YouSaid · the spoken record

Doug Phillips

lines on the record: 92
first: 2020-02-24
most recent: 2020-02-24
sittings or episodes: 1
sources: podcast

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“I think the value of being a good colleague up and down the organizational chain at a university, I try to be that way. I think earlier in my career I didn't really appreciate what value there was in reaching out to others at universities and colleges to internally just understand what they're doing and being sure that stakeholders is the word I've been using. But it's really just being a good colleague and understanding what the deans are trying to do with their schools and understanding particularly our donors too, stewardship of endowments is a very important function. So explaining what's going on to the current donors and the families of past donors too. They really appreciate that. So I guess I would think of that as the relationship building.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Know my dad served in the Air Force and sort of my wife's father. He was an Army officer. I picked it up from my dad, love of traveling, and seeing things and experiencing it firsthand. He was stationed in Korea and Japan and England and spent part of his time at RCI up in Canada and Saskatchewan. But meeting different people, being willing to endure the occasional hassles that come with travel, and particularly being in Rochester, which is third largest city in the state of New York, 1.2 million people. But it is a little bit out of the path of most people, so we have to spend time on the road. And I think I picked that up for my dad.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't see a use for it. So we don't use Twitter or Instagram or I had a LinkedIn account, it was a personal account, which I didn't find useful, so I got rid of that. But I think some of our folks personally might be using those things, but it's more for family friends. At least I hope they're not networking with our managers using social media.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“What stayed with me recently is what I was talking about earlier, the longevity of people and health and how as a society we're actually doing pretty well for most of our citizens. As a capitalist society, we're in a country we're going to have some poverty. And it's unfortunate that we continue to have that, but like to see less poverty. But I think our country is doing pretty well.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mentioned earlier talking your own book that this is what we do and we've got our blinders on and I accept that there are very good specialists in categories but sometimes externalities come into play that firms aren't always aware of and I like to have people that kind of step back a little bit and say you know I understand there's other things happening in the world and here's how it could affect us. But if they're just on their own book and that's all they talk about, I think they're missing something.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't really have pet peeves. I think I have fairly thick skin to a lot of things. I do wish people sometimes would not offer so many opinions without having the facts to support their opinions across the world. I see that. And I try to avoid that kind of behavior myself.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I have to be careful because I have a lot of hobbies and I don't want anyone to think that I have too many. But yesterday afternoon I was stepping off of a chair left skiing in the Finger Lakes area of Western New York, which is a beautiful place to live and work, frankly. But I play a little golf and do a little fishing. I'm a scuba diver also. So my wife and I have a pretty adventurous life and it's fun.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you had to look at one thing about us, 2.6 billion, that's a reasonable size so we can take bite sizes in 20 to $50 million increments, whereas a $25 billion endowment, if they're in the same philosophy of concentrating on managers, that's a $250 to $500 million allocation, that's a lot for a smaller manager to allocate. But we're also of a sufficient size that we can hire good people, like the five of us, and it's a meaningful portfolio.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I said something earlier. We want all endowments and foundations to do well. We don't have any proprietary knowledge at the University of Rochester. This is charitable money. It supports a wide range of activities across the U.S. It's one of the best parts about our country is how these donors have helped assure the future of activities, whether it's healthcare or education or whatever activity they're enthusiastic about. They can perpetuate it. So when we think about competitive advantages, I don't really like to think of us as competing against other allocators. I think we should be collaborating with them.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“We look for managers that are aware of that. If they don't see the world evolving in a good way, there are always going to be these problems that come along. But generally, we like to see firms that are tracking with consumer behavior, technology, particularly biotechnology. A little bit light in biotech, but we like to see managers that have a view. We also like to see managers that have a perspective on the short side, things that are problematic in companies, you know, fads and potential failures coming and can identify things that are overhyped and ready to go against those.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who wrote about this? He said he's not an optimist. He's a realist, but he just looks at the statistics in our world at cancer survivor rates, five year survivor rates are through the roof now. You really can live a long time if you have cancer. Education rates thanks to places like University of Rochester, where we give a great financial aid to our students, keep going up. So high school graduation, college graduation, graduate school. It's a hockey stick for the U.S. and around the world.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the theme I focus on is that I'm an optimist about the world, and that obviously what's happened in China, the movement of people into the middle class and their economy still growing the fastest in the world, reliance on China's internal economy. I think I just read that China's exports to the U.S. now are just 4% of their GDP. So when you see something like that, again, that's something I'll never see again in my life. The other themes that we followed are just generally changes in the U.S. to we've become a little more divisive country in case you haven't noticed. But there are companies, the tech companies here are some of the best in the world and investing through venture and other things in technology is great. Advances, people are living longer, living healthier. We actually have less violence in the world today. It's astounding to think that with all the news media, but we're living in a great time. There's a professor at Harvard.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“So on top of this asset allocation, which might look like other endowments and a process you've been involved with for two decades to try to get at the best managers, we've also talked about your interest in certain key themes that are happening in the world. Why don't you talk about the ones that most excite you?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think I might not ever see it again, given the appetite out there and the secondary programs have evolved to the pretty mature, so there's a lot of money out there.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I give credit to our investment committee. They were with me when I started in 2000, right around the tech rec on the idea that there were some dislocations happening in Palo Alto, frankly, with the uncertainty about LPs being interested in funding their commitments. And our committee was great as a new CIO. I said, I'd like to buy some of those LP interests, those commitments, and sit in, I think we bought 12 of them, become a limited partner in some of these firms through the secondary purchase, which we did directly, and we also purchased funded funds.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're shunning venture, and that was right around the tech wreck. And you have to be very, very good limited partner to access firms like that.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's all the matters. If you don't have access to the best firms either create a roster of sort of up-and-coming firms and hope that a bunch of them do well. But in our view in the office is that there are probably only a handful of firms that can operate venture capital globally across stages and have the ability to invest in companies early, realize the ones that are not going to work, and just let them go, and then really focus on the companies that are going to do well and bring them up to the size that they can be sold at a very nice multiple. Access to those kind of firms, they're hard closed with 10 levels of hard closed. You won't even be able to talk to them. Here, some past relationship work has been my secret. I just have known a few firms, and we're in one very, very well-known firm that's been great for us. But we were able to access that firm at a time when others”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so staple financing, right? Everything that comes across the desk is already at the financing done and the covenants are light or non-existent. That's worrisome. I think it pushes prices up too because it's an easy transaction. The firms that find things that are probably not in the traditional selling environment, so they're sourcing them just like we do for managers. They're sourcing ideas from their network of companies. Some of them have entrepreneurs that are forming companies that are of interest. CEOs that have left companies and are still networked. They're on boards and they hear of things. There are ways to buy companies that are not too heavily auctioned or financed.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“And how do you differentiate between on the one hand liking private equity firms that stick with troubled companies and can fix things and the low financing environment and this potential to extend and pretend?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't want to paint the broad brush and say that every private equity firm that sells another private equity firm, that that's a bad thing because it does happen and track record is mixed on what happens to those companies, but some of them go on to great success under new ownership because they have different management styles or they have different abilities to bring in acquisitions and other things. I'd say no broad brush painting here, and we're a little bit agnostic on whether that's a good thing or bad thing. managers we have it's not that common frankly that there's a sponsor to sponsor sale it's more that they're selling to strategic acquirers that that company can tuck in and do something for them that they didn't have in the program”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you walk through some of that, on the one hand, you've got an environment where private equity businesses are trading among private equity firms. And so there's this question of can you keep wringing out efficiencies? How do you play that into your assessment?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, the EBITDA multiples are record high and there's a 1.4 trillion of uncalled capital out there. All this is bad for private equity going forward. Unless you can find firms that have really superior operational capabilities. And you hear this a lot, that we can operate companies, even though we're paying a higher price. The synergies we achieve through acquiring and cost cutting, and then exiting at very favorable evaluations to strategics rather than going through IPOs. You hear this a lot. Firms that can do that, I think, are relatively few. And we tend to like firms that have had companies with really pretty severe problems, not too many of them, but they've shown the ability to work through those problems, hang onto the companies, get them back to where they should be, and then sell them for an amazing multiple.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“And interest rates, real estate might be affected. I've been through a few real estate cycles. As of you, commodities is tricky. There's substitution risk. The shale revolution has changed the production characteristics here. So we're making very small allocations and letting the category work its way down.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, this is another exercise in humility here. Our program stems from a couple of things. We had misallocated capital before the global financial crisis, meaning we put too much money out. And our manager is where we expected behavior to be a little more consistent in terms of deploying capital that they called, particularly in real estate. It went out too fast. We also got caught in the commodity cycle. You saw that natural resources were the worst performing component of the S&P 500 for the past decade. So we had a commodity cycle working against us. We had better pay too much and just our allocation was too high. It's unfortunate. Now, not every manager in the portfolio has performed poorly. The program is making money. It's just not performing the way we expect it to perform for the level of illiquidity that we're taking. So going forward, looking at real estate, and there are those who would argue against this, but cap rates are low, and if we have a rise.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“After a period of fourteen percent return in the SP for 10 years to say, well, my hedge fund program is making eight. It's not worth it. Well, it is.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where there's risk. These firms can be wrong, they can be over levered, they can just make bad security selection. So why would we take that? And the lockup province is from reallocating capital, so it's illiquid. The answer to that is I think most people, or not most, but many institutional investors misunderstand the role of hedge funds. My experience in 38 years is that when times are really rocky and the benchmark is down or there's enormous volatility, hedge funds can be enormously valuable. And the problem that allocators have is they don't put enough money into hedge funds. So when those times come along, there are five percent or ten percent allocation to hedge funds doesn't do much for their preservation of capital. So if you're going to do hedge funds, I say make it significant. Make sure you have the best managers. Don't worry about the fee. Don't worry about the liquidity, but stay with it. It's very hard.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's the first question that we have posed to our investment committee at next month's meeting because we're doing one of these biennial comprehensive evaluations. It's on hedge funds. And the question is, why would we have high fee illiquid managers that produce a return that is essentially the return of the endowment portfolio over time?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's always these questions, these structural questions about hedge fund fees and performance having come in, which it has over the years. Are there times where you step back, take that pause, and say I know we have this big allocation today The world is clamoring that hedge funds are bad and Should we reevaluate the whole thing?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say we have about a dozen or so relationships. I'd say there's probably one or two that will have succession and we'll have to evaluate whether that next team is good. We thank the bench is good. But we also look at what others are saying and maybe there's something that we're not seeing. And if there's a runoff in assets happening, that gives us some concern. Not always the case that that is a bad thing for future performance. But we treat those firms as if it's a new firm. So we put them through the initial hiring activity. The question says, would we hire that firm today if it doesn't pass that test? Then we exit.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are a lot of firms that you mentioned that 20 years been around for 30 years. The leaders of those firms are one by one. Winding up their careers, what is your portfolio of hedge funds look like 10 years from now?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“We like firms that have the ability to allocate capital in periods of very unusual pricing or economic environments and have a deep bench of people, particularly the multi-strategy firms that have been around for thirty, forty years, that make very consistent returns that when you look at the sources of those returns, they vary from year to year three, five year periods. And they're not afraid to take a bigger swing when those fat pitches come up. We like those type of firms, but we don't want to have the same firm doing the same thing. So some of them have a sandbox that is more specialized than others are sort of playing on the beach.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, the longest one goes back to when I started 20 years ago, and it was a firm I knew when I worked at Williams College. And I did pull some of the relationships from Williams. Williams is still invested, but I was able to get us a spot at the University of Rochester. But 20 years”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“We look at the components they're investing in, whether it's sectors or companies, and they get put into a correlation matrix, and we look at Val and many different factors that are in our model. We have our own modeling software. But then the real part of it is sitting down with those managers after having the knowledge from your existing portfolio of managers and saying, is this really differentiated? And is it likely to continue to be differentiated in the future? It's hard to do, and it doesn't happen very often that we add a long short manager. But when you look at the firms we've hired and the performance, they really are uncorrelated to each other. It's remarkable. So the process seems to work for us.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, $5 to $10 billion and up. There are some that are 20 to 30 billion. We're not in those. The smaller AUM firms tend to be younger, more aggressive, and we like to have a mix of sort of those mid-size and smaller longshort managers.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a good question because the long part of the long short equity has beta to our benchmark. We tend to think of the long short equity managers as having for the short side we want to see them outperform the inverse of a public benchmark and usually it's the S&P or something like that. We know that they're adding value on the short side. It's very hard in a rising market like we've had the past 10 years to do that and not all of our managers do it every year but we like to see that kind of performance. And alongside we want to see outperformance obviously against the long side preferably the acquis and most of our long managers have more beta exposure in them than we typically might want to see but it's been a good thing in this rising environment. One of the things we don't expect are long short managers to do is to generate alpha against our long equity benchmark in a rising market.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“You mention in the hedge fund allocation there's sort of long short equity and then diversifying or uncorrelated. How do you think about the longshort equity compared to your long equity traditional bucket?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Once a year. Actually, domestically, we might do it. Three or four of us might do it more than that. So New York is easy for us. So is Boston and elsewhere?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“One thing that we do to be as efficient as possible when we visit countries is we tend to do these meeting paloozas. So I think Charlie Munger talks about lollipalus or something. But meeting Paloosas are, all five of us go to a country, spend a week there. I'm getting old. It's very hard for me to keep the pace with our younger folks, but they'll want to do five, six, seven meetings in a day for five days or sometimes six days in a row and just cover the gamut across asset categories and across managers. So firms that we're investing in and firms that we're interested in in those cities. So that can be in Mumbai, it can be in Beijing or Shanghai.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Those are sourced through networks these are not mutual fund or household name firms. If you looked at the endowment investors in those, you'd see names that you'd recognize.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, those are the big weights for us. But also Southeast Asia, there's other components in there, not so much in the European area.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Anywhere from a dozen to twenty, typically, but there are some firms that have in the hundred range. We like to see managers that have very good. The macro environment, so the staying away from higher priced securities that are likely to have problems if we hit a recession or earnings glitches come along. So there's a value tilt. We think of more value, and that's been a little harder for us recently. We also benchmark against Acqui, not the S&P. It's also a global mandate. But we reweight the Acqui based on GDP of the countries that it represents so that it tends to overweight emerging, for example. So the cap weight versus the GDP weight makes the GDP weight benchmark tilt in favor of emerging.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the overall comment that I hear most managers is are you going to be on our doorstep a lot with quarterly operational due diligence updates and are you going to nitpick us on our results looking at how far down in the portfolio? So if you're going to be a high maintenance, obviously we have a job to do for diligence and monitoring, but if we're going to pester them, that means that we're not going to be a good client. So there's a balance between informing and pestering. And I think we're respected as a good endowment client, and sometimes a manager will refer us to another firm that they think would be a good fit for us, for our portfolios as a result. So good that networking and being respected as an investor helps.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“At a certain size of assets, and you're probably in that spot, it's not easy to necessarily differentiate your capital from someone else's. You're not so big that you're the largest client in many instances. How do you think about being a good partner to managers?”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“That case happens fairly often, and in many cases we won't trim just because of performance, and we like a firm to get bigger as a part of our portfolio because of performance. So they're out of our 60 or so firms, there's probably 10 that we're just leaving alone because we still like the opportunity of the runway ahead of them. And if we bump up against our overall category limits I was mentioning earlier that we have ranges that we work in, then we'll explain we're at the top of our category and we have to pull a little bit away. But that doesn't happen too often.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you think about the math of that, where let's say you're right and the managers had excess short-term performance? So it's an opportunity to trim. But if you look out five years, you still think they're going to add a tremendous amount of excess return.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Almost always the case that when we trim, we can't put that money back. So I'm just thinking of a situation recently where we did that. That action has to be taken very, very carefully. And an explanation to the manager about why you're doing it so that they do have capacity in the future and you'd like to put more money with them, you can still have a spot. Firms really appreciate the candor from us in explaining why we're taking money.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you balance that with the reality that a lot of the managers you'll have in your portfolio are highly desired? And if you trim, it's not always the case that you'll be able to add back if they soften the case.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“Boy, I should end the interview now because now I'll have to talk about our secret sauce. No, we have a process a little bit that's called watering the weeds and trimming the flowers. So if we have confidence in a manager and the performance isn't poor and things are otherwise good, we may increase the allocation. If a manager has had very good performance, particularly if we're moving in a different direction, we will trim that firm despite good performance. Firms will say to us, wow, it's really interesting that you're trimming after we've had a good year and we'll say, well, it's not for allocation reasons. It's just our philosophy. And that has been additive to our process by moving money to managers that have underperformed, particularly if their category is a little bit depressed on our, we talk about our risk and planning model if we see opportunities in that area, we'll increase the size.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's such a common behavioral problem that befells everybody. When you're thinking about your portfolio today, inevitably there's a manager somewhere in that portfolio who hasn't been performing great. Think about a specific example. How do you dive in and figure out, okay, we're just going to hold on because the performance isn't good. And other times the performance not being good is a signal that it might continue to not be good.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source
“The biggest takeaway from those is that we tend to release managers, at least on the public side or the hedge fund side, right before periods of really good performance. So I say that with the highest degree of humility. It's not always the case. Some don't do well. We tend to hold managers if they have a performance problem or something went wrong in their process. As long as the people are the same and they're not dramatically changing, we tend to tolerate shorter term performance glitches. As long as we understand the reason, and usually the reason is pricing. It's something in the portfolio is just being mispriced by the market to a greater degree, and we hang on for those periods.”
2020-02-24 · Capital Allocators · Doug Phillips – Middle of the Fairway at the University of Rochester (Capital Allocators, EP.123) · IDENTIFIED FROM THE TRANSCRIPT · source