Capital Allocators – Inside the Institutional Investment Industry

Latest Episodes:

Dan Ariely – Investing in Irrationality (Capital Allocators, EP.93) Apr 01, 2019

Show notes

Dan Ariely is a renowned behavioral economist, author, entrepreneur, and investor. He is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University and a founding member of the Center for Advanced Hindsight. Dan is the author of six books, most of which have the word "Irrationality" in the title and has a weekly column in the The Wall Street Journal called "Ask Ariely." Dan's TED Talks have been downloaded more than 10 million times.

Dan also is a Founding Partner of Irrational Capital, an investment firm that identifies and quantifies the nuanced relationship between companies and their employees, and invests in human capital factors that are linked to long-term stock price performance. Last month, Irrational Capital announced a strategic partnership with Jeff Ubben's ValueAct Capital, a firm that shares their belief in the importance of the impact of corporate culture on long-term enterprise value.

Our conversation starts with Dan's journey studying pain and intuition and turns to applications of his research in the corporate setting. We discuss his research process, measurement of human capital, applying experiments to an investment strategy, employee motivation and compensation schemes as investment factors, and constructing a portfolio of factors based purely on human capital. We close by touching on Dan's projects in government and with start-ups.

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Jordi Visser – Next Generation of Manager Allocation (Capital Allocators, EP.92) Mar 25, 2019

Show notes

Jordi Visser is the President & CIO of $1.7 billion Weiss Multi-Strategy Advisers, an asset management firm with a 40-year history of focusing on innovative investment processes and cutting edge thought leadership.

Our conversation covers Jordi's decade of learning at Morgan Stanley, and then turns to a deep dive on all aspects of Weiss' equity market neutral, multi-manager process, including the importance of data visualization to risk management, behavioral alpha, improving portfolio manager performance, blending macro insights with a multi-manager team, factor-based replication, hiring managers, ranking managers, and knowing when to move on. We then discuss issues with the use of analytics outside of public equities, pending problem caused by high corporate leverage, opportunities in biotech and healthcare, the future of the hedge fund industry, and positioning an asset manager for the future.

Jordi leads a rigorous approach to identifying, assessing, and improving an internal multi-manager team using data analytics. The transparency and tools he employs are a few steps ahead of where most allocators find themselves today, and as such, his insights can shine a light on the path where all allocators can develop going forward.

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Manny Friedman – EJF on Economic Opportunity Zones (EP.91) Mar 18, 2019

Show notes

Manny Friedman is the founder of EJF Capital. Manny discussed his background and his nuanced take on markets last July in Episode 61 of the podcast. In that conversation, he mentioned a new regulation in the U.S. that created an area of investing called Economic Opportunity Zones. I started learning about Economic Opportunity Zones from Manny and dove in for my day job. Since then, more and more eyes are viewing investments in Opportunity Zones, and I asked Manny to sit down with me to share his perspective.

Our conversation covers the governments broad, bipartisan effort to reallocate capital to underinvested areas of the country, how tax incentives will potentially unlock trillions of dollars of unrealized capital gains, the future attraction of Economic Opportunity Zones to nontaxable and ESG investors, the ways in which the program could fall short of its lofty goals, and specific examples of how a virtuous circle can get created and make a meaningful dent in the economic divide in the United States

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REPLAY - Manny Friedman – Non-Linear Financial Systems (Capital Allocators, EP.61) Mar 18, 2019

Show notes

Manny Friedman is the CEO of EJF Capital, a firm he co-founded in 2005 that manages $9 billion with a focus on the financial services industry. Manny started EJF after his retirement from Friedman, Billings, Ramsey Group, Inc., a company he co-founded in 1989 and served as Co-Chairman and Co-Chief Executive Officer.

Our conversation looks back at Manny's lifelong passion for investing, the globalization of markets, and the financial crisis, and then looks forward at the newly created economic opportunity zones, long-term impact of government stimulus, stranded assets created by technological change, regulation, and philanthropy.

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Thomas Russo – All About Google (Capital Allocators, EP.90) Mar 11, 2019

Show notes

Tom Russo is the Managing Member of Garnder Russo & Gardner. Last week, Tom talked in detail about his holding in Berkshire Hathaway. This week, we continue the conversation with his new holding in Google.

Our conversation covers buying Google now, comparing the company to Facebook, future growth opportunities starting from a large base, competition from Amazon, Google X's long-term moonshots, and related stories in Tom's portfolio companies Philip Morris and Nestle.

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Thomas Russo – All About Berkshire Hathaway (Capital Allocators, EP.89) Mar 04, 2019

Show notes

Tom Russo is the Managing Member of Gardner Russo & Gardner. Tom and I sat down in Episode 16 to discuss his background and investment strategy in what was one of the most popular episodes on the show. He oversees $13B in a global value strategy focused on family-operated public companies.

Our second conversation is a two-part episode for this week and next. First, we talk solely about his holding in Berkshire Hathaway, a stock he first bought 38 years ago.

The conversation covers Tom's initial purchase of Berkshire, company meetings, reaffirming his thesis and search for disconfirming information, the genius of Warren Buffett, research on Mitek, cross-fertilization of Berkshire's CEOs, the subdivisions of insurance, public market investments and regulated businesses, valuation, compensation, Berkshire after Warren, and Tom's sell discipline.

We close with a teaser for next week's episode, as Tom reveals the name of the first significant stock he's bought for his clients in eight years.

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REPLAY (EP.16) Thomas Russo – Buy and Hold...and Then What Mar 04, 2019

Show notes

Tom Russo is the Managing Member of Gardner Russo & Gardner, where he manages $11 billion in a long only, global value strategy. Tom buys the stock of global consumer businesses with great brands and holds them for a really long time. He looks for businesses with a capacity to reinvest free cash flow and a capacity to suffer through short-term pain in order to achieve long-term gain. Tom started his investment career at the Sequoia Fund in New York, where he worked from 1984 to 1988. His first partnership, Semper Vic Partners, has compounded at 14.6% per year for 33 years, besting the S&P 500 by 3.6% per annum.

Tom is a graduate of Dartmouth College (B.A., 1977), and Stanford Business and Law Schools (JD/MBA, 1984). He has served on Dean's Advisory Council for Stanford Law School, Dartmouth College's President's Leadership Council, and the Advisory Board for the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School, as well as on the boards of the Winston Churchill Foundation of the U.S., Facing History and Ourselves, and Storm King Art Center.

Our conversation covers how Tom created an investment strategy by personalizing early lessons from Warren Buffett, the capacity to re-invest, the capacity to suffer, and what it takes to own a stock for decades. Tom's time horizon and fortitude as an investor parallels those of institutions with permanent capital. Listeners will get a fresh perspective on what it means to be a long-term investor

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Matt Botein – Flexible Investing and Institutional Challenges (Capital Allocators, EP.88) Feb 25, 2019

Show notes

Matt Botein is the Co-Founder and Managing Partner of Gallatin Point Capital, a $1.5 billion private investment company he founded after departing from BlackRock, where he had served as the Chief Investment Officer and Co-Head of the firm's $160 billion Alternatives business. Before sitting atop that lofty perch, Matt formed a bank after the financial crisis, was a Managing Director at hedge fund Highfields Capital and a private equity Principal at Blackstone.

Our conversation starts with Matt's early career experience, touching on differences in public and private investing and forming new financial companies after periods of crisis. We then turn to his reconnection with Larry Fink, who in short order tapped Matt to run BlackRock's giant Alternatives business. We discuss his unusually graceful exit from BlackRock, flexible investment approach at Gallatin Point, and perspective from meeting a wide array of large pools of institutional capital globally. We finish with his take on the opportunities and challenges for private equity, headwinds for hedge funds, and real assets for his personal portfolio.

Back when Matt and I were in school together, he was renowned for taking an occasional snooze in class, getting cold called by the professor, and waking up only to offer the most plugged in and articulate answer anyone could have imagined. I suspected tapping into his brilliant mind would provide lots of food for thought, and he certainly didn't disappoint.

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Rahul Moodgal - Master Fund Raiser (Capital Allocators, EP.87) Feb 18, 2019

Show notes

Rahul Moodgal has spent 20 years as a fund raiser across long only strategies, hedge funds, fund of funds, customized solutions, start-ups, and non-profits. Collectively, Rahul has raised and helped raise $60 billion for firms since 2005. He started his career in the industry at powerhouse TT International, and later joined The Children's Investment Fund (TCI) where he led the marketing effort that raised $20 billion in just 3½ years. Within TCI's affiliate model, Rahul also was responsible for the largest India fund raise in history ($1 billion for TCI New Horizon Fund), and the largest sector fund launch in history ($1.1 billion for Algebris Investments).

Our conversation covers capital raising lessons learned from teaching, the value of transparency, the gold rush before 2008, the lean times afterwards, modern fee structures, the three key points to effective marketing, the three traits that will kill you, the two biggest issues start-up funds face, the best questions asked by leading allocators, and some of the worst horror stories in attempted capital raising. We close comparing by fund raising for charities and investment firms.

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Chris Ailman – CalSTRS' Venerable CIO (Capital Allocators, EP.86) Feb 11, 2019

Show notes

Chris Ailman is the chief investment officer of the $220 billion pool for California State Teachers' Retirement System (CalSTRS). He joined CalSTRS back in 2000 after 4 years as CIO of the Washington State Investment Board and 11 years as CIO of the Sacramento Country Employees Retirement System. Chris is a legend in the business and the list of accolades for his work is longer that the list of my podcast episodes.

Our conversation dives in with the flawed business model of government running a money management firm, looming retirement crisis, and challenges of governance and communication with a rotating Board. We then turn to the inner workings CalSTRS, including the use of internal and external managers, managing a long-term asset allocation cruise ship, inflation sensitive investments, risk mitigating strategies, private equity for a huge pool of capital, the innovation lab, ES and G, and building influence among large asset owners.

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