large trends are that are developing in the marketplace and try to be early in those trends."
    —Brian Miller (48:25)

• Conviction and Internal Validation

  • Build conviction from first principles, not just consensus. Stay the course when your thesis is strong, even under criticism.
  • "If you see a social criticism as a storm, is your tree trunk strong enough to withstand? Is your thesis strongly rooted enough?"
    —David Weisburd (51:08)

Notable Quotes & Memorable Moments

• Consistency in Value Investing:
  "They followed a really consistent approach over long number of years... finding what you do that you can be successful at and then staying consistent with it."
  —Brian Miller (03:18)

• Long-Term Perspective is Key:
  "Allowing the ability for those investments to compound over time and not getting swayed by... shifts in the market."
  —Brian Miller (03:51)

• Behavioral Dilemma in Crises:
  "You have to sell some things for a loss in order to buy other things at higher discounts... which is behaviorally difficult."
  —David Weisburd (09:22)

• Manager Evaluation:
  "On the due diligence process, I think it's been invaluable—no, you need to go visit the managers and really spend time with them digging into the details."
  —Brian Miller (24:06)

• Process and Rootedness:
  "It's very important to root yourself in why you're doing something, even when you would have made the same initial decision because of that... pain of holding it."
  —David Weisburd (28:44)

• Maintaining Conviction under Criticism:
  "Build conviction in those ideas. Have you done the work?... that helps you then have that conviction that you can stay invested with that theme or opportunity set."
  —Brian Miller (50:46)

Suggested Listening Timestamps

• [00:53] Tuckman Grossman’s early days and value approach.
• [03:18] Consistency and long-term focus in investing.
• [06:16] The influence of top institutional LPs.
• [09:22] The challenge of rebalancing during a crisis.
• [11:39] Small cap value vs. growth debate and structural changes.
• [19:14] Transition from portfolio manager to allocator.
• [24:06] The need for in-person manager diligence.
• [28:44] The importance of root investment theses.
• [32:27] Building the public equity portfolio at SCERS.
• [41:49] The role of absolute return strategies.
• [46:10] Leveraging technology for transparency and diversification.
• [48:25] Career advice: stay curious, future-oriented, and networked.

Final Thoughts

Brian Miller offers a masterclass in blending long-term fundamental investing with pragmatic institutional portfolio management. His experience underscores the importance of process, continuous learning, manager diligence, and the behavioral discipline needed to survive inevitable cycles. For investors at every level—from young professionals to seasoned allocators—the conversation is packed with wisdom on navigating not just markets, but the psychology and structure of long-term investing.