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John Glidden

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75

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2024-11-18

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2024-11-18

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1. “The power of the team and working with people and being influenced by other people and not having to have the right answer all the time and to be willing to vote for somebody else's idea if it's better than yours and as a CIO it doesn't mean you have the right answers. It means you can set up the processes that you hope will improve the probability of you making the right decision in the future. So you don't always have to be right. And this isn't the one person show. I am not sitting here without all of the myriad of names that we've discussed over the past hour or so.”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “What Paul gave me. He's like, I understand we've got unique needs, and you're bringing us a unique solution. I appreciate that. And I think it's the right fit. But you need to define success at the outset and do not change the goalposts. So you need to define success and be consistent with it. Have expectations in advance and then build guardrails around yourself that's going to pull the governance infrastructure into play in sufficient time if there's a real problem. I think that's the best advice I've ever gotten.”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Matt Wright. He is my mentor in this business. He is a beautiful, beautiful person. And he taught me the ropes. He brought the quantitative rigor to show me portable alpha. And then the name that's come up most is Paul Jacobson. I mean, he is a uniquely talented individual. And without him, we could have had the same investment results and it still wouldn't have worked without Paul, it wouldn't have worked. So that's Matt Wright, Paul Jacobson. They're amazing people”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “I'll give you one on the investment side, and this is highly tied to how we invest. Effectively, I borrow money to invest in hedge funds. That's one way to look at it. I would love to see cash hurdles for hedge fund managers. I would love to see that. I don't know that I'm going to get my wish, especially we've got a pretty impressive roster of managers. There's supply demand mismatch. Something else I've learned along the way is anytime I see self before team, that's a bit of a turnoff. But I've been guilty of this, I'm sure. Always been pretty ambitious. I always think, yeah, 10% we can do that. 2% alpha, we can do that. But one thing I've learned, diversification matters on portfolio construction, but it matters on the decision making process as well. So anytime there's somebody's like, I have the right answer, I'm not going to listen to you, that's a big pet peeve.”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “Used to be good at some stuff. I used to be a pretty good runner when I was a kid. I used to be a pretty good swimmer when I was a kid. I found that I've kind of slowed down and running just hurts. 52. I know there's plenty of 52 year olds that are running Ultramarathons and marathons. It just hurts. My knees are a mess. I still mess around with swimming. There's something soothing about just having your head in the water and either looking at the bottom of a pool because I'm not thinking about portable alf. I'm not thinking about liquidity management. I'm thinking about efficiency of my strokes and trying to find pain and then trying to deal with pain and work through pain.”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “In a blanket, I mean, the views are spectacular, the sky is spectacular. There's no sign of humankind anywhere. So hiking up in the North Carolina Mountains is really special”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “I want to just send my prayers and wishes out to the folks in Tennessee and North Carolina that have been impacted by the hurricane that went through because that area is one that's very special to me. So we've got a condo in a place called Transylvania County, which is a little bit south of there. We love it up there. There's something that's called the Western Carolina 100. So this is 100 waterfalls in that area. And then there's also something called the Southern Sixers. So these are mountains that are above 6,000 feet in either North Carolina or Tennessee. I love hiking in the Western Carolina Mountains and I love it, especially because my sun will often tag along with me, even at 19 years old. Now, it doesn't happen as much as it used to, but I'm telling you, you ever get a chance to go to Blackball some mountain in North Carolina and you just either take a 10 or you take a hammock.”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “Over a billion excess relative to the respective public markets since then. A lot of people say you can't beat benchmarks. I think we can, and I think we can do it consistently. I love it. I'm as energetic about it as I've ever been. Ted, I love beating benchmarks. It's why I'm here. It's why I get out of bed in the morning along with my beautiful family and everything, but I love it. I love everything about it.”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “I love beating benchmarks. It's what gets me out of bed in the morning. I think we've got a slightly better way. It comes with some moats. Not everybody can do this because not everyone's governance is going to allow them to do this. If you think about this importable alpha and you take the alpha units and the cash units and you report them into those asset class line items, we're in the top percentile bond manager, top percentile credit manager, top decile equity manager. It's all green. We are top decile in everything we do. And that's against any long-only traditional equity manager in the universe. So I want to beat benchmarks. I want to drive alpha and I want to do it in big numbers. That portable alpha, that's over 200 million dollars of net value per year for over a decade, 2.25 billion since the inception of the program. Private markets.”

   2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “That's not a great scale model. It's not a great margin model because I am going to be needy in terms of resources and I'm going to be sensitive in terms of cost. And sometimes we've seen models like that that work on our hedge fund side. Everything continues to work great. It's harder to do on the private side. We've looked at is discretionary the right model is quasi-discretionary the right model is some of the specialty consultants should they play a role you've got to find the right partners and you've got to try to use them in the best way you can and you've got to insert yourself into the process and then they get bought then there's mergers and acquisitions and everything that you've got to try to contend with”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “I've known that Delta was going to be headcount constrained on this process. Again, we froze in 06. These are legacy assets. If you want to do this, if you want to have 70 or 75% of your assets and alternatives, you need a large team of well-paid specialists. And it was clear that that just wasn't going to be able to happen. At a different place, that would have been my preference. That is a more aligned, less expensive way to do things. Couldn't do it there. So you really do need to have the right partners. And we've seen good partners and we've seen partners that didn't quite fit. So, I mean, people will say extension of staff a lot, but I mean it. I want to be able to talk to anyone. Amanda can talk to anyone. Dimitri can talk to anyone. Nick can talk to anyone. Why this manager? What's your process? We like them. Do you like them? You need to have the right partner. And that's a tough moment.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “The biggest one is I thought I was about as pessimistic as I could possibly be, but I wasn't pessimistic enough in terms of we didn't model down 35 in five weeks. I know this lesson. Financial crisis is not a problem for the portfolio that we run today because you get some correlation benefit between stocks and bonds. You got some of that during COVID. You definitely didn't get it in 2022. 2022 is tough”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Alpha, everything else is so much easier. And if you can run a more balanced portfolio, if you can run a higher sharp portfolio, it just makes it easier. It almost doesn't matter what the problem is. You start with your alpha those first two forces, private force, your portable alpha force, you combine a more efficient acid allocation by going out on the capital market line a little bit. It's going to make any investment problem somewhat easier.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “It's very much still the way I view the world. I mean, it's why we're still 30% privates. It's why we're still 40% hedge funds. It's why we're still 140% is what our asset allocation adds up to. It doesn't matter what the problem is. Our problem now is we want to continue to grow our gap funded status to 105 to 110 to give delta maximum flexibility if they want to engage in pension risk transfer. They can do it without any additional cash. If they want to look at ways to use the excess funding in a way that's mutually beneficial to the company and to the company's employees, they'll be in a position to do that as well. There's all kinds of funky nonlinearities of pension management and one that we're facing now is we're looking at mandatory contributions. I'll skip as to why it is. But yeah, we don't want gap funded status to go down. We want to grow it gradually and we want to minimize what those mandatory contributions are. If you can start from a place of two points out.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “You need to have a governance that embraces this from the outset. Delta was willing to look a little bit different on the investment side because their investment needs were different. And Paul understood that and Paul got promoted to CFO. He was the executive champion. And I met with Ed, of course, on a monthly basis. And Ed's had my back this whole time as well, my 13 years at Delta. Ed's always been there to have my back. And then just meet with your committee members one-on-one. Make sure they understand you've got to be able to tell the story concisely and simply, you've got to be able to tell the story and you've got to be able to give control to your governance. If the governance is not going to accept what you're trying to do You can't do it. The governance has to buy into what the vision is.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “Steadfast support in this, it wouldn't have happened. And then I think without really trying to hold this plan up to scrutiny, another thing throughout my whole career, Cliffasnus, what do you think about this? I don't know Ray quite as well, but I know a lot of people at Bridgewater, what do you think about this? I've been influenced by you in making this plan. What do you think about this? Where are the weaknesses? It's an awesome thing about being a CIO. We get to talk to so many brilliant people. It's a tremendous honor and a responsibility to do what we do. I think it's some of it. I mean, it's such an amazing Delta story. I'm so proud to have been one part of it.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “Delta. We had a plan. I'd worked with Amanda Wilmington Trust as well, so we'd been building this plan together. We talked a lot about what that plan should look like and how can we make it better. And we held it up to Paul Jacobson, Ken Moorge, Ed Bastion, board of directors, Jeff Scott, Omer Terrain's phenomenal, Delta making $11 billion of contributions into the plan from 2012 to 2021. Now, we paid out thirteen billion in benefit payments during that same time frame, but they offset a majority of the cash outflows of the plan, which allowed the assets to really grow without hardworking Delta employees in that disciplined capital allocation. We didn't do a lot of buybacks in those days until we got that investment grade credit rating back without Delta's steady.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “Idea was from the outset the 30% privates never changes. The 40% hedge funds never change. The only thing that changes is the nature of the derivative overlay, what we do with that other 20%. So we just reran all of the same calculations and it's like, you know what? We don't need to reserve as much cash anymore. We don't really need equity hedges anymore. Our hedge ratio 60%, 70%, something like that. So some exposure to a collapse in rates is still a good exposure for us. So we've been able to change some of what's in that other 20%. But that's it. It was designed that way from the outset. The beta overlay let that change, let the hedge portfolio change. We don't do managed futures anymore. We don't do separate account macroly liquid stuff. We don't do that anymore. We just don't need to. We think we can get to a better overall risk adjusted.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “So, anytime you have a hedging program that works because the market sells off, and as you said, you then tap that liquidity, you have to think about how do you reset it at some point in time. So you get through COVID, your portfolio looks totally different than it did three months ago. How did you think about recalibrating the program to where you started with this balance between the privates and the liquidity bucket and the hedge funds?”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “My numbers that added over 120 basis points per year at the overall plan level. I was probably too ambitious and maybe a little too risk averse on what we did on the private side. So I wanted the privates to give us 120. It actually gave us 60, some of which was because I had to rebuild the portfolio and it took some time to get money in the ground. The plan largely worked. So we compounded at over 10% from 2011 to 2021. We didn't quite get our 200 basis points of alpha, but we were really close, 180, 190 basis points of alpha. And then we've really been able to ratchet down the risk from that point. We've gone from 38 to 102. That's where we are today. I'm blown away with the role that Delta plays in this whole story. They've been incredible. It's been such a team effort to get to where we're going. And y'all be curious to see what comes next.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “In sixteen or eighteen months, with what the markets gave us in twenty twenty and in twenty twenty one, portable alpha was phenomenal, and we were able to actually rescind all of the redemption requests we submitted. As we get into 2021, Delta put out $20 billion in debt, $9 billion. That was backed by the Crown Jewel, which is the Sky Miles program. They lost their investment grade credit rating. But even by middle 2021, Delta was okay from a cash perspective and you're starting to see some light at the end of the tunnel on the COVID thing and what corporate cash flow might look like. They're like, take this billion five, let's get up to 92% funded. It's an ambitious goal to get the two points of alpha. It's an ambitious goal to get the 10%. In terms of performance, we did from 2011 to 2021 when we got that infusion. Portable alpha was perfect. It was almost on top of.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “Our managed futures managers from our separate account macro managers. We're probably going to liquidate the bond portfolios of our diverse and emerging manager program. And I'm going to violate the prime directive. I'm going to submit a $1 billion redemption request for my portable alpha engine for my hedge funds. So I'm typing this and that was the day that PAL comes out and gives his whatever it takes moment. That was fortunate. 35% in five weeks was a challenge. If it would have been 50% in nine or ten weeks, it would have been a real challenge. We'd start with a fat with the profits. You've got to start cutting a little bit of muscle. And then there's deeper cuts as you go along. It took our funded status. So we were probably at 75 before COVID got down to 63 at the trough of COVID. We went from 63 to 85 organically.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Micromanagers are doing a pretty good job of our separate account. I've got to unwind some of that. Definitely draws on capital, but I was able to pull a billion dollars of profits from the option strategies and from the long vault strategy. So that's $3 billion in cash, $3 billion in margin call. I pulled a billion in profits. And then talking about 8% was kind of the value of my hedging portfolio. I had to unwind $750 million of that or so. And then we get to March 23rd, 2020. Delta's revenues are down $97. I can't go to Delta for liquidity. Look, this has been tough. All the hedging has worked way better than we possibly thought it could. We're taking off hedges, which is what we agreed that we would do when the world goes on sale. We actually want to increase our beta. So we've got that going on. We are in our red zone. And this is intraday. We're going to take the rest of our capital back from.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Now, of course, as I'm doing this, the beta of the portfolio is starting to increase because you're unwinding some of the hedge behind this. How's Longval doing? You can take those profits and that's early. That's like middle March. We had $3 billion in net margin calls around the worst of the COVID timeframe. So we went into COVID reserving about $3 billion in cash behind our derivative portfolio. You've got the one prime directive of portable alpha. Do not let the markets push you out of your beta position. Do not let the markets push you out of your alpha positions. That's why that extra 20% is there and the hedge is there. But we got to the point, okay, now March 19th, 20th. I need the long volatility capital, not just the profits. I need the capital. Managed futures, guys, actually did a pretty good job. Give me the profits. That's easy. Give me part of the capital. Which of our max...”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “2019 was a phenomenal year. So, funded status organically is probably 75% or so. We've reduced the notional value of equity in our hedge overlay, but we still have quite a lot. We think we're in pretty good shape. The COVID was tough because COVID was equities down 35% in five weeks. The 35% isn't necessarily a problem. You combine that with the five weeks, and that's a real challenge. So we had to go through all of the steps. The first thing we did, yield on the 10-year got down to like 50 or 60 basis points pretty early in that process. Look, there's no juice left in that trade. Give me all of that. I'm completely unwinding that LIBOR floor strategy. Here's $450 million. Okay, that's good profits. Now equity's gone below our 70% attachment point on our put spreads. What's the point of keeping those around? Let's monetize everything.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Yeah, so I joined in October of 11. So I miss the worst of the euro crisis that was going on back then. 2015 was not a great year. So in terms of total return and alpha generation, and Paul was there and Delta was there, all the hard work of the Delta employees and the thoughtful corporate capital allocation process, Delta did make it whole. And then 2018 was difficult. The fourth quarter was difficult. And we still had a little bit of smart beta, which did not work. It was great. It was phenomenal for a long time. And then it wasn't. But it wasn't really a challenge. All of the risk management systems that we had in place worked fine. So it never really got that uncomfortable. 2020 is a different story.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “Somewhere along the way you've hit bumps in the roads, you could think of 2011 was a trickier year for some of the hedge fund strategies, certainly in the early time period during COVID, March 2020. What happened in those interim periods when things probably weren't working along the smooth trajectory of generating returns?”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “It's all related to how much cash are you going to put behind the notional value of your portfolio? What is your derivative overlay look like? What is your net cash position look like? How much of a liquidity waterfall do you have? At some point you start cutting muscle as you go through that. That's really it. I mean, you've got investment risk and the liquidity risk and the liquidity risk really is what's your hedge portfolio look like and where are you going to go for cash if you can't get it from Delta and you've exhausted everything else, you've got to start looking at your risk parity portfolio, your inflation hedging portfolio, at your emerging manager portfolio. You've got to start to look at where you're going to draw some of this.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

29. “Program in understanding this pledge of Delta. They've got to make the mandatory, but we're going to be there to augment if you don't hit the 9%. I mean, that was really risk management, keeping the plan alive in as many scenarios as we possibly could.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

30. “Changed in the early days, it was don't be a source of a second bankruptcy for Delta. It was that tight, tight, tight integration. How do we try to hit the return targets without really putting Delta in a position that they can't come back from economically? I think our hedge portfolio got up to be as much as 8% of plan assets in those days. It was more of an asset only consideration back then. I was in it for sharp. As funded status started to increase, but that's when we started to think, what's our gap funded status volatility and stuff like that? But in those early days through 2017, it was tight integration with Delta. We need to keep this plan alive. We want to avoid a second bankruptcy. We want to avoid terminating the plans and having to work with the government and work with PBGC. That is what risk was. So how do we try to get as much return as we can? And it was that hedging.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

31. “And they got it. There's not a lot of people that are like, I understand. Even that first concept, I want to walk on the capital market line, not on the efficient frontier. We need to figure out a way to make that happen. You can try to help me do that, or you can be a believer. And you can say, John, you're wrong on this or you're wrong on that. You think about this. So we've always had quite a few consultants. I need other people to argue with me. I need other people to say you're wrong. Did you think about this? This is your weakest assumption. Your scenario analysis is wrong here. How do you do this? So trying to align external resources to help augment what we do on the inside.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

32. “My team is amazing. There's only six of us. I've got my deputy CIO Amanda Kogar, my chief operating officer, Dimitri Vorankov, and my director of investments, Nick Aleff. The four of us have been together on this journey for over the past ten years. We've been joined a little bit more recently by Mark Fong Wu and by Madison Woolley. We knew that we needed help from the outset. We're very engaged with hedge funds. We're very engaged with privates. But we've got consultants in both of those places because my team is not going to be able to monitor the entire universe, either on the hedge fund side or the private side. So we need help there. Two more names that were pretty instrumental as we went through this process is Jeff Scott and Omer Tureen. So Jeff spent some time at Dow and he was the CIO out at Alaska Permanent once upon a time. He worked in Microsoft's Treasury Department as well. Omer worked with Jeff in Microsoft's Treasury Department.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

33. “What do we do in that case? That's the thought process of that other 20%. There's always been risk parity in there. I'm going through my liquidity waterfall. If equity is really, really tank, where am I going for money? I've got my prime. I've got my guys. I've got my enhanced cash. I've got my hedge portfolio. This other stuff, that's the next place I'm going because I've got those two alpha engines. I've got privates and I got portable alpha and I don't want to touch those.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

34. “Of it, but you start to staple all of that stuff together, and there's 4%, 6% of all of my capital is invested in those strategies. When something happens, and by the way, in March of 2020, something did happen, option profitability, that's going to be the first thing I go. But then is there profitability in long vault? Give me that. Is there profitability in managed futures? Give me that. And then one of the next places you might go is I'm going to hollow out those exposures altogether, give me my capital back as well. And then as we're thinking about it, we did all of the scenario analysis. What is a bad environment for Delta? When might Delta not be able to stand up to that pledge that they made in those early days, which is we're going to pay the 5% mandatory? And if you don't hit a 9% expected return, we're going to stand up and make it like you did make a 9% return. When might Delta not be able to honor that?”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

35. “But a lot of convexity that you got for getting it and maybe not quite as much bleed as you would see in a 90-75 put spread. Third component was long vault. Yes, this is wishing for a little bit of magic here. Can we work with volatility oriented managers to say we don't want this part to bleed that much? I don't want to lose more than 10%, more than 15%, more than 20%. And I understand that's going to impact the convexity that I'm able to squeeze out of the positions, but it's also a funded position. Those first two, those are premium spend strategies. With long volatility, you've got capital in there. We also had funded managed futures positions. This is approximate hedging. And then we actually had some more liquid, less expensive macro managers as well. If something happens, maybe they'll be on the right side of it. Maybe they'll be on the wrong side.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

36. “I'll start with the hedging at the beginning because that is vital to the story. And this is surreal because I'm sitting there in 2013 sitting with Paul Jacobson and Ed Bastion in the conference room outside of Ed's office. So again, Ed is still the president at the time and we are building hedging programs together. That gives you an idea of the extent of enterprise risk that continued to come from the pension funds in those days. So we had four or five components to our hedging program. We did some programmatic high certainty stuff. So we did 90, 75 put spreads depended on what SKU was a little bit. We would tweak some of that. We would tweak the attachment points a little bit. We had call it a LIBOR floor kind of strategy where we were long call options on the two-year part of the LIBOR curve. It was a make money strategy like in an upward sloping yield curve. You can actually make money on that. But then if rates really collapse, you can make three times four times five times your money.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

37. “Buy out dominated, especially in those early days, was very equity centric exposure. So I've got some private diversifiers. So it's pretty much lower middle market, core middle market, upper middle market, and some of the big ones. So it was buyout centric, US centric.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

38. “To be very cautious with Venture because it is the longest duration asset class, but we targeted given that 5 to 10% range of the private equity exposure is about what we wanted venture capital to be. We actually probably do a little bit more venture now even than we did back then. And venture was mostly primary. So let's try to get into the best names. And obviously that was phenomenal in 2021. I mean, private equity was pretty phenomenal in 2021 as well. I think we probably paid the price a little bit since then.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

39. “Portfolios, and it's actually still where we are today. So it's been a decade, and that structure served us well, but it's probably time to rethink some of those allocations.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

40. “Private portfolio was very mature in 1999. By time you get to 2014, it had become immature. And this is all professional credibility because I'm telling people leverage, derivatives, alpha, 9%, 10%, we can do this. This is going to work. The last thing I want to do is show a bunch of negative time-weighted returns is we're firing up this private market portfolio. So private portfolio took a while to build into this. 15% private equity, nine percent private credit, six percent private real assets. Within that, for the private equity and the private real assets, 50% primaries, 30% secondaries, 20% co-invests. I want to put some wins on the board. I do not want J-Curve. J-Curve could derail my entire story. That was the blueprint for the price.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

41. “Something I've got better at through time is really drilling in on the people side. We're looking for a profile, beta point one or lower. There's some great 40 beta managers out there. If you're paying 20% incentive on 40 beta, you got to be damn good at manager selection. Some people can do it. I can't. That eliminates a lot of the universe. And we've known a lot of the universe for decades. So a lot of the long established players and then a lot of the spinouts of the long established players. And then you're just looking for interesting stories as well. Who's out there that might be doing something a little bit different? Maybe something that you really haven't heard before. I still have a convert arb manager that's been phenomenal. I don't know how they've been so phenomenal for so long, but we still have some.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

42. “So, within those strategy categories that fit your risk parameters and that goal for diversification to prevent the unknown unknowns, how do you go about deciding who, in your words, is the best of the best?”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

43. “Around 40 funds at any time. Maybe we'll have five co invests or something along those lines. That might sound like a lot to some people. I'm almost 25 years into portable alpha. I've seen a lot of the stuff that can go wrong. And there's unknown unknowns out there. I don't know what the next degrossing event's going to be, but I know that it exists. I can tell you what the historic correlation between my managers are, but I can also tell you there's going to be environments where they look more correlated than I expect them to look. The only way to get around some of that skew risk, some of that kurtosis risk is to just increase the number of managers that you work with. Some people don't buy into that. I most definitely do.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

44. “Of the multi strats. We do have equity long short specialists. I know that's a bit of a dying industry, but I do think it's possible to develop deep expertise in pretty narrow parts of the market. I know that's what the pod shops suck up, but there's still some folks out there fighting it on their own. And then we've got quite a few macro traders in there as well. In the early days, they're like, no credit. No credit. Credit's got too much skew. It's got too much kurtosis. It was too bad in 08. Nowadays we actually do let some credit in there, but the derivative overlay looks a lot different. And then we try not to really constrain it that much. The idea here is that unconstrained, talented hedge fund managers have a better chance of beating a risk-free rate than highly constrained long-only managers have the probability of beating a benchmark. You are investing in hedge funds because you want the best of the best to beat your barrowing costs by looking for market seams all over the globe.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

45. “This is portable alpha. We need to be super tight on our beta. I've been doing portable alpha with Matt since 2002, 2003. I've seen a bunch of stuff that can happen. And I understand you can calculate all these parameters and all these metrics, but it's not 100% when you're talking about forward-looking projections. But we wanted to be really tight on the portfolio. If we think about what that hedge fund portfolio looks like, we really kind of wanted to target a beta of around 0.1. So pot shops are well represented in our portfolio, and they have been since the early days. They make me a little bit nervous in terms of derivatives, but I think in terms of the risk management processes that they've got, their ability to attract talent. It's been a great investment for us. Relative value and fixed income relative value are points of particular focus for us. We've got a pretty substantial allocation.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

46. “Golden rule. And eventually we relaxed it a little bit and put ranges around it. That's how some of these numbers came to be. And then even within cash, government money market fund, two of the most dangerous words out there, we did do some enhanced cash. I think we were pretty smart about enhanced cash. The rules there are it needs to be liquid. I can't take more than 25 bit, 50-bit haircut on it. So Treasury Cash and Carry, It's been a good strategy. To this day, it's a better strategy than it probably should be. It probably pays you more than you should. Japanese cross-currency basis, precious metal cash and carry, more recently, and we wouldn't have done this in the early days, but there's some interesting short-term dealer funding trades that are out there. So that's really the cash portfolio.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

47. “Of course, I said we're equity centric and something's bad for equities. It's probably bad for delta 2, and we know that going in. We've got the hedging portfolio. That's a possibility. And then we've got our hedge funds. That's another place that we can draw capital from. And so we figured that how much cash do you want to put behind your notional program? And we created our own language around all this. And Amanda Kogar particularly on my team was great about clearness of communication, both in a concise written sense, dashboards and these kind of things, as well as one-on-one meetings with my investment committee. But we figured if you're going to have an equity-centric overlay, you need to set aside 35 to 40 percent of the notional value in cash. So that's what we did in those early days. We created something that we call the golden rule. So we've got a notional value of our beta overlay. Every notional dollar needs to be backed by either cash or hedge funds.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

48. “Truthfully, the cache was a little bit higher back in those days, and the alpha projection was a little bit lower back in those days. The way we thought about it is what is our beta overlay look like? Let's look at that beta overlay in isolation. We've got pretty substantial hedge fund portfolio. We really paid a lot of attention to our 90-day var. So what is a two-standard deviation 90-day var look like? What is a three-standard deviation 90-day var look like? What's two standard deviation look like if all correlations go to one? I want to see three months of benefit payments. Benefit payments are not immaterial. So we pay out over $100 million a month. That's a high, high, high spending rate. You're thinking about that 90 day point because most of my hedge funds are something like quarterly 90. So if I can withstand 90 days, hopefully we'll have a couple of outs. We're going to have delta. That's a possible out.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

49. “All my dollars now, so that's going to add up to 100% of dollars, but there's that one thing, that third force, that portfolio construction force. How do we go out on that capital market line? How do we prudently use leverage to increase the expected return of the portfolio to get us to that 10% gross that we need to get to? So let's borrow 50% of plant assets using derivatives. Let's put a 50% beta overlay on top of the portfolio that I've walked. At the beginning, we needed pretty substantial beta returns in these early days. It was significantly equity-centric. We go back to July of 2014, and that's the portfolio, 30% privates, 40% hedge funds, 10% cash. Borrow 50%. You've got this other 20% funded stuff in case you've got a liquidity event if you really need it. That's what the portfolio looked like back in 2014.”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source

50. “Our spending rate. So that's about as illiquid as I thought we could be, then portable alpha, not in second force. Let's go 40% market neutral hedge funds. If my 40% market neutral hedge funds can outperform my borrowing cost by 3%, that's another $120 basis points. So if I can get 120 basis points out of the privates, if I can get 120 basis points out of the hedge funds, that's going to give me 240 basis points. So that's 30% privates. That's 40% hedge funds. I've got 10% cash. The other 20% of our capital has gone to a variety of things through time. There's always been an allocation to pretty spicy risk parity in there. We also have an emerging manager program that's been in place for quite some time. Hedging. We allocate some assets for hedging. If you think about it, I've spent”

    2024-11-18 · Capital Allocators · Jon Glidden - Delta Airlines Pension Fund Turnaround (EP.417) · IDENTIFIED FROM THE TRANSCRIPT · source