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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. “Love to give you an elegant top-down story, but I'm going to give you a bottom up story instead. I think probably with a public equity-oriented portfolio, if markets are accommodating, I think maybe we can get eight. If markets aren't accommodating, we needed hedging. So I need two points of alpha. I guess alpha's all hope to some degree, but we need a real, real chance of two points of alpha per year. And that's not an easy thing to do. I mean, it's a pretty high target. What does the solution look like? I need two points alpha. How am I going to get two points of alpha? Well, I'm going to go 30% privates. So I figure if we can go 30% privates, we can outperform publics by four points on that. That's 120 basis points at the overall plan level. That's part of it. In my mind, we saw this huge spending rate. If Delta does poorly, we've got a real challenge because...”

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

2. “A little bit differently, it actually could be a good fit. Paul was like, what do you think about the 9%? I'm like, I think we can do it. And I don't think anyone had said that to him before. So he's like, well, come on. Let's see. I don't really understand everything you're talking about, but walk me through it and let's see if we can bring this to life.”

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

3. “Until I joined in 2011, and they wanted a simple, low cost solution. That's what Delta wanted. That's what Delta got. They ran into the financial crisis, which they didn't see coming. A lot of people didn't see coming. If your plans down 26 and maybe the spending rate was only 12% back then, 14% back then, that's a massive loss of assets. And even though Delta had this legislative 17-year window called Airline Relief to make things right, that's when the mandatory contributions really started to become material at the enterprise level for Delta. And that's when Delta is like, you know what, the simple solution's not going to work for us anymore. We need somebody internally to really sweat this stuff. And they had a pretty high expected return target as well, which was 9%. This is part of the reason why I said no the first time around. But I was like, some of these thoughts that I've got in my head about how to do things.”

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

4. “As collaborative as they are. Adult was 115% funded in 1999. Then there was the bursting of the tech bubble. That was tough for Delta. Then there was 9-11, very difficult, obviously for New York City, difficult for Delta. The airline industry as well. That put Delta on a course towards bankruptcy. So comp wasn't great. Job security wasn't great. Delta ends up going into bankruptcy. The team goes from like 25 to 7. They come out of bankruptcy in 07. What do we want to do? Rebuild a pension team, try something else. Delta at that time in 07 had a 17-year window from the government to try to make everything right. So Delta at that time was like, you know what? Our needs aren't that great. We need a simple low-cost solution, 40 with a little bit of alpha probably gets us there. That was the thought process in 07. And you could say it was a pretty rational thought process. They completely outsourced the plans from 2000.”

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

5. “pursue alpha, so I used all the bad words I could think about. We need to use leverage. We need to use derivatives. We need to run a high expense ratio implementation. What do you think? Some backstory on this is Delta had some really unique needs. The pension today is $16 billion. Back in those days, the pension was more like $7 billion and it was $14 billion underfunded on a company with a market cap of seven billion dollars. Funded status was hovering from the upper thirties low forties so it was the worst funded major pension plan in America. Delta used to have a large, proud, very good internal pension management team. They were early adopters of venture capital, early adopters of private equity. They did club deals. The corporate pension world is a little bit unusual. The CIOs are at.”

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

6. “Having fun. Squeezing banks together is not a lot of fun. So I called back the recruitment. Is that Delta thing still going on? And thankfully it was. Probably four to six months had passed. I talked to the recruiter. That goes pretty well. The truest hero in the story that we're about to talk about is Paul Jacobson. He was the treasurer of Delta at the time. He went on to be the CFO of Delta. He's now the CFO at General Motors. So I sit down just to have drinks with Paul. And it's a job I don't necessarily want, which is not a bad way to interview probably. And I've got these four forces on my mind. I'm sitting down with Paul and I'm like, Paul, I think we need to do three things. I think we need to strive for a more balanced portfolio. I think we achieve that more balanced portfolio by leveraging a portfolio and using derivatives. And I think we need to aggressive.”

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

7. “I joined Wilmington Trust. I left Emory in 07. Matt had gone to go be the chief investment officer for Vanderbilt University. I ran a manager selection. I wanted decision making authority. I was at Wilmington Trust from 2007 to 2011. In the first call, and I got really lucky here, Ted, because on that first call, they're like, the job at Delta's open. What do you think? And I'm like, it's an airline. They're just coming out of bankruptcy. That sounds awful. I want to go back to the ENF world. That sounds terrible. Thanks for calling. I appreciate you thinking about me. Keep my name on file, but I'm not interested. No, thank you. Wilmington Trust ended up getting taken under several years after the end of the financial crisis by M&T Bank out of Baltimore. So I worked in Atlanta, Wilmington Trust in Delaware. M&T Bank is in Baltimore. They were like, congratulations, John. We want you to run manager selection for the combined entity. I've got a little family at home. My wife is amazing. We had two little kids at home. And I was working on Baltimore two days a week and trying to hold everything together. And I was like, I'm just not.”

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

8. “Governance force as well. How different can you look from your peers? How much leverage can you really use? How can you tell this story to keep people on side and not give up on the strategy when times get tough? And then Ted, the recruiter calls talking about the delta position.”

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

9. “So I start getting all these ideas in my mind. I grew up in the physical sciences from an educational perspective, but I work in the dismal science. I know that. For years, I'm thinking about these four forces. Is there a better way out there? So you've got a private markets force, this ability to buy undermanaged assets potentially at a discount. Of course, there's been a tremendous tailwind for those strategies with a wave of money coming in. Sometimes financial engineering's a plus, sometimes it'll be a minus, but you've got this private market force. You've got this portable alpha force, the ability to work with unconstrained market neutral managers to beat a borrowing cost. Then you've got the portfolio construction force. It's better to be on the capital market line than it is to be on the efficient frontier. That's how you can unlock some of that power through the use of derivatives and leverage. Then there's a”

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

10. “Of portable alpha. I knew that's what Stocks Plus was. It was a great time for me. Every time I journaled portfolio management came in, I could read it from cover to cover. Emory, even back in those days with $6 billion. We sold three billion dollars worth of Coca-Cola stock in the pretty early days. And since I was on the public side with Matt, it was like, hey, here's a billion dollars. Go build a hedge fund portfolio. We worked with two fund of funds and Ted, maybe you remember this. We gave $50 million to one fund of fund, $50 million to another fund of fund, and we invested the other $900 million directly. We diligence protege to potentially participate in that a long time ago. It worked. We beat benchmarks by 200 basis points on this portable alpha portfolio we had. It also allowed the private team with Mary and with Julie Vollenweider and Elena Kaprevitz to write bigger checks and write more checks on the private sector.”

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

11. “Gave me an opportunity for a second internship. So Emory was heavily concentrated in Coca-Cola stock, and they were getting ready to diversify the portfolio. So I was able to get an internship with Emory with the endowment before I went to University of Chicago. I ended up going back to Emory full-time after I finished at Chicago. You don't end up doing a podcast with you, Ted, unless you've been impacted by a lot of really amazing people. And this is one of the first ones, the guy named Matt Wright. He was hired by Mary Cahill. Mary and Matt were part of the Myra Drucker tree at the Xerox pension once upon a time. Mary came down to be the chief investment officer at Emory. Matt was a quant at B of After Xerox and Mary brought him in to run public markets, and he's a great investor and he's even better person. So he's quant. He's the one who introduced me to the idea.”

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

12. “86th Street. My job for that summer was to go around the northeast, to go throughout the Midwest, and go from Atria to Atria and interview management and take pictures and look at financials and build models, and it was really interesting. That's really where I started to get private markets a little bit, the ability to buy undermanaged assets, bring in thoughtful ownership and management and squeeze some real returns out of it. 2001 is when I graduated from Emory. It was a pretty lousy time to graduate from business school. I wasn't super thrilled about the job offers I had at the time. So I extended school a year. I went to University of Chicago for financial math. I wanted to learn everything I could about derivatives and what better place to go than University of Chicago, hang out around the mark a little bit and find out how that worked. The other thing going back to school did for me.”

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

13. “Wouldn't stuck in my mind. Something else that stuck in my mind was a case study we did on Pimco Stocks Plus. And this is the idea that it's really hard to beat equity indices by picking stocks in a constrained manner. But what PIMCO did, they pair an S&P 500 derivative on top of a bond portfolio. So then they get some alpha, some duration, some credit, and they beat the index that way, and they did it. Now, how did they do it? They used derivatives, they used leverage. There's that word again, these concepts again. Another thing from my time at Emory, I did an internship with Lazard with their private real estate group. So now we moved into 2000 at this point. The bubble just burst. They owned a lot of assisted living facilities. And assisted living facilities were tremendously out of favor at that time because they weren't growth. They weren't new economy. They were boring style. Actually lived in an atria up on West.”

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

14. “Arbitrage, like very obviously. Alpha rack, just a real arbitrage junkie. I read as much as I could back in those days. I ran probably the world's smallest and only closed-end fund merger arbitrage strategy when I was going to school. There are a couple of things that really stuck with me from my time at Emory. The first one, it's like day one in a portfolio management class. You've got an efficient frontier. You got a risk-free rate and you got your capital market line. Well, the capital market line keeps going up and the efficient frontier curves. I'm like, well, it looks like you should stay on that capital market line. That looks like a good deal. Well, how do you do that? Well, if you can borrow at the risk-free rate, you can just lever your tangent portfolio. You can make more money per unit of risk. Well, can you do that? Can you borrow at the risk-free rate? Some people can. You can do it through the use of derivatives. And it's a new concept for me.”

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

15. “My brilliant strategy at the time was about 50% dogs of the Dow and 50% growth stocks. This is 1994 to 1999. This was brilliant except for the Dogs of the Dow piece. The growth stocks, that was brilliant. I love the Navy. I really got hooked on investing while I was in the Navy. I knew that I wanted to retool. I wanted to learn about investing. I wanted to learn everything there was and learn about the industry and what jobs were out there. So I went to Emory University as a full-time MBA student. I got to tell, if you want to find somebody happy at a full-time MBA program, find the ex-military guys. It was fantastic. It was a crazy time. I started in 1999. It was the peak craziness of the tech bubble. And you had stuff like palm pilots. That was all the rage among like business school class when three comms said that they were going to spin out Palm. There was this enormous gap. You could do merger.”

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

16. “Alternative sources of energy. Now, of course, I knew exactly what I was going to do when I left Georgia Tech. I was going to be a naval officer. So I took a lot of very challenging mechanical engineering classes. They make you take one business class to graduate. The thrust of the business class that I took was time value of money. I'd never really thought about compounding at all. And the math is really simple, but it really opened my eyes. That was my senior year of college. And then, of course, I go straight in the Navy. I was a surface warfare officer. On my first ship, I was the Tomahawk Missile Officer on a brand new destroyer. And this is crazy. I qualified what they call officer of the deck on my 23rd birthday, which meant that I would be operationally in charge of a billion dollar warship that had nuclear capable missile.”

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

17. “Sean, great to be here with you. Hey, Ted, it's a real honor to be here. Why don't you take me back to your path that ultimately led to this CETA Delta? I grew up in a place called Newport News, Virginia. I grew up in a Navy family. My dad was a submariner. My mom really ran the house. My parents are the first heroes in this story. They didn't make a ton of money, but they always saved. I can recall that for a couple of birthdays, I would get stock certificates for utilities. He was a nuclear submariner, so Detroit Edison, Central Illinois Public Service. The stock certificates, they looked awesome. The dividends were nice, but didn't really pay that much attention to it at the time. That's where things started when it was time for me to go to college. I was pretty good at math. I was pretty good at science. I ended up taking a Navy ROTC scholarship to go to school and to help out around the house as well. So I was a mechanical engineer at Georgia Tech, thermal systems really thought that I wanted to do all.”

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

18. “Instructors are putting the finishing touches on their presentations and the content looks amazing. We're excited to share insights about the playing field and success in IRNVD roles from allocators, managers, brand experts, conference providers, and chief investment officers. Last chance to dance, and we hope to see you in New York City on December 3rd and 4th. Hop on our website at capitalallocators.com slash university this week to register. Thanks for spreading the word about capital allocators university for investor relations and business development professionals. Enjoy my conversation with John Glynn.”

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

19. “And the implementation of each. Before we get going, we're in the home stretch leading into capital allocators university for investor relations and business development professionals. It's crunch time. We're almost sold out and registration closes next Monday, November 25th.”

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

20. “My guest on today's show is John Gliddon, the Chief Investment Officer of Delta Airlines, where he oversees the company's $16 billion pension fund. John joined Delta in 2011 when the plan had $7.5 billion in assets, a $13 billion underfunded liability, and the highest actuarial expected rate of return at 9% of any company in the S&P 500. Despite a funded status that threatened the solvency of the company 13 years ago, investment performance, combined with corporate contributions that offset planned payouts, have improved Delta's funding status from 42% to 102% today, creating the largest corporate pension turnaround in history. Our conversation discusses John's independent thinking and innovative approach that led to this incredible feat. We start with his naval and investment background and then cover the four forces that drive his investment philosophy, portable alpha, private equity, portfolio construction, and governance.”

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

21. “Hello, I'm Ted Sides, and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access premium content at capital allocators.com.”

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

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

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

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

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