YouSaid · the spoken record

Allison Thacker

lines on the record: 81
first: 2023-11-06
most recent: 2023-11-06
sittings or episodes: 1
sources: podcast

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“Looking for managers to do this for us. But I think part of why you hear we have a person focused on this is that it's not enough to look at the manager and validate them from a seat of a more generalist person in this industry. The more sector specific talent and knowledge and deal level underwriting skills that we had on our team, the better our manager selection skills have been. And so we must build knowledge and expertise in order to underwrite the portfolio in order to choose the manager in this area. It's just not that easy.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a lot of early stage things going on that may pay off but almost require venture philanthropy to back them. And then there's a lot of very late stage things that are totally predictable that you can put big dollars to work in that are infrastructure returns. And in the middle is this enormous swath of companies that probably are going to offer great returns, but also have a lot of science risk or execution risk in them still. And so we're trying to learn more about what risks are we willing to take.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a total sea change in terms of corporate America and big companies' appetite for solutions. So 10 years ago, there was relatively limited interest from big companies about greening and cleaning up their footprints. And so if you could offer a cost superior and scale solution to them, they might buy it. Today, I think even big companies will take an experimental contract with someone who can help them clean up their footprint and make it more green and more friendly. And whether that's because those managers are younger and they believe in it or because the customers of the company believe in it or because government regulation is coming, I don't know, but it enables businesses that would not have possibly been able to get started to become viable today. I think with every year that goes on, that's becoming more true. And we're really at a phase that”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thing, and in the meantime, you need natural gas to power some piece of the power infrastructure in most states in order to charge your Teslas.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our job will be to be out when oil zero, right? And so we actually added a person to our team to spend the majority of his time on becoming the best energy transition investor out there. We shouldn't just be the best energy investors. We understand the industry and the infrastructure and the players. Therefore, we need to understand this next iteration of the industry as well. So we're about a year and a half into that initiative. I would say we're still early in our learning because the industry itself is changing very quickly and these investments still need to meet our hurdles and be competitive across the portfolio. And so some of the earliest infrastructure investments say a solar farmer or windmill, they're more infrastructure like from a returns perspective. And so looking forward to the continued development of great energy transition investments, I do think we see that happening, but it's not an overnight.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“And there's people on both sides of the issue, as there probably are most places where you have an intellectual discourse. But I think what we went back to is we are a university and we are a research institution. And what must a research institution do? We need to look at the science and the data. But we also need to be a thought leader about this industry. And so the university and our faculty have engaged a lot with the industry. I think that Houston is the city of the most energy company headquarters. And so we are very engaged as a university with the industry in thinking about what can they do to become better stewards in this area. I find most of our alumni, most of our students, most of our faculty appreciative of that as the university stance.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sitting in Houston, in the oil patch, you'd imagine there's more of an appetite to own oil than there would be most anywhere else in the country. And you're talking also about hedging that out to some extent or the carbon emissions with offsets. Curious what that conversation is like.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“We don't invest in a single fund that hasn't committed to be using carbon offsets and become carbon neutral. And so from our standpoint, that's an okay place to be as a university, but the rules are constantly changing and we're going to keep revisiting that issue.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you're awake and alive right now as an institutional investor, you must have a view on the carbon situation, global warming, greenhouse gases, et cetera. And Rice, I'm very happy to say, has walked a good path on this in the sense that we have decided that the university will become carbon neutral by 2030, but additionally the endowment is committing to make its oil and gas assets also carbon neutral by that same date. Now we will have to buy offsets in order to do that, but we have been engaging versus divesting. And so we spend a tremendous amount of time talking to our investment partners, talking to our mineral royalty less sores about how can you do a better job on this and this environmental issue. And maybe because we're one of the few people still talking to them.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've always held a significant portfolio of directly owned assets in those areas that we manage internally using consultants on a very cost effective basis. And not only are the consultants cost effective, but just the fee burden avoidance is very effective. And I think we have stuck with that strategy and where it made sense, taken some more things in. We have been opportunistic as well on co-investing where that's made sense. with managers in projects that I guess I would say are follow that high yielding high margin of safety tend to 14 returning projects so I'm not trying to get 25 IRRs and living in the world of the most aggressive projects out there building hotels and drilling oil wells not at all what we're doing but more on the infrastructure side the other thing is”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have around 25% of our portfolio in real assets. And I think that's the most significant asset allocation differentiator for rice versus our peers. I think if you look back 10, 12 years ago, many people had 15% in real assets, 15 to 20%. And today, I think you see a lot of people sub 10, maybe even sub 5. And that's exiting real estate and exiting forestry and exiting oil and gas. And those are separate different decisions driven by different factors, but it's ended up with people having a pretty low allocation to real assets and us sitting out here.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Fairly lowly valued on an EVDA basis or even on a market value to book value or residual value or salvage value, and then they generate cash. I think that's one of the reasons we felt like it remains a place where the university sees opportunity”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's been a conscious choice to be in real assets, and then it keeps self-reinforcing via what we see from the bottom up. So from the top down, what we loved about it was you have a margin of safety because you have a real asset, right? You have an asset that has a liquidation value. It is not goodwill, brand, et cetera. You have tangible real things like forests and trees and mineral royalty rights and real estate. And those could be sold. And they don't go to zero. The other thing they do is they pay dividends. And in this last 15 years, there's been no coupons anywhere. And we're spending institution. And so you looked at these portfolios and say they yield over this decade probably two or three X, the S&P 500. Currently, they're yielding 4x or 5x to S&P 500. And it makes it very hard to sell because they're”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“At this point, than most of our peers. We are less equitized, we are less in private equity inventure, even though we have a large portfolio. It's just that we have not added as much in that area as others have.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“We are less concentrated in public market drivers than some endowments. And I do believe we're also less equity market-centric. Historically, Rice has had less mark-to-market volatility, and that's been a goal of ours, which is how do we protect the distribution and provide stability to the budget? The board's gone through an interesting discussion with me over the last year about that, which is how could we structure more stability for the budget without capping your ability to drive long-term upside? And what do you, as the CIO, think is the best plan on that? And so there is an attitude that if we and the team believe that better returns could be driven by a more volatile mark-to-market strategy, that ought to be an option on the table, which I think is correct and a good evolution. Pragmatically, we've ended up with a lot more real assets than other endowments. We have a very different asset allocation.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Inaugurated a new president a year ago, which is if you're highly endowment dependent, should you take more risk or less risk? It's not totally clear what the answer to that question is. You might say we're highly budget dependent on the endowment we should take less risk and make sure we can always pay the distribution. But on the other hand, over long periods of time, that's disadvantageous because you really need the returns in order to enable your school to grow and keep up with inflation and do new programs. And so I think we have settled on a happy medium, but it is a real source of tension.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rice is highly endowment dependent. It's forty percent of the budget is covered by the endowment. And Rice charged no tuition through 1965. So from 1912 to 1965, if you could get in, there was no tuition. And I bring that up because it's part of the DNA of the school that we are highly about affordable education. And in fact, even today, you pay nothing under $70,000, which is true at many of the universities that are fortunate enough to have large endowments, but Rice has expanded financial aid to the point where you don't pay tuition up to about $120,000 in household income. That's one of those core things that's important for a CIO to know. If there are extra returns, they're going to go towards subsidizing tuition, towards growing number of seats. So we can take more students in, add an affordable price. It's a really interesting conversation, which we've been having again as we have.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was a great portfolio, actually. It was diversified. So my predecessor, Scott Wise, had done a great job moving us out of the one manager domestic orientation and some bonds into a global equity portfolio and alternatives portfolio. Rice has always had real assets because of our location in Texas. And we had a very nascent real estate and private equity and venture portfolio.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“At the time, the endowment was about $4 billion. And we had professionalized the investment office, but really they were still on their first CIO, who was an internal person who came up through the university finance organization, had many different roles at the university, and eventually was running the investment business and did a very good job. But they had not hired a lot of outsiders or a lot of people with an institutional money management background to do the research. And I was the first real outsider that they had brought in to really look at, okay, how do we do? And that was really the first maybe two plus years that I was there was building the team and building the processes and systems.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's definitely oil and gas assets, mineral royalty rights, which means that if someone drills a well on this mineral right acreage, so you can own the surface land or you can just own the mineral right, we have some of both, but those definitely exist in the portfolio.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know if this is true everywhere, but it's a board driven strategy and it's you get what you were given and you don't really sell it. So we are the proud owners of a wide variety of assets that people have given us. And it wasn't until maybe the last 10 or 15 years that we've done much disposal of assets that have been given to us. Although Yankee Stadium, which was owned by Rice, was given to us by an alumni in the 60s, we probably would have kept holding it and I would have inherited it, if not for eminent domain. So it was recaptured for a giant renovation project and rice was forced to sell Yankee Stadium. We still own the original forest that William Murray gave us in Louisiana, 50,000 acres of timber forest. And we own parcels of land that notable Houstonians gave to the university. And that's just how boards do it, I think.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Got a call from the headhunter and they said, we're looking for names and ideas about who might be a good chief investment officer for Rice. They really would like someone to stay. It's in Houston. Do you have any ideas? And tell us what you've been up to. And I said, I can tell you what I've been up to, but I don't have a resume. I haven't interviewed in 11 years. I'm a partner. But I think it was such an intriguing conversation as it unfolded, thinking about this is basically the dream job of most people who are long-term investors, right? You have one client. They know what they need. They know what they want. They have a very long time horizon. And if you come in and do a great job, you can have a tremendous impact on affordability at the university where you attend it. And so it was just too magical to not go after it. And so what I said to them is, hey, if you find somebody better than me, I'm an alum. I want you to hire them. Go for it. But I think I could do a good job at this. And this is how I would approach it. And there I”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Google IPO and did the first Dutch auction bids. And so it was an unbelievably good time because what do you learn? You learn things can always go down and they can go down more than you expect. People can lie to you or be confused. But on the other hand, that great companies will eventually come back. I think that I also learned that you need to look out beyond most investors' time horizon if you want to make a lot of money. So we were never going to beat SAC at their game at that time. They were always going to have more information, better information, faster information than I was about any company. That was the game. And so you needed to be there with a position in size before they were there, which means you needed to be anticipating where were this company be 9, 12, even 24 months out, as opposed to thinking about where it will be the next quarter. And I still think that applies in the allocator game too. Maybe even more so because”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was on the growth side and I went to work for Morningstar's fund manager of the year in 2000, Jim Callanan, straight out of business school. And he said, I'm going to give you this interesting sector to look at, the internet. You've never looked at it, so you have clean eyes and it's not acting well. So tell me what you see. I think I built up a thicker skin going through that experience because it's pretty hard to tell someone that things that made them a tremendous amount of money in the 90s were terrible. It was just an amazing experience to go into the crucible at that time and just look at all these companies and watch some of them completely fall apart and go away. I have toured the web van distribution center in the Bay Area and eToys knew all those company managers. But I also got to see the Netflix IPO and I saw the NetSuite IPO and I saw the”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“I interned at Putnam Investments and loved it, thought it was an amazing experience, but ended up at a firm RS investments out in San Francisco, which is the old Robertson-Stevens funds. And I had a couple choices of where to go, a big firm like a Putnam or Franklin Templeton or a boutique like this that's owned by the managers that had a smaller lineup of funds. And Andre paroled my very wise advisor who I idolized after taking his class said, obviously you go to the boutique firm. And I think what appealed to me at that time was just the entrepreneurialism of going to a smaller place where they said if you see a nickel on the floor, go get it. Go pick it up. It's yours. So there weren't as many rules about what you could do, what you couldn't do, what you could look at, how you could add value. And that seemed exciting to me 26, 27 years old. You're like, that's what I want. And I was there 11 years.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very intrigued with these dramatic pullbacks in tech and in biotech, right? Huge 70% pullbacks. And maybe you put up on your wall when you say 100% or 95% of the S&P 500 year-to-date performance is from the magnificent seven. That's not normal. That's not a healthy sign.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, no, they go up when I see it. Actually, the Sequoia Forever Fund is up on there too. Things where you're like, I don't understand what's going on. I'm going to put this up here, whatever it was, hundreds of billions of dollars of negative interest rate bonds being issued. And you think who buys a negative yielding bond? I don't understand. But that went on for some time. Yeah, you just put it up there when you want to think about it. You're not going to necessarily do anything. It's just there.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Some interesting ones, right? When Softbank raised the first fund, the first Fortune Cover maybe with the unicorn on it. And then a nice chart of vomiting unicorns. And so it's just things that you see where you're like, this is a bad sign for markets. And so I want to remember this moment because it seems normal to see it, but this cannot possibly be a good sign.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like horribly uncomfortable. Armed enemies, right? John had the research report posted on his wall that for me, they're Jeff Skilling or Ken Lay that said on the cell note, can't wait to prove you wrong, John. And then he attacked it on his wall. You know what? I wonder if that's where I get it. I have a wall in my office called Signs of the Apocalypse where I put things up that happen that are just really egregious. And I bet that's where I got it. But yeah, it was very uncomfortable.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to have to look back to Merrill Lynch Investment Banking Days. And it was an interesting time. I worked at Merrill straight out of undergrad in Houston, Texas, and Merrill Lynch had a large office, like 25 bankers at that time. That was a big office for Houston. So they did all their deal execution out of Houston. So it was a great experience. Those guys were the Enron bankers. John Olston sat down the hallway in an office and that was a really tense relationship. John Olson had to sell on Enron and the bankers who were the bankers to Enron and watching that said to me, I do not want to be an investment banker or a sell site analyst. And so I went to business school. And at that time, people said, hey, you know what you ought to think about? Maybe you should be the person sitting on the other side of the table. You sound a lot more like those people than you do like us.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess on today's show is Allison Thacker, the president and chief investment officer of Rice Management Company, where she oversees Rice University's $8 billion endowment. Allison spent 11 years picking growth stocks before joining Rice 11 years ago. Our conversation shares Allison's keen insights from experience as both a direct investor and endowment manager, Rice's quite different portfolio with a heavy allocation to real assets and an organizational structure that blends internal and external management and generalists and deep specialization.”
2023-11-06 · Capital Allocators · Allison Thacker – Different Perspectives and Different Assets at Rice University (EP.348) · IDENTIFIED FROM THE TRANSCRIPT · source