YouSaid · the spoken record

Carrie Thome

lines on the record: 60
first: 2020-10-19
most recent: 2020-10-19
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Do you have one teaching that honestly has always very much stayed with me, and this one came from my father, and I strive daily still to embrace this. And he managed to get this. I don't know how because he ultimately passed away from cancer, but he did, but it was making me get warm. Control what you can and don't worry about the rest. That's all you can do.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Biggest pet peeve, I just told you I have four sons is that they don't seem to know how to flush a toilet. So that would be my biggest pet peeve that I haven't figured out how to solve that one.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know that I have one. I was thinking other than brushing my teeth. I don't do anything on a regular basis anymore given the startup. There's no one daily thing I do other than brush my teeth and I do like to start the day with a cup of coffee.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a tough one now since I'm doing a startup. There really are none outside of it. The best I could come up with, I still like to run. It's how I get my brain cleared. I don't do it competitively. I just like to go and do it. And I also like to just go have a drink or go eat dinner with a friend and make sure I maintain those. So those are really truly the two hobbies I can fit into my life right now. I have four sons, so two of them are still at home. And as we talked about earlier with the one who had COVID, there's one that's just at the University of Wisconsin-Madison. So three in total are pretty near me. So that still keeps me busy. And they all love sports. So that's the family part. But those are the two things I can get in.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have a website and LinkedIn, so it's nvng ia.com is the website and nvng is out there on LinkedIn and we have a program and we put materials out there and we host webinars. We're young. We were formed in November. So we're coming up on our one-year anniversary.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know how in practice well it really ever worked out. Well, now you had innovation teams and this was real and this was a thing and this was my first introduction to it. I know on the coast probably it existed a decade earlier, but it had now gotten here. And this group, it became apparent was largely trying to figure it out. So while they could create their own corporate venture capital fund, that does require a certain amount of scale, you could also say, well, maybe you just want to dip your toe in the water and you want to just see what professional VC is about. And a fund of fun structure, if you provided transparency because this group actually wants it, a financial investor may not want the transparency, but this group does. You've solved a few problems and you've opened up their ability to get what they want without the difficulty of how do you build an investment office.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Way we looked at the capital base there. I mentioned earlier there was an accelerator group that we had, we did an early sponsorship with and we became really good partners because what they were trying to do was get more technology off campus somewhat you start to have to change culture and as part of what their product offering was they had had a program where they brought corporate innovation groups together and we would get invited to go to those dinners and those meetings and I would find myself sitting next to a corporate innovation officer from someone from one of Wisconsin's big fortune 500 companies and you'd start conversations around what they were doing and try to understand it and then this whole new world gets opened up and you realize back in the day a lot of times someone would have like a GE or somebody in their buyout fund and say this is great because now we can have access but it didn't really work that well because the investment was located in the pension which really didn't know how to get to the rest of the organization and so it sounded good but”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Classes. So now it's like, well, I am of Wisconsin, but I have definitely, I think, proven that I can navigate anywhere. I had hardly been out of the state before I was in college. So my first trip to New York was when I went to Swib. And that just blew people away because I was 23, 24 years old before I ever made a first trip to New York because it's just, it's not that unusual if you grew up where I grew up. But since then, you know, I couldn't tell you how many times I've been there. And we had the ability to go and say, well, here's what we've done. And we know this world. And we have a passion for it and we're interested in it. And let's use what we've been given to the best advantage for this product. That's how I guess we approached it.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Tried to figure out what we were good at, which is earlier I mentioned, I tried to build an investment office where we could add value in what we would be good at. And what I knew was that I had 20 plus years of working in hiring and interviewing and meeting venture capital managers. I had also had 18 plus years of working in the local startup ecosystem by helping make introductions to venture capital managers. And I had to say, because the question that we got frequently was, well, why not just start a venture fund? And I had to say, that's not my skill set. That's not where I can add the most value. I can add the most value by bringing being of Wisconsin plus if I had a warrior chip, if you will, on my shoulder at some point, it was that I was just Wisconsin and that people would think I didn't, you know, I hadn't lived outside of it and was I really, you're in a CIO job, you travel the world, you're everywhere, you're across assets.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“And you have this big corporate presence that exists here, the asset base manufacturers that are all now trying to figure out how do they navigate in a digital world and how do they get the innovation and the research that happens inside their companies out. It's to me a fascinating opportunity as venture moves to sort of be part of watching it grow bigger here in the Midwest, which I think is imminently possible to do.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“For here in the Midwest broadly, there are groups similar to what we're doing that operate. And there's a lot of value to be harvested because there's a lot of really interesting technologies. I find it fascinating that one of the companies I help support when I was at WARF was creating a universal vaccine for the flu. And when COVID came, they were already in phase two trial. So it's a different approach to attacking how you create a vaccine. They were able to take their technology and use a COVID virus and try to create. And they're one of the companies that's trying to develop a vaccine that will come at it in an entirely different way than where you're growing virus and chicken eggs. That's not how they approached it. And to be able to see that people now have interest in those kinds of deeper technologies, things that require more money, more time, that's, I think, what you see a lot of.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is we can support the local venture groups that will clearly have an interest in supporting the local entrepreneurs, but we can also represent a point of contact for other groups that may want to enter this ecosystem and see what's available here because the University of Wisconsin-Madison and the State Universities, there's a billion dollar research spending every year and there's just a fraction of venture capital that's dedicated to this. So the Midwest writ large really doesn't have as much venture focused on it as a coast does. And you end up with these large land grant universities that were started in agrarian times. So they're all away from money centers. And so what you end up having is that they just haven't had that amount of focus. It's been easier to invest where the money is right next to the university. And that does not happen in the Midwest. So that's kind of a problem I'd say we're solving.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“What we recognized and thought was important was that what you're doing is you're focusing on getting professional investment capital to the state's entrepreneurs to the best ideas and that it isn't so much about worrying about whether we have a well-developed local ecosystem, though that is definitely part of it. It's looking out at the industry and seeing that there's a lot of interest in Midwest technology. And there's a lot more venture groups targeting it, be they right here in the Midwest, in our state, or even coastal firms that have developed Midwest offices or some that later stage will invest with a trusted local partner. So for us, someone recently had said venture is a social network. It's about networks and connections. And when you frame it up that way, what we were lacking in our state was sufficient connections, density, if you will. So what we can represent”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“I proposed the idea to my partners. We didn't want to call it Nothing Venture, Nothing Gains, so we switched it to the acronym. After a while it starts to flow off your tongue a lot easier and you can say NVNG. And so we've embraced it. For us, we're targeting and think that venture capital asset class is so powerful and that there are a lot of other types of investors who aren't engaged in venture that should be. So the nothing venture, nothing gain, we think applies there as well.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“It didn't rip it off early when I started. We would stumble over it. And we've gotten mixed reviews on the name, but the name at the time for us really spoke to us because we did the, everybody struggles with it, whether it's the creek in your backyard or it's some Greek god. And for us, we were focusing on the venture capital asset class. All of us were trying to decide what we wanted to do next with our lives as we moved on to the next stage. And I was welcoming my puppy dog one day and the phrase nothing ventured, nothing gained came up. And so I think it was as much about me trying to move myself forward to do I really want to not find that next job inside a corporation where I have a role and it's well understood to the uncertainty of a startup because I'd known what that looked like. And I've always just been a little bit in part of what we believe is if you don't try it, it's never going to happen. Like just let's do this.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're still building it, so I think we're still building the values, and it starts with who I decided to choose as my partner. So I wanted to find people who shared the same values. And one of the partners was formerly with me at my wharf team and joined me. And another one was an operational person who had run one of the startup companies. And that's how I met her. One of our values is impacting a place or having an impact that's more than just for us. That we're going to do good here. It's honesty, it's directness. It's being us. It's, I think what NVNG is, is, is who we all are, I guess. We just stuck with what we know.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“So when you go to start your own company, how did you distill all the lessons you learned from running Wharf into something? It's now your own without a governance structure. What did you sort of put in place as the values that you wanted to impart in the business?”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Lot of efforts to enhance the local ecosystem starting a venture capital fund here in Madison in partnership with the state pension fund had supported some of the accelerators. So I had this desire and interest as we started out with Wisconsin through and through to take what we knew, to take our institutional investment expertise, what we knew about venture, and just really focus on that and try to really get venture capital to this state to fund the innovation. simply said maybe take my wharf playbook when it came to that aspect of my job and bring it to the whole state. And there had been models where it happened in Michigan and Ohio and we felt we were ideally suited to do that and I really wanted to focus in on a single asset class again and this was the one that I had the most passion for.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“What I decided to do now was go back to specializing. I have always been impressed and fascinated by people that just become experts in their area. And at the time, some folks have said, why wouldn't you become a CIO someplace else? And so the challenge of just becoming a CIO at a bigger place would be a challenge, don't get me wrong, but that wasn't the kind of challenge that I was looking for. I had always managed our venture capital portfolio at some level. And the hedge funds were interesting, but my passion and my love has always, it turns out, been in the private markets, whether it was the real estate pieces or the venture and the buyouts. And what we did at WARF, we also co-managed our direct investment program. So we would invest directly into some of the startups. So that had always been part of where I kept my fingers. We'd done a lot.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“If it's still the right strategy to fit everything, because strategy doesn't exist outside of and away from the governance structure that you're in.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what I have to do is firmly believe in what I'm doing and then have the courage to stick with it. But that would take a lot of courage. And then what you end up finding out, actually we all saw what happened when COVID hit. Yields did go down. And if you were holding them, that helped. It provided that asset that did well, but obviously whipsawing is really bad for an all-weather portfolio. But you have to then ultimately marry that to the governance you have. So as you go over the course of the 15 years we ran that, your board changes, risk appetites change, the program changes. And so then you have to be aware of a changing universe and where the organization wants to go. So I don't know that at that point, we're still wanted to have that same structure. And if it made sense anymore, and I obviously since left and I'm not sure where they've taken it, but I do think it's always worth questioning.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“As to anyone looking at what would you do, what I found interesting, because I was no longer there when COVID started was given my skill set and what I'm good at, I wasn't a market timer. I wasn't a person who loved to spend a ton of time in the markets. I had once asked a good friend who was a marketer. He said, you know, I'm not the kind of person who just loves to jump on and see what the S&P 500 is doing every day. I said, am I in the wrong career? Because does that make me a bad CIO? And he said, I actually think that makes you a better CIO because you're really focused on building a team and putting together the right process and the long term and you understand you can hire that expertise. So everyone would always say, you know, yields are going up, yields are going up. And I had a different view of it. And I just said, maybe that they could go down. I mean, there's zero in Germany right now and they've been there in Japan. So I don't know that they're going up. Yes, they could, but I also could see where they would go down.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Forward in the markets take off, and now we have a tailwind of we're underweight equities, and all you really had to do was own passive exposure. You owned the market and you had great returns. When I left, we were still a top quartile, even though we had perpetually been underweight equities relative to everyone else. And I think that was in large part built upon the fact that we had a portfolio. The bonds had done well. They actually were the best performing, the levered bonds were the best performing asset class we had, which I think surprises some people. And we built a really good alpha engine. And it delivered, it was targeting 200 basis points of added return over the market exposure. That's what we targeted.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“For the period of time, it varied in that first period of time when we had it in 2005, equities were taking off. So we were underperforming. So then there was a question. You go through the financial crisis and coming out of that, when you came out of that on the long-term basis at one point, we were top 1%ile over the 10-year period. Like that's how well it had propelled us. And we've had some great picks for those folks who've been around long enough. One of the earliest hedge funds we put in was the pulse and credit opportunity fund. So there was substantial tailwind from that particular hedge fund in 2007. Bridgewater had some fantastics in years. So the hedge fund portfolio doing the overlay when the beta portfolio was weak offered a ton of value in that window. Now you start to move.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Such a different construct than, as you said, a typical endowment foundation, just to kind of calibrate over the almost 20 years you're in the cedar, maybe it's more relevant talking about the last 10, what did the returns look like from a return and risk standpoint compared to maybe a median or even a top quartile endowmenter foundation?”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“I want to say at one point we had 1.4 billion invested in it. The portfolio, so the rough numbers, we're shy of 3 billion dollars in total and we had some other assets that had come in from the private foundation that we oversaw their assets. And we had about 6 billion of notional exposure if you included the derivatives and the leverage that was used in the portfolio and the hedge fund portfolio. So we ran about two times leveraging portfolio, of which about half of that was the alpha portfolio, the overlay over the top. I think at best we were able to get to about 60% of the beta portfolio covered in alpha in hedge funds. That makes sense.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Opportunities after 2008 for the longest time we sat with like a lot of cash. We didn't deploy it. We had a small team at that time, so we were rebuilding the team and we just didn't have the ability. There probably was all the opportunity, but we just didn't have the ability. So at that point in time, we saw a lot more cash. And what was nice about separating that way is you're always getting the market exposure, the private assets, there wasn't anything you could do about it. And you could either try to increase or decrease how much active. When I left, we were in the process of hedge funds, as you know, really were struggling. We were at the process of ratcheting down that exposure and instead building the cash back up because we just didn't see if there was the opportunity for the risk we were taking and the fees we were paying.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we tried to balance it from it became a liquidity question as much as anything. So clearly we had established some pretty stringent, just pure cash. We held aside and how much cash we held aside to support the derivatives and the margin position. And we'd learned in 2008 pretty clearly how much you needed to have. Then there was the question of did we think there was value in the private markets? And over time we had really created a big venture bent that was starting to align with the tech transfer activities and the startup activities. It ended up being kind of a fallout between once you had your private assets, once you had your capital set aside, that's what was left. And then it became a, do we think that there are opportunities? So for us, what we would tell people is it's sort of up to whatever that percent level was. It's zero to however comfortable you are. And if there aren't”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm curious how you think about or thought about sizing in the sense that if your beta portfolio covered the risk of the pool of capital, that alpha portfolio in theory just needs to make a cost of capital. Like it could be leverage on top of the beta portfolio. So how did you think about how big to get it and what your required rate of return was on that alpha portfolio?”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is the smaller manager, which you're hoping for, is that they can generate the return. So we win international, the last manager that I added in before I left was based in Hong Kong. So you were looking for new markets that had the ability to capitalize on something that still existed that hadn't been overinvested.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“I like to have a blend. It was my preference to have some long-term well-established. I've always enjoyed work with a relationship, as you can guess, with Bridgewater. That was one of the very first products we put in there, and we kept that Pure Alpha and the all-weather we eventually lost the training wheels and we stopped using pieces of that. So I liked having big high quality managers. We had AQR in there for the longest time. But then we'd like to marry small niche or strategies where you could take maybe person risk, if you will, and you would size it appropriately. So where it's a star hedge fund performer, you're not going to put a big proportion of that portfolio because there's a big risk in that particular manager, but you're probably not as worried about Bridgewater imploding on you. So you can move a little bit more capital there. But then you get the difference between are they too big and can they still generate the return versus”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“We ended up with a portfolio when I left that maybe had somewhere between 12 to 16 managers and they're not, I don't think an overabundance of strategies. There was a when Tom ran the portfolio, I think we had every quant manager of notes that you could get. Not surprisingly we found in 2007 that they all correlated together. So we got rid of some of that. There was a nice blend of quantitative as well as somewhat niche focused strategies. And a lot of people would take their very focused strategy and we would be able to get them to remove the market beta from it for us and just give Got a lot more sophisticated over time in working with managers than when we started.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“There. And to the extent that we had, we would have tried to capture what that number was and then taken it out of. So we had kept traditional managers in the portfolio when we first made the transition. So what we would do is we had a small cat manager, for instance, and we had a big allocation to them and we liked them. And that was actually bigger than what we wanted for small cap. So we would short out the extra exposure. So that was how we managed the alpha piece was hedge funds had to have no market exposure and to the extent that we were still in traditional managers. We hedged out their beta exposure to match what we were targeting.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“We did a few, it took us a while to get the teams right. So when we started really, there were just two of us. And that was crazy. And we hired an analyst pretty quickly. And we did a few variations of how we structured the team. Ultimately, we ended up with someone handling the private assets, and that was because they also handled the co-invest piece we did on the venture capital, the stuff that came off campus. So that by itself was a full-time job along with the venture and private equity portfolio. And we hired a hedge fund person. When we started it, we always knew that the market piece was the market piece. So therefore, we were going to seek very hard to make sure we weren't paying for beta in the alpha piece. So all of the managers had always been put in. And I think that was a mistake, at least it seemed like in the industry that some people had made, that they had put market exposure in their hedge fund portfolio. So for us, we didn't have long short managers in there at all because there's a lot of beta in.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“A mechanism by which we would true up, and we would, if the active management piece exceeded 1% of the overall portfolio, we would adjust the asset allocation weight. So it sounded really complex, I'm sure. Once it was in place, it actually ran really smoothly. It was the process of getting it put in place. That took some time.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“The lovely part about using derivatives, and this I thought was pretty neat. And we've been introduced to this by, it was the Clifton group at the time when we first started working with them, the idea of you hire your manager and then they would look and see how much cash they have and would get you to your exposure. We had a daily look at that portfolio. And so what we did was we set the volatility of the asset class times our weighting. And then we put a band around it. And we would every day get that. And if we exceeded the band within some time period, we would instruct parametric slash Clifton to rebalance. So we kept the beta piece, when I say set it and let it, you're like, we weren't trying to let it tilt and we had bands that it went around, but that was where we wanted that. That was the exposure we said we wanted and we weren't trying to make our gains there. We were trying to make it elsewhere. Then you can guess that there's the added complexity of the alpha portfolio and the beta portfolio aren't growing at the same rate.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we would make those types of decisions private equity for sure. You can't separate the alpha from the beta. That's just one package. So you're going to have to do that together. And when we did real estate, we did really just core real estate. We did a little bit of read exposure, but for the most part, we hired core managers to do that. So we had a combination of active versus passive, and it really was asset class by asset class that we made that decision.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it absolutely was. What we did was we used futures for large mid and small cap US equities as well as we used the futures for the EFI. And then we had emerging markets. And in emerging markets, we sometimes used active management because that was an area where you weren't sure you really wanted. And for sure, when we added frontier markets in, we had that for a while. That was all actively managed. So the decision usually was that it makes sense. Could you efficiently get the exposure you wanted better by the overlay plus the passive approach, if you will? I like to say passive. It's almost that vehicle versus hiring the combined group together. What you were getting, even if there was a derivative, you're not sure you wanted it. So in that case, then the decision, yes, it's more expensive, but there's more return potential and it's better managed in an active.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was about a third, a third, a third, so it was a bit of a third equity exposure than it was about a third of the fixed income. And then we did commodities in real estate and the natural resources and the real assets fell into that other third, the inflation protection bucket, depending on how you wanted to do it. That's probably the easiest way I could think of. I think we had about some were usually between 40 to 45 percent in public equities or in private equities.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Than the fixed income piece. But we had a lot more balance than most people had. And given you that timeframe, we rode this through the 2008 crisis and it was pretty painful because now you had correlations at the depth of that kind of go into one and now you're holding a levered bond portfolio. But we stuck with it. And when we did that, we came out of it so much faster because eventually the fixed income came back, yields dropped, and our portfolio. And it did exactly what it was supposed to do. And we ended up with this balanced portfolio.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Start with how I structured the team we had a provider of the derivatives exposure up in Minneapolis area and we controlled asset allocation and we came up with what the asset allocation was and when we used derivatives that group would implement that piece of it and we would monitor it and then I took the team and we said what can we do here we can focus on the alpha generation, the part where you're adding extra value because if there isn't a whole lot of value to be added by just the market exposure let's make sure we have people that are good at helping us set the asset allocation and our approach was is a little bit trite to say but it really was set it and let it and so the idea is it's all about diversification so we were trying to do that all whether we wanted the equal boxes and there's a lot of art even to that so in folks would say you're just 25 25 25 we had a higher weighting equity”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so the idea of levering government yields or tips more made people nervous. And then you're going, okay, well, our choice is equities, do you want me to either go into something that's a more risky equity, like an emerging market or a frontier market? And we added stuff. The valuation seemed high, so no one wanted to do that. So you're left with, and this is where committee decisions come down to, let's just stay where we are. We're pretty happy here.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Living with it. So then the question was, what do we want to do with this? Do we want to ratchet up the volatility? And I'd say over my whole tenure, that question never really was resolved because we had factions that really liked, they said worse money is for the long term. Let's take the volatility. We have enough capital. We can weather this. Then you'd have more conservative folks. Ted, it also ultimately came down to the fact that you'd say, okay, how are we going to get the volatility up? Are we going to leverage the bonds more? Are we going to start to leverage equities? And you start to put the actual implementation options in front of them. And that's where you really get to test whether people really are that comfortable with how you do it. You know, the idea of more leverage wasn't great, but we'd gotten into fixed income because the levered bonds are really all government debt. It's all high quality debt, but yields had now”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“We talked about it, right? We would say, okay, well, here's what we've achieved because Tom was there. So I'd been at war for four years when Mark decided to retire. I didn't feel that I was ready. Everybody wanted a change. So he said, I'm happy to stay as the associate director. Tom was brought in with the idea, let's do something different. He was only there two years and then he was recruited away by one of our hedge funds because we'd put a whole hedge fund program in at the time. And so then I, and this is, so Tom arrived in 2005 and now we're in the beginning of 2007. And probably when everything started to feel a little weird and uncomfortable, I was interim through all the way through sort of September and then they made me the CIO. And once that happened, then we started that question of, okay, this is what Tom put in. We can go back to what we did before or we can continue to embrace this. People had started to get used to it and we're used to it.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a fascinating tale to watch how we move from such a traditional portfolio style boxes, active management to where we went. When Tom came in, the idea was not to change the volatility. What he wanted to do, you could sell all weather two ways. You could either keep the same volatility and get a higher return or keep the same return for lower volatility. What Tom sold to the investment committee and what we were trying to achieve was the same level of volatility, but as long as we're going to take that much volatility, let's get higher return. We ended up delivering significantly less volatility. And the way Tom would originally model it, he hadn't given any diversification benefits when he would calculate what the volatility on the portfolio was going to be. And ultimately, they were so much more, at least in that time period, we were doing it, that market volatility was crashing, if you will, but we were even significantly lower than that.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Director who had brought me over, he was entering like year 28 of being at wharf. So there's a lot of longevity there, as you can even see by my tenure. And Mark was going to retire when they were looking for his replacement, the question was, do we want to continue with this high volatility portfolio? And we ultimately ended up with a man named Tom Weaver, who joined us who at his former employer had really, really embraced the concept of what all weather was about and diversification and using tools at your disposal to create this incredibly diversified portfolio. And then you separated your market decision, your beta portfolio from your alpha decisions. And we embraced this, that portfolio. And that's the one that I ultimately really came to embrace and like. And I continued with that strategy during my tenure.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“I live through two incredibly different regimes when I was there. When I first arrived, we ran a pretty traditional portfolio. And then ultimately we went and embraced the Bridgewater concept of the all weather and overlay portfolio. But when I got there, the traditional portfolio was still, there was definitely a venturish high-risk taking aspect to the group because we had a portfolio that was 80% equities in 20% fixed income. And if you broke apart the fixed income, 5% of that fixed income was high yield. So we ran a portfolio that was about 85, 15. The VAL on that thing, I think, was like 14% when I got there, which put us on a roller coaster that we were either the best of the best or we were down at the bottom. And the roller coaster, you get a makeup of a trustee group that at some point started to get a little nervous with that amount of volatility and the current.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Know if we kept graded enough records back in the day, the goal was always to give money back to the university because that original professor could have just kept that money and that patent for himself. And that's the really unselfish, wonderful part of that story was he was so dedicated to the university that he basically donated it all and kept it for the benefit of the university”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Period, Ricketts was a big deal and it was a vitamin D deficiency. So this patent and what it was about was the irradiation of food to put vitamin D into it. And when they did that, that essentially eradicated rickets, which is that was always part of the super fun part of working at WARF was you were involved in these really interesting technologies, whether it got licensed to someone like a Kellogg Foods or went through a startup that could truly impact lives and you could see that happening and it was just fun to be a teeny tiny part of that.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source
“Over time, they were smallish donations, but all the donations to the campus go to, the more traditional there is a UW foundation, it's UW Foundation and Alumni Association now. This was primarily built off of royalties, and they were pretty prescient back in the day because they didn't pay all the money back because they knew that they needed to defend the patents. They also weren't sure the university had been in business for 70 years or something at that point. And they hadn't ever yet had a big invention like this. So they didn't know how long it might take for the next one. So the trustees originally decided to establish an endowment to protect the intellectual property and be able to do the types of programs. Also back then, they actually managed this patent. You could still find bottles that have, this was a vitamin D was about people don't know what this typically means these days because you never hear of rickets. But back in that time.”
2020-10-19 · Capital Allocators · Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160) · IDENTIFIED FROM THE TRANSCRIPT · source