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Amy Falls

lines on the record: 88
first: 2023-05-22
most recent: 2023-05-22
sittings or episodes: 1
sources: podcast

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“Traditional categories, and I think it's very helpful to see opportunities across public and private markets and valuation. So I would say there's been a move towards blurring lines, not complete generalist model, but a more fluid model and a more collaborative model.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Investing capital, and in particular at Harvard Management, I felt that the move towards a generalist model from a highly siloed model had some real benefits. Also, even at Tiny Rockefeller with a much smaller team, there had been silos and there was a benefit in kind of blurring the lines. But I also felt that there was importance in sort of maintaining the depth of industry knowledge that these longstanding professionals had. So we've tried to craft, I would say, somewhat of a hybrid model where we're blurring the lines across asset classes so we don't have someone who owns private equity or owns venture capital, but we're able to think more laterally, but still retain depth in certain areas. And that's been interesting and I think an appropriate change that reflects also change in the way money is being managed. I think a lot of managers are starting to break out of the”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the first thing I tried to do was really spend time with every member of the team and just understand what they thought, what they liked, what they were concerned about. I tried to do a lot of listening. It was very important to me to not break anything. I mean, this was going well. Will was a longstanding, respected Will McLean, my predecessor, longstanding, well respected CIO and member of the community, and he'd built a great team with a lot of longevity. So to some degree, you're sort of in a do no harm mode. That was important, and the team is incredibly devoted to the institution which helped. But I also think fresh eyes you always come at things with different perspective, and I had seen at both the Ford Foundation and Harvard Management Corporation where I sit on the board evolution in how people had thought about it.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is very important creating an intellectual triangle between University of Chicago, Northwestern, Illinois, and even you could go out to Michigan others. There's a lot of intellectual property here and just trying to help that bleed into the local economy, I think could be very useful. Now, that's way beyond my pay grade, but just you're part of it by being part of one of the universities here.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“I do teach a class, and we have a bunch of interns that roll through the office. And that was very compelling. Also coming back to a part of the world where I grew up, I feel like it's a great spot. And I think the investment office has a good history. The university is on the move and has moved up dramatically in terms of its rankings, its research. So I feel there's an opportunity to help grow the spendable resource as the capacities of the university are growing. So I wouldn't say the university was in any kind of trouble, but more it's kind of surged like a lot of the colleges in the US is really become a preeminent institution and continues to need to catch up, I think, from a capital standpoint. So there was a sense of mission and the importance both for the region, I think the Midwest and Chicago.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I think the excitement about coming to Northwestern had two aspects to it. One was it really felt interesting to me to be able to teach and to go to a university which had students, Rockville has some students, but it's mostly postdocs and they all do science and I really am not going to teach them much. But to come to a university and to be able to work with students was really fun.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Towards not a checklist, but a set number of things that you sort of try to score people on, but always a deep look then at the historical data of their returns and what drove returns.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Everybody hates you because you have to fire people. And it's often not because they're not doing a solid job. One of the things we talked about was David's view of culling versus weeding. Like you could have four really good managers that have very similar characteristics. You just don't need all four of them. So then you pick the two that you think are the best and that may also be how they relate to one another. Generally speaking, I would look at the whole roster plus people outside the roster. That's where the math and the statistics of risk and return and portfolio concentration, just a whole series of measurements. I like to read all the letters, understand the culture. Early on didn't have like a scoring chart. It was a little more loosey goosey, like right up a memo as to why you're picking these two.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“So once you make those definitions clear to your committee and you see a pruning process necessary, what actually happens from in the first year, is it the low-hanging fruit changes, not complicated, but important to make, and then you go out and implement?”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I think just really being clear what you want out of it and what you're modeling out of it. And again, optimizers are super unhelpful in a lot of ways, but they just forced you to specify, okay, this is what I'm looking for”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“But your fixed income for me is really like a treasury portfolio, so that I can say with some degree of confidence this is the kind of characteristic it's going to have. It's going to be up for me in Denmark. It's not always. Similarly, hedge funds or absolute return, I've typically divided that into two categories equity-oriented strategies, i. e. long short, because there we assume you're going to have a 0.7ish correlation to stocks, but you're going to have less volatility and more alpha. And then we have other kinds of absolute return on correlated macro strategies. I usually make a separate bucket for distress debt and credit. And then these multistradter capital rotators. And those we expect to have lower correlation to stocks or to be a play on credit spreads. So it's kind of like making it a little more precise. And I find the same thing with real assets is even worse. I mean, what are you talking about?”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“I have on several occasions felt that common definitions are not helpful. I like to define asset classes in terms of risk and correlation and somewhat what risk factor do they imply. I'm probably closer to what you would call factor analysis than ASDA classes, but it gets tricky because that's just not the way the world is really organized. But I think it's helpful when you think about something like fixed income. What do we mean by fixed income? For us, we wanted to have something that was liquid, highly safe, or would have a negative correlation with equities and not complicated. So I don't really want the Barclays Ag. I don't need a bunch of mortgage-backed securities in there that have complicated duration, complicated character. Don't need a bunch of investment-grade corporate bonds either. So if you define it that way, you might put credit elsewhere in the portfolio”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“portfolio targets. You can't have an expected return with ranges. You can have a range of expected returns, but you can't have one. So they turned out they had gone to the common fund, and the common fund has a model for intergenerational equity, so they gave them the spend rate and the common fund told them what rate you would have to earn, and that was what was being plugged into the budget. So it's like, well, I don't think we should do that. These are basic things, but I remember saying to Mark Tessay Levine, who like is a Nobel Prize-winning type neuroscientist, this math is going to seem very babyish to you. Jim Simons was on the committee. I mean, these are people who are really good at math. I was like, we're just going to kind of talk about x times y plus p times q. And we're going to go with that. So that, I think, was important just to impose a bit more architecture around the portfolio. And then again, weed the garden too many managers.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“There had been a fair amount of turnover too, so that was an issue. They also had ranges, as I said, a hate portfolio ranges, so equities could be five to twenty percent. Do we want to be five or do we want to be 20? So the biggest change we made was to move to portfolio targets for asset classes to define what we meant by the asset classes. And that long short equity was a perfect example when you asked the question, not should we fire this guy or that guy, but how much do we want in this asset class with these characteristics? The answer was more like 10 to 12. So that just implied behavior that then had to happen. So I think it was really about creating, again, a framework. The other thing that was really interesting was the spend rate was quite high, about six percent. And I asked the CFO what return expectation are you putting in the budget, which is impossible if you don't have.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Like 20% long short equity like a lot. It's not crazy, but I asked each person why do we have this? And nobody had an answer. It had been a manager driven process, and the board would come up with eight million dollars.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“The first thing I did was I had a one on one meeting with every board member, and I said help me understand some of the tilts in the portfolio. There were some slightly odd tilts in the portfolio.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was there for six years, and I think that was on the short side. The opportunity that came up was Rockefeller University, and it was at a time also with really wonderful leadership coming into Rockefeller, Mark Tessa Levine, who's now at Stanford and Russ Carson and Bill Ford. And it was a moment where I felt I could make a difference at Rockefeller. There had been upset between the board and the staff. I think it was on the early side, but the combination of a mission that seemed important leadership that I was very impressed with and the ability to perhaps have a positive impact made me make the move.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Privacy is going to become an issue, and there's going to be money to be made in preserving people's privacy. It was so far ahead, and I'm not sure we could have made money on it, but I just always remember that moment of, wow, the kids have a lot to say about the future.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Several ways in which I think it's valuable. One is to rebalance. I think rebalancing just doesn't happen by itself. It's a reason I love targets rather than ranges. Ranges are really sloppy. Just having someone sit in the seat forces you to say, you know, we're actually way overweight this or that. Another thing was leveraging the intellectual capital of the institution. So we have a lot of smart alumni, and most of them were not on the committee. So I traveled the world and had conferences and gatherings and tried to really figure out who did we know who was an Andover grad, how could we mine their thinking, and even once we ran something with students, and this was at least fifteen years ago, probably more, they were supposed to come up with their investment ideas and they were seventeen years old. And one boy stood up and said, I think you can make a lot of money in private.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Between the board and myself and the rest of the staff. So when the markets were imploding in the fall, we actually issued some debt on behalf of the institution to stay invested, and we rebalanced back into equities in February, March, not because we thought the crisis was over. In fact, I had a horrible stomach ache for, I think, that whole three-month period, but we were so far under our targets that the decision was made to put one percent back into both emerging markets and U.S. equities, not a huge amount. We went from being down twenty plus percent to only down fifteen because of that little extra allocation at what turned out to be the bottom of the market. So that was a lesson in stick to your targets, at least to some degree. You always extrapolate, oh, this is going to go on forever, but there's a reason.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the returns got better. And the global financial crisis happened. So two big things. On the return front, we were bottom quartile when I took over. I don't think we knew we were bottom quartile because you tend not to look at that as an all-volunteer committee. We had more than sixty managers for a $600 million portfolio and more or less firing about a third of them was very important in boosting performance. And I've not figured out the math, but somehow the tail of managers seems to drag you down more than it pulls you up. And I think that's true with stock positions too. And I think it has probably to do with conviction levels. We definitely narrowed the manager roster. In many cases, we would have four guys doing the same thing we'd take it to two. Then the financial crisis, I mean, that was huge, and that I really feel we did well in the financial crisis because we had a high level of trust.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Time on is what we call multistrat, which I like to call capital rotators, people who can exploit inefficiencies or market dislocations on our behalf quickly because most funds, and I really believe in longer lockups, I like giving people capital for a long period of time. But that means I can't get it back if there's a dislocation. So then if you have a strategy that pays people in a very siloed way, that's not going to work because you're not encouraging people to pass the puck. Compensation structures need to align with what the strategy is. So it's just alignment, really.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think alignment in the narrow sense of aligned interest, but I think it's really important that your structure fits your strategy and your strategy fits your sandbox. So I love the idea of niche managers, but the issue with niche managers is that if the sandbox gets bad, they're stuck in the sandbox. So generally with really niche managers, I'm a bit more in favor of long short if you can. I mean, there's some markets you can't really short, but I think it really helps if you're only going to do India, let's just say. And for some reason, India becomes expensive, either the currency or the market, I think it's nice if you can put shorts on to hedge, but along it's harder. So I think a more narrow strategy requires you to be able to hedge in other ways. One area I spend a lot of time.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Its multifaceted, the data helps to understand how they do and under what circumstances, I also like to read all of their letters. I find that if you start with a book, I usually make a paper binder, of all the letters since inception, you will really begin to understand the thought process of a manager and how they handle mistakes. That doesn't help you with new launches, and frankly I find that the most challenging, but I do find understanding how people talk about what they've done and what went wrong actually gets at accountability and thoughtfulness. Then we try to look at compensation. How do you reward and value people? Because I really do believe people will do what they feel they're supposed to do.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Important, but there's so much more to it, and I think that's what's been the most interesting surprise and also skilled to kind of start to try to build is how do you assess an organization that is run well to succeed in investing.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Unexpected was the manager's selection piece is really critical. I think the asset allocation was something that I understood at the end of my career had moved out of emerging markets into global fixed income strategy. I worked with a lot of allocators and institutional investors on how to think about divvying up a portfolio globally and across different risk factors. But I think the importance of getting the manager piece right and what that actually entailed was a very new kettle of fish. I remember spending a lot of time generating enormous spreadsheets and then going to see one of the board members, Fred Schumann, who'd run a hedge fund of funds for years and just reams of data. And he said, Amy, Amy, let's just get the 10 best guys. It's not all in the math, but the math is important, and the track records.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“We had a consultant, but there wasn't really a person to drive and pull the trigger. So the market fixed the problem by wiping out a lot of that value. And the board said, geez, this is not smart. So it became an exercise. And then I actually spoke to David Swenson. I did a white paper for the institution on what were options besides on all volunteer committee. One was to join an outsourced CIO, another was to create a small office. And with a lot of input, but especially from David, the idea to create our own office, the endowment at the time was $600 million. It's a borderline amount of money, but it seemed like we could leverage the network that Andover had and that we could try it. So the idea was let's try it. And then we hired a headhunter, but having spent so much time working on it, I thought, you know, I would love to do this job. So happily took”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's what all these wise people were saying. It's like, yes, we really should, but there wasn't anyone to do anything. I mean, that's like, yeah, we should.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“That was sort of a stroke of luck, I think, and over like many smaller endowments, wrestled with the notion of do we just keep having a bunch of volunteers or do we create a professional office? And maybe it's not luck, maybe it's crisis, maybe a theme in my life story is you benefit from crises. So we were pretty heavily invested in venture capital. Andover was an early mover in venture capital in the 80s. So we were early investors in funds like Matrix and some others. And that had risen to in 99 to be almost 35% of the endowment was like a huge exposure, almost entirely through appreciation. And I remember sitting at the meeting with all these guys, and they were very experienced investors, but they had day jobs. We should probably do something about that.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“at the Andover endowment and it fascinated me to think about using finance to support philanthropy and thinking broadly about markets and of course fixed income markets are huge but they're not huge in most endowments so again it kind of opened my mind that there's a lot more to the world than trading bonds”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was really the benefit of volunteering, so I moved from JP Morgan to Morgan Stanley, was very actively engaged in my professional life, but was asked to serve as a volunteer on the Investment Committee for the high school I had gone to, which had really changed my life and done a lot for me as a person, and which hasn't needs blind tuition policy, which is supported by the endowment. So I was asked to serve on the investment committee for the endowment as a volunteer in 1998 or 9. And so I did. And that just really opened my mind to this whole world of endowment management. And at the same time, Barton Biggs, who I adored periodically would write a book report because he was maybe didn't want to write about the markets. And he basically wrote about David Swenson's book Pioneering Portfolio Management, which was really the first time I heard of David Swenson. So I read the book.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the capital account like how were they funding that and how stable were those sources of funding? And so in both banks and countries, the ability for capital to flee is dramatic. And one of the ways that really helped actually was back in Russia, way back when long-term capital defaulted, but they had a current account that wasn't really that bad, but there was so much capital fleeing out of the country. So if you didn't look at both sides, you didn't understand the situation, and we actually were able to avoid hit sold out most of our Russia exposure on the fixed income desk prior to the devaluation, which ultimately led to default. But it was really that focus on the quality of the financing.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Interestingly in the bank side we started with this notion of solvency and liquidity, and I could still talk about that with Silicon Valley Bank and First Republic, so in one case it's probably more of a liquidity crisis, too much reliance on short term funding, and in the other it may have been more of a solvency crisis real loan impairment. So we took that same framework to the countryside and said, okay, countries are entities, they borrow money, and they either borrow a lot of money or they don't borrow a lot of money. And if they have to borrow a lot of money, which is not necessarily a bad thing, how are they borrowing that money or how are they attracting capital? Is it equity capital? Is it long-term financing? Or is it overnight short deposits that could flee? So we spent a lot of time on the balance of payments data, both the current account deficit and what was driving the country's need to borrow, but also”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“It really was the macroeconomic underpinning for everything I've done since. And the other thing was that it was critical to think of a framework for organizing a ton of information. I think when you're talking about countries, you could talk about the politics, you can talk about the economics, you can talk about inflation, you can talk about growth. There's so much information. And so I think what was helpful was to develop a framework as to, well, what would really impact your ability to pay? What is really the risk I'm trying to assess? What information is critical to that risk? And how would I look at that historically in a cross set of peers? So I think the really interesting lessons I learned early on and from some early bosses was figure out how to make a framework to rank the risk profile of different banks or different countries. So it's kind of how to organize information.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“To go from doing what they wanted me to do to doing what I had wanted to do, but it did get there eventually. What did you take?”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's funny how things come round, and also to understand how different governments reacted to the banking crises in their countries, and that allowed me to start thinking about how to assess country risk because many of the bank bonds became essentially government bonds in places like Sweden and Finland. And because I had the interest in government and emerging markets, I was able to push that into at least European governments, Canadian provinces, and then Asia was exploding and issuing a lot of debt in the United States. And that led to understanding Korea and China and Thailand and Malaysia, and it ultimately Mexico issued what we used to call a Yankee bond, which was a foreign issuer issuing in the U.S. capital markets, at that time really the only source of long-term debt financing. So it took a little while.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it took me to doing securities analysis for the bond division at JP Morgan and initially a good mentor said, just tell them you'll do whatever. That's how you get a job. In those days when you were young you said I'll do whatever you want me to do so they said we need someone to help in financial institutions and this was nineteen eighty nine and actually there was a banking crisis in nineteen eighty nine that started in the US and rolled into Europe and elsewhere so it was a great opportunity to understand bank balance sheets, to understand the risk of deposits fleeing”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source
“I backed into finance through an interest in international affairs and in particular international development, and I couldn't get a job at the World Bank, but JP Morgan was hiring, and they had been leaders in restructuring in the late eighties the Latin American debt that all the banks had on their balance sheets. So it felt like an institution that would lead towards something related to emerging markets.”
2023-05-22 · Capital Allocators · Amy Falls – From Bonds to Boards to Leading Northwestern (Capital Allocators, EP.316) · IDENTIFIED FROM THE TRANSCRIPT · source