YouSaid · the spoken record

Ashvin Chhabra

lines on the record: 83
first: 2022-07-04
most recent: 2022-07-04
sittings or episodes: 1
sources: podcast

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“I think that really it's fretting and worrying too much. Maybe when you're younger, you feel like you must do something, you have the weight of the world on your shoulders. Like now when people raise their kids, I tell them light enough with the kids. It's all going to work out anyway. Of course, I didn't necessarily follow the same advice with my kids when they were younger. But for me now And I think a lot of it is when I start thinking about legacy a little bit, it's actually just about being a good person, being generous in spirit. It's like, how do you grow? How do you stay calm? How do you observe the universe? And how do you participate in a way that makes it better? There's just things that were not on my radar screen when I was 25 or 30, but I'm like, I just wanted to do stuff And maybe there's a life cycle to it.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“from Hanoi to Saigon was at the Women's Conference in Mexico, was appointed Secretary of Health by the Prime Minister. So I grew up with a very interesting set of parents. And I think the one value, which almost seems funny, was Money was never valued in our house. We didn't have a lot of it, but we had enough because they had good jobs. And it was the least interesting thing. And so it's almost funny that I am ended up in investing. And in many ways, making money has never been terribly interesting. It's solving a puzzle, doing something interesting, getting to a better place”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think my parents are actually very interesting people. My dad was a printer and a publisher of a newspaper. He taught me chess and we would just play chess. He was laid back, I think the best lesson he gave me was you're not enjoying yourself enough. You're too intense. Just take it easy. It's funny because when he died and he died a few years ago, the printing industry published a special edition to say the living legends of Indian printing has passed away. So he got a lot of success by just being a good person, being a nice person. And I remember that, that you don't have to drive over people in order to be successful. You can actually build a nice environment where people thrive and good things will happen. My mom is a brilliant and driven person, and she was a freelance journalist when I was growing up, and then she was the first journalist to enter Vietnam after the war.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Clearly on the investment side is Jim. Jim Simons is just, and you know, it's sort of funny because there is a sort of, you do overweight what famous people say, how successful people say, so you've got to think, I think on the scientific side, I think in some funny ways I had a very tough relationship with Benoit Mandelbrot, who really, I mean, he and I butted heads on a lot of stuff. I actually solved a problem that he posed and he was not happy about it. But I think he influenced the way I thought about life.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“At the senior level, so there are little things I do on a daily basis that I think makes me feel that this is going in the right direction and worthwhile. Of course, as I said, the Simons Foundation does a tremendous amount of wonderful work. But I do think that I have a pet peeve with society, that it doesn't function correctly.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think on a serious level there is this view that society could be a lot better than it is. And we're in this very happy place where we are managing money. It's well paid. These are storied institutions. They benefit from society. But there's a lot that's wrong with society. And we should find good ways to talk about it. And we should find good ways to fix it. I think we've done it actively in terms of diversity, say, among our own team. I think that's always been an easy one. I've always said we have enough resources to hire whoever we wanted to hire, so we should have a very good diversity. We should create a safe place to work, and we should create a place where you can make mistakes. If there is a big mistake, it's a mistake of the process. It's a mistake.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I like hanging out with my wife and just we read watch TV go see places There's nothing special I occasionally read a hard math book just to see my brain still works which normally I come to the conclusion it doesn't And so maybe that qualifies as an unusual activity. Sometimes I'll have an interesting conversation with Jim and he'll talk about a mathematical concept and I'll go look it up. I also love looking at original papers on anything on a technology. There's a lot of fun in going back to the original source. I'm also in a bunch of committees, Rockefeller University, National Academy of Sciences, Stony Brook Foundation, the Institute for Advanced Study. And I think each of these institutions Represents something special, the boards are interesting.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I got Bitcoin wrong. I don't know whether I got it totally wrong, but clearly the concept of being able to create a currency that would rival the dollar is somewhat surprising. And I think I have reconciled it in two ways. One is there appears to be an ability for two different systems to coexist because there are countries outside the US, there are the deep state and those who fear the deep, you know, there's a duality in the society. And so crypto appeals to a certain section of society and has staying power. The other is there's something genuinely interesting going on with Web3 DeFi, the distributed ledger. And with every genuine transformational technology, there comes a bubble. And I think it's going to have to play out.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I said in order to have a currency, you need a military. Otherwise everybody's going to counterfeit your currency and you need to enforce it in a court of law and you need to have a transparent court of law and therefore the US is sort of the right country with the strongest military and a democracy to have the reserve currency. There's a reason why after the Second World War when Britain lost the Second World War, really although they technically won it, but they lost the empire the US won it. The US informed the British that the pound would no longer be the reserve currency, it would be the dollar. So what's the chance if I go to the government and say I'd like to set up a printing press in my backyard? and print some money because I don't really think you guys are that good in managing deficits and managing my”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“the short rate sharply because the overnight cost of leverage they're going to have to delever. So, my view was, nope, they're not going up anytime soon, and even if they do, they'll go up as slowly as they can, and you should take every rise as a good sign, because finally we're going to get back to equilibrium, and you're going to get paid for your bonds, which you should have in your portfolio. I got that completely right. Street got it wrong. The second question was What do you think of Bitcoin?”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I thought about it quite deeply, not that I know that much about the bond market of how the Fed reacts, but it occurred to me that people were unnecessarily concerned about interest rates going up. And there were sort of two easy pieces. One is if I borrowed a lot of money and I can set the interest rate, am I going to set it high or low? The second was my clients were all mostly retail clients. They were not getting anything for their money in bonds. So interest rates going up was a good thing. So it's not something they should fear. So no panic should set in. The reason why the street was so concerned about interest rates going up was a lot of the research is around hedge funds and other institutions that are leveraged when you're making deals, investment banking. And so for them, it's a big issue whether the Fed is going to raise”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's go back a few years. I joined Merrill as global CIO, which is sort of a nice, interesting job after what had been quasi retirement at the institute. And what are the two questions that I get asked very early in my career? One is, are interest rates going up? In the second is crypto, Bitcoin. Let me start with what I got right. Our interest rates going up. At that point, everybody on the street was convinced that interest rates were about to go up.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that most people are capable of both good and bad behavior in their lifetime and people will manifest that. So I don't think of any one person as good or bad. I'm asking myself, what are the circumstances that we have? Is this going to engender good behavior or is this going to engender behavior that's not aligned with what I want, what I would define as bad behavior? And the way fees are structured, how they behave when things are going badly, are they raising as much money as possible or are there being capacity constrained? It's actually not that hard. What is hard is that you're always looking at managers who have done well recently. That's why they're raising capital. So you have that behavioral bias you want to get in and you're willing to overlook things that in retrospect We're always”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm not the guy you want to have a drink with in the bar every evening. And then I have a very good quant team and the person who heads it has worked with me for more than 20 years. And he will pass the data and he'll look at all kinds of correlations and convexities and embed it things and take into account market conditions. And a story will emerge from there. The data tells its own story. People tell their own stories. Bringing that together is the fun part. And if you can get some sort of persistence and some explanatory power, but with the right people, then you have a very good candidate. I will say if the data is good and the people don't look good, forget about it.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've done this also, for example, in an area of, you know, if you look at drug discovery, you need to go after good scientists and good science. And then it's a process. And very often the first piece won't work. But then good scientists will sort of look at the data and pivot, and they'll take a longer period of time. They'll get to the right answer. And often Big Pharma is not ready to take those chances. So there's a niche where you could actually go and work with good VC firms who are willing to have a slightly longer duration. So I think that with regard to hedge fund selection and manager selection, there are two components to it. It's getting to know the people and then what is the data telling you. I split it up because those qualities require different set of people, if you like. There are people on my team who enjoy meeting people.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the end, everybody will tell you that selecting the right person is the most important piece. And that's true even in venture and startups. Because if you give money to the right people, if things are not going well, they will pivot.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think this is where the low beta framework that Jim has always been a proponent of is very useful, in that when you have a high beta, you are getting good return. And therefore, when the markets are up, it's compounding in a great way. But then when the reverse happens, there are very painful changes that need to be made to the institution. So you want to ask yourself, what is your strategy? Is it that you want to grow reasonably every year, or do you want to go with the market and then retrench with the market? I do think from the diversity, equity, inclusion point of view, even for places like Princeton and Yale, when they retrench, it's really the lower end, the lowest rung of employees that end up getting retrenched. The tenured professors do not. And therefore, I think there is some great wisdom in not taking all the risk that the market has to offer.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's a wonderful place to be associated with. And of course, working with Jim, it's a privilege and an honor to be in that position. The thing with family offices is the money is made in a certain way due to certain expertise. In Jim's case, of course, it's the quant fund. In other family offices, it may be a trucking business, oil refinery, whatever. And I think you always want to ask yourself is, what's the right way to diversify? And the three buckets helps you understand that it's okay to have still a concentrated position in the original piece as long as it's producing alpha and you understand it well. And then you institutionalize the rest of it. And in many ways, the endowment model works pretty well as a complement. I think people often forget liquidity, the fact that this institution must be able to survive the ups and downs.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is the family office for Jim and Marilyn Simons. They signed the giving pledge, so there's a very large scientific foundation associated with it, the Simons Foundation dedicated to basic math and science. They're also one of the biggest donors to autism research. And we have, I think almost 200 scientists at the Simons Foundation and another 200 support staff doing amazing things.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“And you have a big safety net sitting there on the left, and on the right you have your reinsurance business that's taking complex bets. Now, when the crash happens, does warren go down as beta one? No, it's a buying time for one. He has lots of cash, it's opportunity. So there are many different ways to invest. There are many different ways to make money. I think the question is to understand the game that's being played. You all want to understand the ecosystem. And the question is, can you understand it deeply? And can you participate in it correctly? And if you can do that with more than one ecosystem, then you really have a diversified portfolio.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Goes into the metal bucket. What happens over time is the middle bucket is actually leveraged. I think AQR or somebody did some work on it, which is like 1.6 or something like that. So you have a leveraged, very smart value portfolio middle bucket.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“What is interesting by Ron Buffett's is that his portfolio sits among all three buckets. So he has this value based great companies, leaves the management alone, and so he has this wonderful market portfolio. Then he has this amazing reinsurance company sitting, when what is that? That's sort of a leverage play, if you like. It's taking the cash flows now and then paying out later based on probabilities. Of course, Ajen runs it for him and runs it brilliantly and they actually make a massive profit on it. Now those excessive cash flows, he takes a bunch of them and he puts them in the first bucket for safety. Why? He wants to pay out in case his models are wrong. Plus, he keeps it for when the market crashes. When the market crashes, he invests at very low prices with some warrants, the only source of capital”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So now I'll switch to Warren Buffett. Now the joke is a little bit is when you're a capital allocator, if you get a very large number of true value investors who come in and say, I want to be the next Warren Buffett, here's how I think about companies, moats, cash flows. And you realize that they don't have a chance of replicating Warren Buffett's track record.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the objective would be like 25 years from now, you want to write a list of the top three universities, you want Yale to be there. Now, if you have a strategy like that, you're in an arms race. You're in an arms race with Princeton, you're in an arms race with Stanford and Harvard, you're in an arms race with universities around the world that are emerging and will contend. So you need to invest heavily in each area. Unknown areas today, robotics, computers, bioengineering, AI, et cetera, et cetera. So in that sense, I think Swenson did it perfectly for Yale. Better one market portfolio, safety net is the educational institution, aspirational is developed the alumni network and continue to foster excellence.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the lockdown. Is it appropriate therefore for another institution to copy Yale's endowment model? The answer is if your Princeton yes, if you're some very small university in the middle of the country that's already having trouble getting students each year, no because you're not going to be able to raise tuition by 50% or 25% and you're going to be in a big hole. Now the other piece was doesn't Yale have an aspirational portfolio? Like where do they go from here? And it occurred to me it's the alumni is the human capital gets them jobs for the next students, brings in donations, sphere of influence. And what's the goal of Yale? What are they trying to do? Now, if you write a list of the top three universities today, Yels among them, I have a PhD at Yale so I can be reasonably bullish about it.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“What is the test that this analysis is correct? Well, when the market crashes and really crashes and all correlations go to one, Marty Lieberwitz's stress beta, beta goes to one, this portfolio will go down like the market, like the equity market. And sure enough, it does. So then the question really is, is this appropriate for Yale? Now, this is where smart people do the right thing. Yes, my conclusion is it's a great portfolio for Yale because what is Yale's safety bucket? It's students' intuition. It's educational business. Tomorrow, if they need some money, they'll raise tuition by twenty five percent, and you think they're going to have trouble filling the seats? No. So it's fine for Yale because Yale already has a safety bucket, and the purpose of the endowment is to create long-term market return with duration.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a mathematically correct statement. It's not just a glib valuation. So when I look at Swenson's portfolio at EAL, there's not a lot of fixed income any longer because fixed income rates have been very low. There's a little bit of cash. So it's really a beta one portfolio, maybe slightly more than beta one, but let's call it beta one. And it's a market portfolio. So first glance, under the framework of the Walth Allocation Framework, no safety bucket, 100% market bucket, nothing in aspirational. Very boring. He's competing with Vanguard. Now, of course, it's a well-constructed market portfolio. And the beauty of it is it's doing extremely well under normal circumstances. You have the best people in the world investing with different structures in different areas of industries, restructuring, and therefore you have a good market portfolio. Now you say,”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So now you go and you say, Well, can it really describe the endowment model or Warren Buffett? So this is like a fun exercise. So the endowment model came out From private equity. Now, so I went back and I said, let me understand Swenson's framework, so the lens of the wealth allocation framework. And I look at it and I say, okay, if I look at just Swenson's portfolio, that's actually very easy to analyze. It's the market portfolio. All this stuff about private equity and venture are just different risks in the market. I'm getting paid market risk. And none of these are aspirational investments. A hedge fund is not an aspirational investment for the LP. It is definitely an aspirational investment for a GP. Similarly, private equity. It's definitely aspirational for the people who own the firm.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thank you for mentioning the book. It's a well kept secret. I actually released it the month I left Merrill. So there never was a book tour and I think I solely underestimated the power of the book to sell by itself. But yes, it's an expansion on the work of Beyond Markowitz and it really was written with the hope of sort of bringing a larger message. That investing is about you or the institution and you've got to get the portfolio to work for them. Now, the beauty of that framework, as I said, was a large deviation framework, so really three buckets, is that it turns out to be amazingly flexible in describing a variety of real-world situations. As I said, the put, the index, and the call.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, somewhere along the way, you wrote the aspirational investor, a wonderful book that describes the framework and in it in particular you talked about both Yale and Warren Buffett as it applies to your framework. And I'd love you to take me through both of those examples.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Make a real difference in the portfolio. So, this goes back to wealth creation, and the aspirational portfolio, I think, can move the needle as well as fulfill certain aspirational objectives that I think more and more people are looking to.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“in a situation that you just could not imagine. And so it's very easy to do that. You put everything in those three buckets and you say if the market is down 80%, what is my liquidity situation look like? The piece that has been really useful, because I think the first two are really simple. You can think about safety, liquidity, and you can think about the market, and I include private equity and venture as part of just variations of the market. I think the fun part of late has been the aspirational bucket. So at Euclidean, we have a couple of interesting companies. We have a battery company that we've been incubating for a long time. It has very high energy density. You signed a deal with trucks to sort of do that. We have an air conditioning and cooling company that works on natural gas and can work on hydrogen. And so developing these companies can transform the world and also”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I go back to my framework. The first thing I always ask myself is what are the goals? Goals of the institution and try to be aware of governance. So people that manage you, how do you manage yourself? So what are acceptable risks and what are unacceptable risks? I think it's very important. And this is particularly true when you're trying to be big on alpha because alpha by definition almost is inducing you to take risks that are different from normal. And so there is a delicate balance between what you're allowed to do for what will you be given forgiveness versus for what you need permission. As I said, you look at the portfolio and the first thing you want to ask yourself is in really bad scenarios, what could happen? So as you chase return and you keep increasing the risk of your portfolio, at what point do you get to a point where there could be an unacceptable scenario?”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Far as I know. And I believe the answer was Swinson said, I like to invest in things I know. My view was give me any large gap stock. JP Morgan, Merrill Lynch, IBM, Microsoft I still don't know what I'm investing in. To know is to be able to predict something, especially from physics. They're talking about multinationals, you're talking about the world. So you need to go back and ask yourself, what are the different ecosystems that coexist in the investing world? And which are the ones that you can participate in and which are the ones you should say no? It would be perfectly acceptable to say, I can't do emerging markets because my team structure is not set up to exploit it. I don't understand it, so I won't do it at all. Or I'll just index it. So I think that that's how you should go about it with a more open mind rather than just think that G Venture has persisted.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think there's a silver bullet. I think people are doing the best they can. Everybody exists within a certain framework. And I think that's a nice article that both you and I have read by Graham Duncan. It's an infinite games. And I think you have to understand the games that everybody is playing, including the game that you are playing. And I mean that in a serious way, not necessarily that it's a game, but what are the rules of whatever you're doing? And where is value coming from? Where's the return coming from? Why are you at the table? Why are you being given permission to participate in the gains? And in that sense, the fundamental value managers are playing a different game than the momentum managers. The quants are playing a different game than either of those two. Yale, for example, would never invest in quantitative managers.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say that what really worked was it was a small portfolio We had a tremendous committee. And I was quite experienced before getting there. So that worked well. I really thought about who in my committee is good at what and then use them, collaborated with them for that particular purpose. And so it was quite unique to have Jim, Marty Lieberwitz, Nancy Pretzman, and then a whole host of other distinguished people that I won't mention all the names. I think that what doesn't work is I'm not clear that the entire ecosystem of the Swinson model that has become so super institutionalized really works any longer. The fees are high, the fees are asymmetric, the LPGP risks are different. And I think we should explore different models. And I think Vanguard constantly puts us to shame.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Can therefore start taking other kinds of betas, and as long as you're transparent about it's not like you're creating a portfolio without risk, it's that you're trying to find different kinds of risk with different market cycles. And so somebody could argue that mathematically you've already raised your beta beyond point two. But another way of saying it is your S&P correlation is still that. You've taken some additional risks. Here are the kinds of risks you've taken. This is why you've taken, are you getting compensated for them?”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So when people talk about Lobe Beta, it's really this is where you have to understand the institution, the committee, how people think and come up with a philosophy that's compatible. So as I said, when Jim talked about low beta, he defines beta precisely with the S&P 500. And what you're really saying is there's a retail risk for which there's a risk return framework. I don't want to take that kind of volatility for those kinds of returns. Now there are other kinds of betas.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Portfolio, and then we'll have five managers. I said we have 30 managers in our portfolio. Each one gets 3%. We'll get three venture managers. So I did Sequoia, I did Union Square Ventures, and then I looked for yet another slightly differentiated manager I found first round. So it was sort of West Coast, East Coast, Philadelphia. At that point, it was large cap, mid-cap, small cap, almost different themes. And it took about 10 or 12 years to really work out, but boy, did it work out. You have to say that you got lucky with a lot of thinking.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“In 1999, 2001, I don't see how this connects with the low beta, low risk strategy at the institute. I do feel like I need to get return from somewhere and venture is a persistent source of return if you can get there with the right people. And so I had a long conversation with Fred about bubbles. And one of the things he seemed to be his previous fund had gone through this entire cycle. He was an experienced manager by now. His view was that when it's very high, it's okay to sell in the secondary market and give up some of the upside. And this is the opposite of some of the venture firms will say you're not allowed to sell any of your stuff in the state market. He said they would be totally open to it as a way of managing risk. So that actually a light bulb went off in my head. And I said, yes, not only will I take a chance, but I'll size up. I'll supersize this. And so I went back and instead of saying, all right, venture's going to be 4% of upwards.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“But then the question was, and this is where I think I had some fun because I had a very interesting committee, and I very quickly determined Jim was setting the strategy he was easy to work with, as far as I was concerned. I was on the same page. Marty Lieberwitz was there, and he was terrific in terms of understanding risk return, beta, stress betas. And then there was Nancy Peretzman who just is a genius at emerging managers. And she sent me to Union Square Ventures and she said, go talk to Fred Wilson. And I went and talked to Fred, and I really, really thought they were very good. This is 2006. So, you know, they have their 2004 fund, which is already doing well. But he's talking about something called networking. And that's interesting. Networking is an interesting concept, but who knows? It's like eyeballs in 99. And I'm very concerned about the bubble I've seen and gone through.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“I cannot tell you. I don't think that they would want. Me to reveal that, and I would just say I was grateful that they gave us capacity. The institute is a wonderful, wonderful cause that I think we do them proud and their returns have done us proud.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because of our name, and we don't need a lot of capacity, so even the best names will give us some amount of capacity. And venture has persistence. So this all comes back to human capital. It's can you find very good people who are doing something in the investing world that hasn't either been totally recognized or through capacity management have managed to sustain it over long periods of time? And so I started off the simple way, which is I went after Sequoia and took some effort, and luckily we got in and we built a nice position.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“We asked ourselves what is it where do we have structural advantages? I'll use the word structural advantage and not unfair advantage. I do not like the phrase unfair advantages. We would like society to be fairer. But structurally, we were a small portfolio with a very good name and tremendous access. And so we could get into the best hedge funds and we didn't need a lot of capacity. So in fact, if we were patient, we could actually build a very good portfolio. Now, one of the things that I did notice is that we didn't have any venture, and I don't know why. It was just sort of a artifact. We had private equity, but not venture. And we had not a lot of it because, again, there was a focus on liquidity. And so unlike Yale that had pioneered a much larger percentage of private equity in real estate, we had but 10% or so. And I thought venture is really hard to get into. We'll be able to get into it.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Saying I recognize the returns of the market and the risk that comes with them, and one of the risks is volatility. And that volatility can be very painful for the institute because there's no other source of funding. While, on the other hand, for Yale or Princeton, they could just double their tuition. They still fill every seat. So the low beta portfolio was a challenge. It was the right thing to do for the institute, therefore also when markets are riding high, you don't end up spending too much because you're not changing your budget. So the second order effects are also very good. But it's also a challenge to hunt for alpha. Take diversification seriously with correlations and with alpha.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I think that you want to take one step back and say, remember, it's not just the three buckets, it's the goals. You always go back and you ask yourself, why do you have this money? What is the purpose? And in fact, that is what the interesting piece is. Jim had really thought that through for the institute. The idea that the institute has no students, and therefore the only source of funding is the endowment. Now, think of it another way. If you're taking a lot of market risk and the market goes to hell and the institute gets into deep trouble, the next Einstein doesn't come there or do their work because the S&P didn't return the right amount. It's the same thing with individuals. Your kids didn't go to college because the S&P 500 underperformed. There's something wrong with that. So the idea about having low beta is not to have low returns.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's an interesting question. So Jim is a low beta guy. The quant background is you don't have a lot of beta. The leverage won't allow you to have such high beta and get exposed to market fluctuations times leverage. So he had sort of reoriented the portfolio to lower beta hedge funds, but there were still pieces of the portfolio that were left over from Leon, especially in emerging markets that just were so very idiosyncratic binary bets that I think if Leon had been in charge, he would know when to move in or how to structure it. So there were some restructuring that I did. And of course, we were just about to enter 2008.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, Leon, for those who don't know, was Odyssey, was an old school hedge fund guy, discretionary. Jim, clearly quant, very different. I'm curious what that portfolio that you walked in looked like with these two very different chairs that had been running it.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“Gonna have to teach you a lot. I think it's just a bit of sense of humor that Jim has, but there's lots of genuine sense of where he looks at this knowledge gap is missing. Hence it's missing. It doesn't matter who he's talking to. And so in that sense, it's always been a wonderful experience working with Jim because You know exactly where you are. There's no BSing and it's a joy.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I looked at Jim and I said, Jim, I have a really nice job right now and I'm paid very well. The only reason I would take this job is because various aspects of my lifestyle and physics, but also that I'd get to work with you and people like you on the committee. So I want to make sure that I'm being taken seriously here, that you'll work closely with me because I think I will become a better investor. And Jim didn't miss a beat. He just looked at me and he says, of course I'll work closely with you. You don't know anything.”
2022-07-04 · Capital Allocators · Ashvin Chhabra – The Aspirational Investor (Capital Allocators, EP.260) · IDENTIFIED FROM THE TRANSCRIPT · source