Podcast Summary: How I Invest with David Weisburd — Episode 304
Guest: Jeff, Co-CIO at Neuberger Berman
Air Date: February 13, 2026

Episode Overview

In this episode, David Weisburd interviews Jeff, Co-Chief Investment Officer of Neuberger Berman, a $550B asset manager. The discussion centers on the decision-making and pitfalls of institutional investors, the differences in managing mega-scale portfolios versus endowments, the importance of drawdown versus volatility, lessons from the venture capital boom and bust, and the art and science of constructing robust multi-asset portfolios. Jeff offers candid reflections on behavioral pitfalls, portfolio construction, the role of private assets, and adapting investment philosophy to new challenges.

Key Discussion Points & Insights

1. Institutional Investing: Scale & Objectives

• Differences Between Institutions ([00:12])
  • Large institutions (e.g., Texas Teachers) have "the ability to fund niche managers or smaller strategies often off the table."
  • Managing massive portfolios is "like driving an aircraft carrier in a creek;" smaller endowments are "more agile" and can be "more artistic."
  • Large plans must use more quantitative, targeted approaches compared to "artistic" smaller endowment models.

2. Lessons from Britt Harris ([01:32])

• Harris "had a knack for simplifying complex investment concepts," enabling teams to cluster investments effectively and communicate the rationale to governance.

3. First Principles of Portfolio Construction

• Total Portfolio Approach (TPA) ([02:42])
  • Portfolio buckets: "growth and defensiveness," easy to communicate and benchmark.
  • "Determine your risk profile appetite, measure it in passive equity-bond blends, and stress test historical scenarios (e.g., GFC drawdowns) for suitability."
• Optimizing Returns with Drawdown Limits ([03:50])
  • Set the maximum tolerable drawdown, then maximize returns within that constraint.

4. Drawdown vs. Volatility ([04:01], [04:51])

• "Standard deviation is helpful if you have a trading book... As time goes by, who really cares?"
• Drawdown matters more — impacts liquidity, ability to fund obligations, and organizational survival in deep bear markets.
• "The COVID drawdown was sharp, but short. The Dot-com bust was a prolonged, devastating hit that took nearly a decade to recover from."

5. Risks of Complacency and Hidden Assumptions

• “Buy the dip” can work until it doesn’t ([06:34])
  • Complacency regarding perpetual short drawdowns can be hazardous: "History rhymes even if it doesn't repeat."
• Low Volatility Trap ([09:06])
  • Current low VIX/volatility "can encourage excessive risk taking" and is a "perilous assumption."

6. Endowment Allocations to Venture & PE: Mistakes & Liquidity Lessons ([10:05])

• "The magnitude to which venture and growth equity became part of endowment portfolios was too high."
  • In peak cycles, overexposure to illiquid assets starves portfolios of flexibility.
  • "It will take 6-8 years to get your capital back in venture/growth equity, 10-15 years for full return."
  • Many VC funds raised in last cycle "have yet to return a penny"—liquidity constraints became severe.
• Denominator Effect & Forced Secondaries ([24:15])
  • Overcommitment leads to forced secondary sales, "sometimes at a 20-30% discount in venture."

7. Neuberger Berman’s Multi-Asset Mandate ([13:18])

• Balances public and private markets, using buyouts, co-investments, real estate, catastrophe bonds, and hybrids.
• Top-down and bottom-up allocation; stress-testing for liquidity shocks and regime changes.

8. Role of Private Assets: Modeling, Marking, and “Volatility Laundering” ([14:52], [16:13])

• "Privates look artificially less volatile" due to infrequent marking. What matters is the cumulative, cash-on-cash return.
• "Volatility laundering" (term from Cliff Asness): Not a problem if privates actually deliver higher returns, "but liquidity penalty means you need a real return premium."

9. Behavioral Pitfalls in Asset Allocation ([18:03])

• Two dangers: taking wrong actions at market bottoms, and risk of ruin due to leverage.
• "Leverage is a different type of volatility ingredient that can be dangerous because it can take you to zero."

10. Sample Unconstrained (“Dream”) Portfolio Construction ([19:37])

• Recommends: 50% Public Equities, 30% Privates, 10% Uncorrelated Diversifiers, 10% Cash/Treasuries
  • "20% liquid/defensive reserve acts as 'motor oil' for the portfolio, for rebalancing during drawdowns."
• Overweighting privates (>50%) can turn “portfolio” into “problem” due to illiquidity ([22:56]).

11. Sequencing & Implementation for Large Inflows ([27:23], [28:58])

• Phased ramp-up recommended for new entrants to avoid behavioral/institutional scars from poor sequence of returns.
  • "If you put it all into equities tomorrow and that's when we get the bear market ..."
  • Behavioral pitfalls can lock institutions out of attractive asset classes.

12. Yield Enhancement While Waiting ([31:07])

• "Don't just keep sidelined cash in Treasuries. Blend in lower-equity-risk, yield-enhancing strategies and liquid diversifiers to target higher returns while ramping up."

13. Asset Class Valuations (Q1 2026) ([33:06])

• Favorable: Equities (especially non-US), private equity, private real estate.
• Unfavorable: US fixed income (tight spreads, less upside).
• Private credit earns 9-11% but is illiquid; distinct from traditional fixed income.

14. Philosophical Evolution & Lessons Learned ([36:09])

• Resilience of Human/Economic Actors: "Don’t count out humanity’s ability to adapt incentives and navigate shocks."
• Shift from "pure value" to "core" (value + growth) investing: "You get what you pay for. A value investor is going to be challenged if you don't have high quality businesses that are capable of growing."

15. Continuous Learning for Allocators ([38:37])

• Drill down from index to sector to company: "Double click. Understand the earnings. See the revenue. Is it proving the economics that drives dramatic equity moves?"

16. On AI & Market Efficiency ([42:01])

• AI is already meaningfully impacting productivity; believes we’ll see this reflected in incremental EPS, but full impact is yet to be realized.

Notable Quotes & Memorable Moments

• On Large vs. Small Portfolio Management:

  "It's like driving an aircraft carrier in a creek... But with a smaller pool of capital, you can be more artistic."
  — Jeff ([00:12])

• On Drawdown vs. Volatility:

  "Drawdown is where you have a cumulative hit to your net wealth or your liquidity that may interfere with the ability to pay your bills... that should inform your gut check."
  — Jeff ([04:01])

• On the Endowment Model Mistake:

  "The magnitude to which venture and growth equity became part of the menu got too far askew where it was dominating commitments."
  — Jeff ([10:05])

• On Private Allocation Pitfalls:

  "Imagine having [50% privates] at the end of 2021... you don’t have a portfolio, you have a problem."
  — Jeff ([22:56])

• On Portfolio Liquidity & Flexibility:

  "If you're already 100% in equities... you can't rebalance by definition, you're already in."
  — Jeff ([21:04])

• On Evolution as an Investor:

  "If you have high quality businesses that are capable of growing, they're probably not value businesses anymore. You have to look through valuation."
  — Jeff ([36:09])

• On AI’s Impact:

  "We see it in the macro data, not as much in micro, but over time... meaningful uplift, probably about 2% of incremental EPS growth from AI after we look back at this year."
  — Jeff ([43:32])

• Advice to Younger Self:

  "Don’t get so anchored and put a certain role on a pedestal... focus more on the journey, not the destination."
  — Jeff ([44:06])

Key Timestamps

• [00:12] — Large-scale portfolio management vs. endowment style
• [01:43] — Lessons learned from Britt Harris
• [02:42] — First principles: growth vs. defensiveness
• [03:50] — Drawdown risk ("the gut check")
• [06:34] — Fallibility of “permanent” short drawdowns (“Fed put”)
• [09:06] — Low volatility regimes and hidden risk
• [10:05] — Venture/PE overexposure, liquidity pitfalls
• [13:27] — Multi-asset mandate and toolkit (public/private mix)
• [14:52] — Modeling risk in blended (public/private) portfolios
• [16:13] — "Volatility laundering" and real versus academic risk
• [19:37] — Ideal unconstrained endowment-style portfolio
• [21:04] — The rebalancing imperative, liquidity planning
• [22:56] — Why too much private allocation is a problem
• [27:23] — Sequencing/ramping large new inflows
• [31:07] — Yield enhancement for cash awaiting deployment
• [33:06] — Current favored/unfavored asset classes (Q1 2026)
• [34:29] — Role, risks, and returns of private credit vs. fixed income
• [36:09] — Philosophical lessons: incentives, resilience, growth vs. value
• [38:37] — Drilling down: how to stay sharp as an allocator
• [42:01] — AI’s market impact: evidence, lag, and expectations
• [44:06] — Career advice: journey over destination

Conclusion

This episode delivers a nuanced perspective on constructing, managing, and evolving institutional portfolios. Jeff's lessons for allocators center on balancing return goals with drawdown tolerance, being wary of illiquidity and overconfidence traps, prioritizing flexibility, and staying grounded in pragmatic, first-principles thinking. He underscores the enduring relevance of behavioral discipline, continuous learning, and adaptability in navigating ever-changing market regimes.