YouSaid · the spoken record

Jason Klein

lines on the record: 67
first: 2017-10-09
most recent: 2017-10-09
sittings or episodes: 1
sources: podcast

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“Even if cancer is cured, that I'd hope to be productively working somewhere. What advice would I give? It would be breathe. Good, Think those four words, if I could try to give that advice of be in the moment, try to do some good, even if it's not on point, and then continue on.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Change is harder the longer you wait. The status quo is comforting in a lot of ways, and there might be an opportunity where, hey, maybe I'll make this change. Maybe it's a portfolio manager. Maybe it's something else in a personal life, or maybe it's something else professionally. But there's the hope that if I just wait it out, I could either, one, the problem will go away, or two, maybe things will develop and it's, again, being a little bit of an optimist where maybe things will resolve more favorably. even though you sort of know that the right thing to do is to make the change it turns out that making change early is easier than making change late”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really sure offhand tend to internalize things, I tend to focus on control, controlling emotions, and try to really focus on breathing and staying in the moment and trying to understand with a perspective that is both inside and outside to really focus on that and trying to keep things in perspective.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Favorite book of all time. I'd love to say that it's the intelligent investor. But really, it's Green Eggs and Ham. Dr. Seuss, the Sam I Am character 16 times in a row asks, pushes, probes, smiles, approaches the same issue with a fresh. Enthusiasm each time, unencumbered by the failures before, doesn't give up and succeeds in the end.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“The sharing of investment ideas and granularity in terms of the sort of informal or sort of quasi-professional or sort of self-made analysts. So you look at the kind of information that people are sharing on Stock Guru or seeking alpha, and you realize that a lot of the people that are sharing that information or on Quora, for example, you realize that a lot of the people that are sharing information are not full-time daytime professionals. And yet they've got an edge, they've got an insight. So when we are talking to full-time professionals, having that bit of information or having somebody understanding the quality of insight that a non-professional can bring and then using that to push probe and challenge for a professional makes a difference.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Focusing on education. I remember the emphasis always on making the most of your education. So it was not only the quality of the education, but also the amount of the education. I think that infused me with an intellectual curiosity and a learning. So that has led to for myself two graduate degrees. So some people run marathons. I sort of collect extraneous degrees. And as a practitioner, really focusing on how can I learn, where can I learn, how can I improve myself, I'd say that really comes from them.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“As a fan, I'd say it was a few months ago watching three of my four kids successfully test for Black Belt and Taekwondo. Our fourth is a few years and a couple of belts behind, but watching them successfully go up against higher order black belts as a parent was a little bit intimidating, but they held their own and watching them develop and watching that persistence and watching that tenacity over the years has been a terrific sports moment for me.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“As in the artificially or engineered low interest rates has pushed enough capital out onto the spectrum where at this point valuations appear really high. So if you look at all of the traditional valuation metrics, Cape Schiller, stock market to GDP, Tobin's Q, almost all of those metrics are top decile type figures at this moment. Is there a chance that those could continue forever because we're in a permanently low interest rate regime? It's possible. It's also possible that cycles don't last forever and that at some point interest rates will reset. So I think the mispricing of capital right now is the big concern.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, it's hedge fund structures, and perhaps the global equity managers that have a fair amount of flexibility as well. But you're right on that.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably hard to put a number on it in that way, but I'd say that probably a third of the managers have a very meaningful degree of genuine flexibility across many different asset classes. I'd say another third of the managers have meaningful flexibility within their asset classes. So, for example, Global Equity is a global equity manager might fall into that second category, which for us is not as much flexibility. They can't go into, say, credits, but they do have more flexibility than your traditional U.S. equity manager would have. That last third would be managers that are well defined within their opportunity set, but are so deep in their opportunity set that we think that it is worth having a constrained opportunity. for the depth of research that they're bringing to it.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm trying to envision you're sitting at your desk and you have your portfolio sheet in front of you with a certain number of line items and managers and some of those probably fit the description you said of flexible and some of them probably do something really really well what's what's the balance roughly in either numbers or percentages of that you say well that's just a best bald in what they do and we're really allowing them flexibility versus while that's someone who's incredible at one thing And that's a great opportunity set for as far as the eye can see.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not necessarily depends on the strategy. The reason why it's not necessarily is because the opportunity set as AUM rises, the opportunity set tends to fall. So as you gravitate towards larger managers, that larger capital base acts as a constraint on the opportunity set itself. So there's a sweet spot. That sweet spot might be measured in a small billions or a high hundreds of millions of dollars of AUM size, but it's not, there is a sweet spot that kicks in above some critical mass where it's the small manager and below some too much of a critical mass where it acts as a self-existing constraint.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“So in the particular categories that allow a broader remit. So you could mention a global equity manager as opposed to a US small cap value manager. Does that lend itself to seeking out somewhat larger managers that have broader capabilities and then can be flexible across those capabilities?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let them provide guidance for us as well. In some ways, I think of it as a multilane highway, where if you are charged with getting cars from city A to city B and you've got a five-lane highway, most five-lane highways have those little white dashed lines where you can have the left lanes go really fast and the right lanes perhaps not so much. You could have the same amount of runway, roadway, and you could just eliminate all of the white lines and have pure flexibility. On average, you wouldn't really know where the cars would be and the average speed might be a little bit slower and there might be a little bit more in the way of accidents. Perhaps yes, perhaps no, depends upon the skills of the drivers. But for sure what you wouldn't have is the demarcated lines or lanes of what to expect. I think having those asset classes provides that expectation and provides a”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“And managers are going to matter. I mentioned earlier in the conversation our focus on flexible mandate managers. Really what we're interested in is nimbleness of capital. What we're interested in is managers that can make those real-time or more real-time trade-offs across asset classes and in a much more nimble format than we're ever going to be able to do. So finding that flexibility, even for example with inequities, we don't have a category called global equities, but for sure we have global equity managers. managers that have the opportunity to flex around the world go from US to emerging markets if they want, find those opportunities, populate bottoms up. They're populating bottoms up. We're populating bottoms up. So the asset allocation part of the equation is very important from a framework, very important from a governance. Let our committee know in advance what they can expect.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“than the amount of or in addition to the amount of each asset class. But I should also say that while we're on the subject of asset allocation, all of this is sort of in some ways academic and governance-oriented, because when it comes to populating our portfolio, it strictly bottoms up.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Do we have with those? Again, it's an exercise. It's meant to be informative. What I do find to your point around whether asset classes are helpful or not is that in the last few years, in part because of the monetary policy that we've had that has really brought correlations higher across asset classes as people have been pushed out and out and out in a low interest rate world onto that risk-taking environment generally, that the meaningful, actionable insights across asset classes has broken down in the last few years as opposed to previously. So what we have found ourselves doing is looking within asset classes and the complexion of each asset class coming back to the point around does price matter? For sure price matters a lot, so we find ourselves looking more about the complexion of each asset class rather than”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, a bunch of years ago, we developed an alternative framework for looking at this, which we thought was needed in the world was something that was a little bit more straightforward and less convoluted than the classes that we had, and something that would be helpful directionally without having the false precision of being a prescription. So we've called it, and we called it straightforward as a group exercise. It's part of an ongoing exercise. We use the acronym stage. With that, what we've done is we've identified primary asset types, equities, rates, currencies, and then which sliced each of them slightly into two categories. P.S. What that does is it enables us to reslice and dice our portfolio on a bottoms-up basis to figure out what are the core drivers that we have, how do those correlate with each other, and what kind of”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we have, and we have in a couple of different ways. First, on the view of asset allocation, for us it's a guide. It's a helpful, having that vocabulary and having that framework is helpful in setting expectations and helping communicate between our committee and our staff. So that's very helpful. You also need asset classes that matter. And this was one of the great learnings coming out of the great financial crisis, where it turns out that in the conventional wisdom and the conventional asset classes that we have, they're not really asset classes per se, equity versus private equity we spoke about earlier in this conversation. There are not different asset classes. They're both equities. They might have different characteristics and they might have different levels of risk, leverage or illiquidity, but they're not different asset classes per se.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of this manager. If we're pulling together that kind of a group And we're discussing a one or two percent position. It's just not the best impact that we can bring their experience to bear on behalf of Memorial Sloan Kettering. So we do access them. They are a competitive advantage for a competitive edge and a competitive advantage for us. But we need to do so in a way that is respectful of their time and get them focusing on risk and opportunity and not on minutia.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, everything that we do is we make recommendations to our committee and we involve them. They're each a phenomenally informed, successful person. It's a collection of page one of the journal kind of names. And we're fortunate to have them. They're also busy. So the challenge to us is how do we do so efficiently and respectively. So what we try to do is we try to discuss strategy with them in advance and get their strategic guidance. We put together a strategy dashboard each year. We focus our conversations with them on asset allocation and market environments. We distribute written materials on our managers at two different points in advance of seeking approval so that we're incorporating feedback from them early in the process in a time efficient way. Hey, Jason, I like this market opportunity, but have you thought about these other two managers?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's funny that you mentioned that. This is a bit of a challenge because the whole spirit of the pre-mortem is that you are committed to the project and you are therefore sort of embed with it, as it were. So we do find ourselves pre-thinking ourselves and those conversations as a result have gotten a little bit more concise because we're trying to preserve the spirit of that intellectual exercise. But for sure we're planning ahead in this sort of infinitely recursive loop and learning to sort of think ahead and gee what it is, how can we make a better decision and what can we learn from bringing a new perspective to what it is we're doing?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“What we've learned is that no matter how creative you are, people will always find new ways to surprise. But it actually has been helpful because what it has enabled us to do is to apply learnings from one situation to another. We recently had an opportunity to apply this where we were looking at a venture capital manager and we found ourselves identifying a risk that came out of an experience in a private energy situation that clearly it was orthogonal to the venture capital situation but”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“You've done those pre mortems over time, how accurate have you been in the sense that when something happened, when you exited, how often did you flag it ahead of time, or how long was it something you couldn't possibly have foreseen?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“forward-looking part of a case planning or scenario planning or stress testing part of analysis, all of which we do, what we have found is that creative thinking, once you're fully committed, lets you take a step back and identify things that from a different perspective maybe you didn't do Identify earlier on and what it also does is it gives you a sort of checklist of things to monitor with that manager as the relation develops over the course of time.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Towards the later parts of our investment process, one of the things that we'll do is something that we call storyboarding, which is to make sure now that we have sort of internally as a team committed to this investment opportunity, are we really understanding it well where we can crisply assess its strengths and its weaknesses and communicate it up to the committee for what we do. Then I'd say the last one that we do, and this is the third part of the group dynamic that we do together, is after in the days after we fund an investment, we get together for what's called a pre-mortem. We didn't invent this, of course. But once you're committed to a project, it's fast forwarding hypothetically to some future point, assuming that the project has failed and then hypothetically retroactively looking at why might that have been the case. And you could say where that is in some ways part of a scenario planning.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Do we understand any behavioral biases that might exist or might not exist? Are we undue pressures or timing to rush to make a decision? How sure are we that we're having the opportunity to do all of the research that we have? If we had only three opportunities to make an investment over the course of the next year, would this be one of them? If we wanted to change our mind later, could we? Under what macro environment do we expect this investment to succeed or not? So one of what we call 30 questions is something is a group-wide endeavor that we undertake together at the earlier stages and the function there is to make sure, are we really focusing on what we know, what we don't know, and that guides the rest of our research.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going to trust them. We are going to give them our capital. We will be as informed as we can be, but respectfully informed. We don't want to get in anybody's way and we don't want to hinder them from making from spending their highest and best use of their time. So we're going to try to use independent sources of information, including quantitatively, to truly try to confirm that understanding. And then we're trying to, as a team, come together and make sure we really understand this opportunity. Are we making sure we have two team-wide discussions that help us in the behind the scenes? One is at one of the earlier stages of the gestation period, as it were, something that we call 30 questions. We've got a group of 30 questions that we've put together. Again, it's meant to be informative. It's not meant to be prescriptive. But we're looking at do we understand the investment mechanics? Do we understand the investment thesis? Do we understand the alternatives?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So, what we're trying to do just to bring a little depth to the points that you meant, we're trying to understand everything we can about the manager. So we're trying to understand qualitatively what it is they're trying to do, where they think they are getting their returns from. And then we're going to try to corroborate all of that through independent sources. We're going to try to corroborate that by speaking to as many people as we can inside their organization, outside their organization references, references that are provided on list. More importantly, references that we source on our own off list. We're going to try to investigate that quantitatively. Look at the track record, slice and dice it a lot of different ways and figure out, does it make sense? Is it consistent with the qualitative understanding? We'll do background checks. We'll do reference checks. We'll try to make sure are we understanding the people that we are aligning with because we are”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Down to those five words What is the homework of the due diligence process look like inside your organization once you've met a manager, you like them, you've had a series of meetings, you've asked the questions you want to ask, what happens behind the scenes from that moment until when you're funding or through the committee?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“And third party marketers. So I say those are the big channels of ideas. But our bias is to, because our bias is to be patient and to be long-term oriented, again, coming back to the turnover question, in practice, the answer is that we're not turning over the portfolio all that frequently at all. So we have the benefit of having a fully invested portfolio without a whole lot of turnover. We're really focusing everything that we're doing is in pursuit of our enormously complex two-step game plan, step one, make one accretive investment. Step two, repeat. It comes down to those five words. If we can do that and we can do that a little bit at a time and a little bit at a time and a little bit at a time, we'll generate great returns.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Asked my team, or so they said they're great, and I asked them. We benefit from having a number of different channels of information. First, I do have a great investment team. We all have networks. We're speaking with other people. One of the big benefits about investing on behalf of a cancer center is we're not in competition with anybody. We're here to help patients. Happy to be collaborative in a trusted sense, never break a confidence, but happy to be collaborative with people and share ideas and compare notes, so to speak. So our team is one source. Our committee is another great source. We've got a terrific investment committee, each of whom has many angles through which they interact with financial markets and other institutions. So they're a great source of ideas. And then the third, of course, is, and this is a benefit of being an endowment with a great organizational name, we attract the, because of our size and because of our brand name, as it were, we attract unsolicited interest from a number of different managers.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“doesn't want to invest forever. Maybe they have motivations that are different, but we can align with them for the duration of what we think is a time-specific opportunity. We're willing to do that too. That'll have a higher turnover to it.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“In practice, hopefully, if we're aligning ourselves with the right managers and we are aligning ourselves with managers that are pursuing flexible mandates, come up with a lot of acronyms. One of his FMNs, flexible mandate managers, which is sort of the ideal for us. If we spend the time to research, find the people, understand their worldview, understand their philosophy, understand their risk-taking, if we are aligning ourselves with them, then we can hopefully stay with them forever and we'll never sort of turn them over. At the other end of the spectrum is we might have a manager that is pursuing a interest”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“They are because the So, when you layer in these special types of people, Lot of those characteristics don't change much. They can, right? People can evolve. They can make all their money and lose the curiosity and the drive they had. But for many of these people, they're innate characteristics. So you layer in a certain type of person. And in a lot of strategies that might not be cyclical, say, okay, they're pursuing a certain sandbox. How often do you change your mind?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the third one would be what I would sort of describe as productivity, meaning an interest in being productive. We find that there are people in this world, there are managers in this world that have, by any measure of success, certainly any measure of economic success, amassed a bank account that would enable them to do anything they wanted or nothing at all. And yet they still come to the office five days a week. Sorry, they're coming to their office seven days a week wherever they are because the office follows them these days, meaning no matter where they are. So we're in a world where if you've got a smartphone with you, you're reading, you're doing, you're productive. And there are people that have that passion with them. And it's a little bit different than the competitiveness. It's a passion towards productivity. It's a passion towards production. Production of investment returns, production of contract.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say the second is probably an intellectual curiosity. The world's a complex, interrelated place, and when I find that being impressed with managers that are open to taking information in from different sources in a genuinely curious sort of way. And again, that helps towards being fact-friendly. That helps towards being unemotional about what it is you might find and opened to accepting that in a process of continuous improvement.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Two years ago, I thought that valuations were important. Now I realize that valuations are important, but you have to segment my market regime because we're in a different environment and I've thought about it differently. So what I'm looking for and what I do find in the example is people that are doing things differently now than they had in the past. It's a self-learning process. It's a roll up your sleeves. It's a self-critical, but it's a fact-friendly process, not being afraid to ask the question, not being afraid of the answer, not being inflexible enough to change what you're doing.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. I won't name names, but we've got a manager. Each time I meet with the manager, there are examples of what they're doing differently than last time. Sometimes those are big many times, most times they're small, but they're specific and they're concrete. Here's how I looked at my buys over the last six months. Here's what I found. This is what I'm doing differently. Here's what I found in my portfolio. Here's a new information source that I came across, a new website, a new journal, a new channel of information. I'm incorporating that now I didn't before. Here's what I thought was the case.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a great question. I would say an internal competitiveness or a competitiveness that is internally oriented. Like to find people that are driven but driven to compete mostly with themselves to do as best as they can. As a result, hopefully that will propel them if they're skilled to be better than others as well. But the primary source of that drive, the primary source of that ambition is hopefully internally oriented. That will enable them to be good partners. That will enable them to be good collaborators. That'll enable them to have a good open dialogue with us. That'll enable us to be supportive of them, which is what we're always trying to do.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've recognized that bar stool sits inside of an environment where that environment is a market environment, that market environment is accounted for by amongst other things, entry prices that you mention. Market opportunities wax and wane in terms of their attractiveness and we track market multiples and we track valuations and we track conditions not chasing flavor du jour but we do look at the the attractiveness of valuations on the entry prices for the market strategies ideally we want to find a great management team that either one has access to many different market environments or two is sitting inside of a good opportunity set at the time.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Economically exploitable game plan. Third is process. What are they actually doing? How are they finding investments? How are they diligencing investments? How are they assembling a portfolio? How are they managing risk? Those are the three components we think of them as three legs of a stool, sort of like a bar stool. They hold up the sliver that you see in a profile, the seat, which is the part that you touch, the part that you consume over the course of time that's returns. So without a sound philosophy and a strategy and a process, the returns aren't well supported. We need to analyze those returns and we need to understand what's upholding them. That's the stool. The stool rests on a foundation. Foundation people. People are the foundation to the investment business in our view. People are imperfect. People are quirky.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, for sure. Price matters, right? So at heart, I'm a value investor. So certainly price matters a lot. And with any active strategy, with any security selection or certainly any private strategy, I mentioned the harvesting or the optimization on the cell, but certainly that links back to the opportunity, the valuation on the buy. You mentioned comparing managers across different strategies. One of the things that we've developed is a manager selection paradigm that helps us in these trade-offs or helps us evaluate and price figures in. It's the latest part of the paradigm that we've added. For us, when we're looking at managers, what we're looking for is a couple of different things. One, what does a manager believe? What is their core investment philosophy? What's their worldview? Second, what's their investment strategy? How are they taking that worldview and making it into an”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's a couple of different legs then. You've got the terms hey, if you can negotiate a little bit better, you can understand that you have the operational improvements, deal dynamics separate, but the skill of that manager. And the one thing you didn't really mention is entry price”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“What are they doing on the investment side that should lead to that we believe will lead to a difference in return? Ideally you'd have a manager that has been doing the same strategy for a long period of time. So we should be able to see our way mapping a manager's research engine to the returns that they actually have produced. And then if you have that benefit of the track record, you can say, okay, how much of this has been alpha or excess return? How much of this has been beta? And what are their sources of, what are the drivers of each of those different return streams? And you should be able to link it back to an ex ante understanding of the manager's research engine at the start.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“There might be a multi-year fee crystallization or carry determination that it turns out is actually worth something. There might be a lower carry rate. Again, that might be worth something because of the compounding, because of the variability within the carry generation. So there are structural elements that generate gains, but beyond that, then it gets to be a little bit less concrete where you're looking at how a manager's research engine and what are they bringing to the table that the public firm is not. Are they operationally adding value through helping managements with either with their formation or with their strategic business plans? Are they providing capital for roll-up opportunities? Are they optimizing advantage of their cell cycle in terms of harvesting businesses or harvesting opportunities in real asset strategies?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“100 basis points per year. This is why it's a heuristic, right? So this is meant to be directional. This is meant to be informative. This is not meant to be prescriptive. And it turns out that's quite a big premium to achieve. There are some ways that you can actually look at it and say with some high degree of conviction. An example might be a fund manager that has two different share classes. Same strategy, one-year lockup versus three-year lockup. A fund might offer you a fee break for going with a longer lockup. Well, if you have, say, a management fee that goes down by 25 basis points per those two different share classes, that's easy and concrete and something you'd count on.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you quantify 100 basis points? I'm just thinking in my head, oh, we've got a technology stock picker. By the way, that might be next to a technology hedge fund manager. And then we have an early stage venture capital fund that isn't one of the big brand names that everyone wants access to but looks interesting. 100 basis points?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we've spent a fair amount of time thinking about this in terms of what should we be paid for our per unit of illiquidity. And we've examined historical data. We've examined by asset class. We've examined by economic and market regime. And then we came up with a simple heuristic. Basically 100 basis points per year. We think that we should be getting in terms of an illiquidity premium to lock up our money. So in a simple case, if we had a public equity or you chose venture capital, if we have a private venture capital fund and we have a public manager that invests in the same underlying risks of those venture capital companies but for stage of development. So if we're talking technology or if we're talking healthcare, then for the difference in liquidity, what we'd like to see is our way to a premium of 100 basis points per year.”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, and then let's touch a little bit on this sort of liquidity and risk thinking and framework. So just taking the example that you mentioned, you have a venture capital investment. You have a public equity investment. You have them, you've allocated them to managers. What do you do to compare these things? And what does that actually look like?”
2017-10-09 · Capital Allocators · Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28) · IDENTIFIED FROM THE TRANSCRIPT · source