YouSaid · the spoken record

Jim Dunn

lines on the record: 103
first: 2017-09-04
most recent: 2017-09-04
sittings or episodes: 1
sources: podcast

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“That's really interesting. Yeah. So you think about, and even in the evaluation space, the valuation growth versus value, for example, the model really likes value right now because where growth has rallied so high, but we don't have a great expression of that in our portfolio right now. So there are things we can't get access to. But it's really an art. So the math comes out and says, here's the model, here's the math, go and get it. And the art is, okay, how do you do that? So go back to growth. It's easy by the S&P ETF. And we have some of those, but it's harder to say, okay, so private equity is growth too. Growth equity, right? It's levered equities. So how do you pick? And that's where our value comes potentially is let's look at and say, okay, we're going to get access to these things the way we want to get them or we think that there's opportunity and really focus back to that concept of risk and fees.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think when you think about momentum, that's a part of the portfolio that this year has done well for us. So we can look at long short, we can look at, so what you've seen in our portfolios broadly has been a shift from long only to long short. Now, we're probably early in that, hopefully.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's interesting because one of the big buckets that obviously we as an endowment have the ability to take advantage of is illiquidity. So illiquidity is a big driver of return, at least in the model. So you find that's a unique one that you have to liquidity is different, right? It's private credit, it's private equity, it's some hedge funds. So I think that was one of the things that's the blurriest. So you think about the mathematics behind it. High R squared, hard to apples to apples implement. I think one of the areas, for example, right now, spread is not a big play based on where spreads are, right?”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Want to get crystal clear on understanding what this model looks like. So let's start with you run this through your optimizer and you come up with a bunch of factors that add up to 100 in exposures. You mentioned twenty percent growth.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“A manager who has ability to short a wedge, ability add leverage, a driver. You find a good manager, they can do better because they have more tools. But if you still have a bad manager, you're still going to shoot a 120. So you still have to find talent. But if you have talented managers, give them tools to do what you want to do. So that's what we've been focused on is our model really around the factor model, is to build around the managers that we have in our portfolio that can give us lots of exposure and then build around it and try to find other opportunities. And I think that's where our model is a little bit different because then we're not focused on the Fed. We're not focused on the S&P. We're not 70-30. We have less in vergure capital management of all our portfolios. We have less than 25% in long U.S. equities.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I can't time it exactly, but I have this hedge on that also can affect other things in the portfolio as well. So we can take this overlay and say we're going to do basic completion portfolio, both long and short. We can have basically all of our managers going along. Let's take some S&P exposure off, or all our managers hate Brazil and Venezuela and Argentina. Let's put some exposure on. So that's really focused on not a bet on the market, but a bet on our portfolio looking at our managers saying, what are they doing? So again, going back to our model, really it's manager focused. And I think our analogy has always been the Tiger Woods, Arnold Palmer analogy, right? So the golfers in the world, you've got a golf bag with just irons, nine through putter. You give that bag to Arnold Palmer, Wake Forest graduate, or Webb Simpson, Wake Forest graduate, Bill Haas, Wake Forest graduate. You know how it goes. But if you get that iron, they'll go out and shoot an 80, 75. If you give...”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Couple years ago, everyone was doing Lehman Trade claims. It was a great trade. They went from 30 to 60. But the problem was they were all doing a 10% maximum allocation for their fund. Well, if we have three managers all doing that and their big allocations for us, it's 15% of our total allocation for our total pool. So we're uncomfortable with that. So we can hedge out a European basket of European bank stocks because they're the other side of that trade. If they can't pay because they have the collateral, if they can't pay, then that trade doesn't work for them.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“One, it allows us to have a concentrated portfolio. We can get three managers to give us eight factors each, and that gives us all the factors which we want. The other thing allows us to do is, and for us, that's good because we can write bigger checks. And that helps us drive fees down and have better relationships. The other thing that allows us to do is we think we can, we like to quote the great American philosopher Mike Tyson. Tyson said, everyone has a strategy till I hit them in the mouth. So every endowment had a strategy in 2008 and 2002 and so on. So we have an overlay. So we look at all the factors and say where are we overexposed because of Elliot, Balpost, whomever, whatever managers are doing certain things. And those managers may or may not be in our portfolio, but we look at the portfolio and say, okay, I can't tell Singer not to do this, but I like the exposure. But if the three managers are all doing the same trade, so historically one example would be Lehman trade claims.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So here's where it breaks down you think about let's just use bridgewater, for example. So bridgewater has about eight factors that drive the return and you know what they are, their country or their currency, their momentum, duration spread. And they can tell you they have the sheet. And when we run our returns-based analysis, we get very close to the same answer they get. So you get eight or nine factors exposures with Bridgewater. If you pick an activist manager, you get one. You get growth, basically. Maybe a little momentum, but primarily you get growth. Private equity, you get growth. So what we find is that we want to get exposure to as many factors as you can. So you take the managers and try to find out their factor, and then you run those factors. So you may have five managers that have different factors, but we're not running them as hedge funds or large cap corps. We're running them as just the factors themselves. So once we get the factor exposure, the model says I want 20% growth. We then can get that across four or five different managers. What we end up doing to the model, the factor model does two things for us.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“You still use multivariant regression. You just really don't constrain them. So you still take a look and say, okay, what were the returns post-2008 and going forward? And you look at also the volatility of those factors as well. So you still had to use the same tools. You just don't run it against asset classes. So large cap, small cap, high yield, you run it against these factors instead.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, can you dive in a little bit to what the model is? So, is this, you have a set of factors, growth value, momentum, quality, whatever those factors may be? And are you running those factors against historical returns to those factors to try to estimate what you, based on history, what those expected returns might be going forward?”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the big key of it is not constraining it. And I will tell you that the last couple years for us have been a challenge because the model says it wants growth. So you look at GDP growth and say, where do you want it? You're not buying in the US because there's no growth in the U.S. You're buying 2% growth versus investing in China and Russia. And for us, China and Russia, we can't do it because we believe in the rule of law. So we're not going to invest in those areas in a big way. So we end up finding we're doing more emerging markets, more frontier markets. And it's worked fine recently, but for the last eight years, if they weren't in the S&P, you weren't doing well. So I think the factor model is a blurry lens. We end up finding our portfolios look a lot different, but our returns look very much the same.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a blurry lens. It's not much better than what you have now. So I think you still have the proxy the factors, right? So you can do certain things, growth versus value. You can look at different proxies.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this question of optimizing factors and weighing factors comes up, right? You have this asness or not debate of whether you can time factors and smart beta. The factors themselves are a similar group of factors. How do you model what the factors are and then how do you create a framework for Wake that says these are the exposures we want to these factors?”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“What's the biggest innovation in asset management, ETFs, such as index, right? There hasn't been a whole lot of innovation. But you think about it, you go and say, okay, we're going to use the last 25 years of returns and correlations, and we're going to put that into a machine, and we're going to pretend that the next 10 years will look like the last 10 years. And then the second thing we're going to do is we're going to constrain it because it's going to put all your money in private equity. So all of a sudden, you've taken all the value out of the model. We took a different approach, which was basically take the managers and what are their factors that drive the return and then optimize the factors, unconstrained it. So the Model 1's growth, go get it. But you can get it growth active, passive, private, public, non-US.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Factors we want to get. So the model says think about traditional mean variance optimization, right? The problem with modern portfolio theory, it's not very modern.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably not. So I think there was a view on us that we wanted to focus on what were the drivers of return in the portfolio, and let's try to build it from that perspective. And I think if you look at the Harvard and Yale model, they're very different, right? There's one internal, one external. That's changing with NARV, but we use the Yale model. We're more like the Yale model from the perspective of we had in our portfolio some very good managers that gave us exposure to multiple factors. And that was a great place to start. So then reverse optimize what do you need to help build around that? So we started with the managers first and then build asset allocation around it. And I think that was the key for us was that we had these great relationships and that's the value of a university. You can get these relationships. And we were paying 75 basis points for some of these managers that now charge three and twenty five. But we've been there for 15 years and we've got capacity. Let's build around those assets. So I think the first thing was let's try to get exposure to the”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a great question. So, two things we did first. First thing we did was I asked the committee when I started, how much do you pay in fees? And nobody knew. So went and looked at every manager and said, here's what we pay in fees on each manager. And some of the numbers were very big, but some of those managers were doing really, really well. But incentive fees were big. I have no problem paying incentive fees. I mean, they're doing a good job. So we looked at that and said, okay, who are we paying money to? And that's the first thing, that fee part of it. The second part of it is where are the returns coming from within these managers? So we sort of did what we call reverse optimization, ran every manager through this factor analysis, and said, okay, what's driving their return? Is it momentum? Is it growth? Is it value? Is it spread? Illiquidity, duration. And you find interesting things. You're real estate managers spread in duration. You wouldn't think that that's a fixed income concept, but spread and duration, cap rates, and how long the rents are. We like student housing because you can change it every year. Do you want a long-term lease based on cap rates of four?”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Morgan Stanley, all rights reserved. And now back to the show. So that's a very different frame for the reasons you discussed than the Yale model or the typical endowment model. How did that translate into action? So you say we understand risk. There's a certain amount of risk tolerance that we have at Wake. What do you then do in terms of framing the structure of the investment pool?”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So let's folks. So, we got Pawn Sharp ratio for five years. And that got us thinking about what the focus for us was really about what we control as risk.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Move this thing forward and I'll level your comfortable with and not having to bet on the S&P and get away from what Harvard and Duke do because you're not Harvard and Duke. So stop thinking about that. So one of the first things we did was we changed the compensation program. I should not be, the CI prior to me was basically paid on a peer group. He had to be seven schools. And I thought we're not Vanderbilt. We're not Duke. Duke is $5 billion with 28 people. We're awake with 700 million and six. We don't have the same fundraising, the same responsibilities, the same payout. So let's go back and think about what's really the target here and pay at us out over three years or five years and have clawbacks and have, and what can you control? Larry Divonzo Wilshire told me every day, you can control two things, fees and risk. You can't control return. So every committee that comes in and says we want an 8% return is starting with the wrong output. Focus on the inputs.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, how do you protect the purchasing power of this endowment if you keep losing 20% every five years? And that was the key. And I think the running endowment is very contextual. It depends on the nature of the institution. It depends on the history, its ambitions, its financial resources. Wake is not Yale. It's not Harvard. It's not Georgetown. It's not Villanova. So they have to have their own mentality, their own work. And I think the big driver for a lot of endowments is politics. Look at Harvard, right? Jack Meyer was one of the top endowments in the country, and then all of a sudden he wasn't, and he was kicked out. I think you think about the Machiavellian politics alive and well in three places. The military, the clergy, and higher ed. And higher ed teaches it. So if you can get away from the politics of the endowment about what you do with it and how you use it and really think about the purchasing power going forward, that drives a lot of that conversation. So it wasn't about 2008. It was about what do you spend? What do you bring in? And then how do you...”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“You don't look at 2008 in context. And the endowment is not a series of one year returns, as you know well. You go back and look at, okay, 2008 and 2000 and 98 and 94. So what did you do in all these periods where you had these drawdowns? And if you're down 20% every five years, here's the math because you're spending $4 for every one dollar you bring in. You're not Yale. You're not getting $100 million gifts. You're getting $1 million gifts. So you're spending $50 million every year and you're bringing in $14. That's a great number, but it's not enough if you have 20% declines every five years. So you do the Monte Carlo simulation. You say, okay, just so you know, in 2150, that year you will be zero. That's the math. That's the easy math. And that's okay. That will not be on this committee will not have that problem. But somebody will.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when you started with that core conversation of how much can you lose and you had the frame of two thousand eight, that doesn't incorporate time, right? That's one year, 28% drawdown. Now it turned out if you rolled that forward to 2009, you didn't know it would happen at the time, but you get a lot of that back. So how did you conclude that portion of that conversation of what was wake willing to lose and over how much time”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“But the advantage we have at Wake Farst in every endowment has is time. And think about that as the driver of what you're trying to accomplish, not what you're going to do every quarter, not bet the future of Wake Forest on the S&P five hundred.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“The work you need to do to get the right kind of managers in the portfolio. So let's take a step back. Let's relook at the portfolio. Let's make sure everyone belongs. They're all correlated. You had all that and didn't work. So let's look at the world a little differently. So trying to get them to think about what drives returns in this portfolio for the last 10 years was all beta. And that's okay. Beta is like cholesterol. There's good beta and bad beta. In 2008 it was bad beta, right? The last 10 years has been eight years has been good beta. So we try to think about can we make this portfolio using the scene to left the anti-fragile portfolio where we can handle shocks and get stronger for it.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“When I started they were hiring firing managers, they were meeting with managers, and I kind of came in and said, look, the model of you coming together four times a year as trustees, getting sandwiches, picking managers, playing golf, just doesn't work. And it's going to get more and more difficult as the market changes. So let's take that off the table. Let's change the governance structure. Delegate that to us. And it was a great exercise we went through with the board. And they had some trepidation about doing that. And I gave them this book. I said, let me show you how we looked at managers of Wiltshire. So I gave them this big Wilshire book of 400 pages and it had this strategy. And I said, this is the kind of book that you typically get from a consultant. And it was a manager that was on the board of NASDAQ, and he was doing this and that at $8 billion. He's never been down. And he does split strike conversions. You know where this leads. So I gave them Bernie Madoff. And they all said, let's hire this guy. I said, well, you've hired Bernie Bernie Madoff. You can't do in your 30 minutes a quarter or an hour a quarter.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“It meant that 14 kids couldn't come back to college. So what can you lose? What are you willing to lose? And from a standpoint of the university, you've got to think about fundraising. You've got to think about the endowment. You've got to think about how you use this for Wake Forest. 85% of payout goes to financial aid. So really, can you handle the volatility that you've put in this portfolio? So that was the first question. The second thing was, what are the tools and team we have? Do we have people who actually can go out and find managers and have talent? And the reality was wake out a pretty good team. And they had good relationships with people like Bridgewater and other large asset managers, Elliot Millennium. But they didn't have sort of the whole picture. There was no private equity. There was no real assets or very little speak of. They had done some fund to funds. So the thing was to think about from a governance perspective, let's take a step back. What are you comfortable doing Wake Forest Investment Committee?”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think they were long and loud when I got there, and they had a CIO who was very well known, Lumorelle, sort of a great investor on the sector long analysis, did a lot of work on mutual funds, and was basically buying and selling ETFs pretty effectively. But when he was wrong, he was really wrong. When he was right, he was really right. So the challenge is I came back and looked at the portfolio and said, where are the issues here? Let's start with sort of governance and the big picture. What does Wake need? And that was the starting point. So I sat down with the trustees who hired me and said, okay, what are you going to lose? That's the first question. And that was sort of interesting. They hadn't really thought about it that way. And looking at Wake Forest, again, they had lost 28% in 2008 before I joined, and I looked at that portfolio and said, what does that mean? Like 28%, that's not too bad considering all the other schools that lost 29, 30, 31. You're actually in good company. What did that mean to wake? Well, that meant that 10 years of fundraising got wiped out in four months.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So they were stuck. And now some of them went and borrowed money. Some of them didn't make the payout, cut their payout back, but Wake Forest couldn't do that. So that protect perform provide is in that order. And I think we really try to focus on that mantra across the board with all of our prospects is that you got to want that. You got to want to be able to invest that way. If you don't, if you want to be the number one endowment in the ACC, we're not for you. But if you really want to focus on Protect Perform Provide, then we have a unique opportunity.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“You think about those issues financial aid's a really important thing. But the only thing that goes up every year is tuition. So as tuition goes, so does the need for financial aid. You've got to be able to meet that need. So performing is really important. And then the provide part is more important, I think, in universities after the crisis because you had a lot of schools that basically were illiquid because they had hedge funds that locked up on them, private equity distributions. These schools didn't have the money to pay their distribution.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Endowments and responsibility for us to protect the corpus, protect the endowment. It's $700 and it's now a billion dollars and it was here in 1930. I don't want to be the guy that screws it up. I think what I learned at universities is that everything you do in a university is done in perpetuity. And that's a unique framework that you have to think about. Every building, every policy, every statue recently, it matters. And someone's going to remember 50 years ago that you didn't call a timeout during this game or you said this or that. And we want to make sure that everything we do is in that framework. So we think about those things. And that long-term view is really important. So protect the endowment first and foremost is our number one responsibility. But you got to perform overspending and inflation. And inflation really kills an endowment because healthcare costs, the average age of a professor is not 40. It's closer to 60. So healthcare is a big deal and they work forever because they can.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“I got that in the right order. There's a lot in there, and some of it you could say, boy, protect and perform and investing doesn't necessarily go together. There's a cost of one or the other. Are those three together”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“And when you got to wake, how did you start this process? So there's a pool capital. How big was the pool at Wake? About 700 million? Okay. You have a mantra for Verger, which I think was the same at Wake Forest, protect, perform, provide.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I said, well, I let her sweat for a while, and I found out how much the shoe cost. I said, well, let's have her in. But in Wiltshire, there's two floors, and there's an elevator, but there's also a staircase. So I said to the woman, if she comes in with one shoe, make her walk the staircase. She came up, limped in, got her shoe. We had a good meeting. We didn't allocate to her.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Left shoe. The note says, I got my foot in the door. Can I come get my shoe? And I thought that's pretty interesting. That's pretty funny”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would see the large ones. I saw the Ray Dalios and the Dan Lobes, but I didn't see most managers. And I had a woman send me an email saying, I need to see you. And she was a hedge fund in the UK. And I said, look, I don't see managers. Your analysis, this person, go see them. And she kept being very persistent. I wanted to see you. So one day, after blowing her off, I got a box with one red stiletto in it, a Louis Baton red stiletto, just one.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“and the CIO of Wilshire had this great opportunity to go to BlackRock and run their defined benefit program. So they did a search and didn't like any of the candidates, and they said, how about you? You want to try this? I said, well, let's try it. See how it goes. And it was a great run. I got to learn a lot about manager research, asset allocation, portfolio construction. But again, I was on both sides. It had the large cowpers and clients on that side. But I also had the consultants and I had the money managers trying to get access to us. It was really interesting sort of think about how that big pool of capital came together. But it was also interesting for me to think about how managers got their foot in the door. I have a great story where, you know, as CIO, your role is pretty ceremonial, right? You're basically trying to put fires out and deal with people less about asset allocation. You've got portfolio managers do that and analysts. But everyone wanted to see you because you were the CIO. And I didn't really see managers.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we had one big client Dia Sumatomo, and we went around and raised money from institutions all over the southeast, the Asia, Middle East, I found myself in KL and Manaus and Oman and Kuwait. And it was a great, interesting thing. And then we raised a bunch of money. And we did really well.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“This platform, but I was also trying to deal with Arden and K2 and Lazard, trying to help them raise capital and get it on the platform. So I had both the buy side and the sell side, and I was talking to both sides. So that was a unique opportunity to see who's out there, who's doing what. I had all the data at my fingertips, not only who was using it, but what they were doing with it, but also the returns and the stats and so on. So it was a pretty interesting perspective. And then investorforce sold Altfest, and I was asked to go to Wilshire and run the hedge fund business. It was nascent. They had no hedge fund business and they wanted to create one. So Larry Divonzo brought me out and we went from zero to a billion in one year. We had one. What year is that? This is in 2002.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, total by accident. So Villanova, Philadelphia convertibles, and then we started a hedge fund and we had one great year and then one terrible year. Turned all the capital and my two partners closed the doors and took a mulligan and started over again. And I said that's not what I wanted to do and I wanted to go to grad school and had one child at a time and I got an offer to go be the hedge fund research person for an investor force. They really didn't have anybody knew anything about hedge funds. So here I am, this guy who started a hedge fund and closed one and knew convertibles. I was a pretty unique commodity, but I was 27 years old, 26 years old. So I was tapped to sort of help Ron Oldfest as part of the investor force opportunity. And you got exposure to a lot of different asset classes. And the cool thing about that position for me was I was on both sides. I was on the investor side trying to sell cow purs and AP3 and Sodom Well Funds, Temisec.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“I still had to go and apologize in person to the Saudi family. I had to go to file LBIE bankruptcy on the portable alpha swaps in person. It wasn't a fun period. But just prior to that, I was sort of my career in Philadelphia as a sort of convertible reg D trader at a little boutique firm in Philadelphia putting the death and death spirals. But it was a great place to learn the business. You know, it was a great place to learn the business. And we started. It was really around helping biotech companies help raise capital, right? Go and raise 25. You don't need 300. Do 25 and do it through a convertible. And then it became pets.com and other folks were doing it. It just wasn't sustainable. But it was a great place to learn the business both how to go and see companies and also how to trade commercial bonds. So it was fun.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“And most importantly, Ted, there's no other Virger Capital. We're the only one. So that was the hardest part of creating Verger was naming the baby. And now it was an entrepreneur raising money. So coming from Wilshire previously, I was a CI Wilshire Funds management, which was about $56 billion of institutional capital, but I was traveling my last year there was 220 days on the road. So I miss a lot of broken hearts and broken legs and first kisses and ball games and decided that I didn't want to do that anymore. You know, I had in 2008, we were down 13% in our larger portfolios, and I still had Jamie Diamond calling me at home wanting his Bear Stearns 130 thirty seed fund money back.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Being the vicar, everyone loves him, and being a deacon, everyone loves him, he's going to be fired. So to get his strength up to tell his wife this, he wants a cigarette. Not a big smoker, but he wants a cigarette. And we're in Ronalda Salem, North Carolina, the home of Reynolds tobacco. So now it's really starting to click. So he gets a cigarette, tells his wife, but he decides that trying to find a cigarette was difficult. He's an open tobacco shop. It's his new business does a tobacco shop, opens it, becomes wildly successful after a couple years, goes to the bank, and the banker says, Albert, you're the biggest customer. You're the richest guy in the bank, but all your money's in cash. Wouldn't you prefer to have invested wisely? He says, sure. They had him a stack of dogs. He said, I'll be back tomorrow. And the banker says, why not start now? Albert says, well, I can't read. And the banker sort of looks at him incredulously and says, Albert, imagine what you could do if you could read and Albert looks and says, if I could read, I'd be the deacon. So it has a story, a connection to tobacco.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the biggest challenge was naming the baby. I have a great friend, Charlie Ruffle. Charlie and I were sitting on a bus at two in the morning after a conference going back to the hotel. And he's very erudite. And he said, hey, have you thought about this Somerset mom story? And I remember Somerset mom from my eighth grade or ninth grade English, but I knew the pearl, not the Verger. And he said, there's a story called The Virger. I said, well, let me look it up. So I read the story. And basically the story is about a deacon in the Anglican Church. So Damon Deacons, we're the deacons. Is it starting to make sense? So I read this story. It's a very short story, but it basically talks about this guy's named Albert. And Albert goes to work one day and finds out he's been told there's a new vicar and the vicar said he can't, if he can't read, he can't work there. And Albert can't read. But he's been the vicar for 25 years. So he decides that he's going to not try to learn to read. He's going to go home and tell his wife after 25 years of being.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“and spider. And what did you guys do wrong? What would you do differently? And one of them said, just don't name it Wake Forest Asset Management. And I went to NC State, Libby George, who had money with UNC. And she said, the only problem with UNC managing our money is every quarter I get a statement from UNC with their logo on it. I have to hand that to my trustees at NC State. They hate that. So we were trying to find a name that would work within the framework of kind of Wake Forest, and we tried to find Magnolia trees, Magnolia Capital taken. We've got a chapel, spire capital taken. Ronalda Capital, Ronola Road, taken. We couldn't find a name that fit.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“But, you know, it's really an entrepreneur opportunity. But within a university, you still have minutes and you still have boards and you still have constituents that want to do it the Roberts rule away. And that was surprising to me. I kind of want to sit off and do this entrepreneurial and do it the way we wanted to do it. And that was not the case, which is totally understandable, but it was difficult to get through that. The other thing I didn't really understand was sort of the need to go to every constituent. So every board member had to understand why we're doing this and buy into the model as well as the reason to do this. Then you go down and, okay, everyone in accounting, do they understand why you're doing this? Everyone in HR, do they understand why you're doing this? That piece of it was really important. And then the other piece of it can only was, how do you name it? So demon deacon management was the first name and I went around to all these other outsourcers, Chris Bittman and Pirella and Alice Hannah.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“The university said, look, what would it take to do this? And I gave them 10 things considering they would do none of those 10 things. What are the kind of typical list of things you need to convert? Yeah, I think one of them was to think about an independent board. You really couldn't make this the Wake Forest Investment Committee because they have their own needs and issues. You had to have an independent board. You had to give the team equity. They had to have some motivation to stay and make this happen. You had to be diluted as you brought in new investors on your private equity portfolio that you've built over the last 10 years. Those were some of the big items. There were some smaller issues, but I think I was the proverbial dog that caught... And it was out, you know, that's going race capital. I had this great position.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“They can go to Chapel Hill for $15,000. And even though they love the small classroom size and love the university, they can't afford it. So how do you get those kids to come back? But higher ed's been challenged since Socrates, right? It's not anything new, but at a certain point there's some elasticity that you can't keep charging $65,000. So instead of cutting, which is hard to do at a university, you've got 10 year other issues, you think about what can you do to be innovative? And we were tapped as one of those ways to be innovative.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think I have a privilege of being We had a chance to do something pretty unique with Verger spinning it out. It wasn't our idea. It was the university's idea. And the concept really was driven by Wake Forest thinking about having a really hard conversation with itself. Look, we charge $65,000 to go to Wake Forest. And this school is built on teachers and preachers and middle class kids from North Carolina, and they can't afford to go here anymore. And the school looks a lot different. And it's not bad. It's just different than it was 25 years ago. It's a different in what way. The kind of students that go there, that's now a top 25 university with big-time athletics. It's not middle-class kids, North Carolina. They can go to Duke. It's got a larger endowment.”
2017-09-04 · Capital Allocators · Jim Dunn – Protect, Perform, Provide (Capital Allocators, EP.24) · IDENTIFIED FROM THE TRANSCRIPT · source