YouSaid · the spoken record

Larry Kochard

lines on the record: 89
first: 2017-06-12
most recent: 2017-06-12
sittings or episodes: 1
sources: podcast

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“For the long run. So that's an issue. And how do they react? I saw many managers, and I'm sure you saw the same in the 08, 09 downturn. You saw some managers that were down 08 big. They behaviorally were fine. I'm sure they weren't perfectly fine, but they then were Up bigger the next year such that they recouped all the losses in what went well beyond that. And they had enough of a runway, meaning they had enough reputational capital that investors gave them enough of a break to do that. Then I saw other investors where they're down forty percent and they're just scarred. They're done. They can't get back up on the horse after they've been thrown. And you don't always see that coming, but that's a problem. So that's something you have to watch out for.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Never work back So I'll talk about what I'd like us to do and what we should be doing in theory and then what practice is. In theory, the performance, especially when you're investing in concentrated managers, you have to know going in there's going to be a lot of volatility, which again gets very much diversified out when we combine them with other managers, with other investments. So the volatility in and of itself is not at the individual manager level is not a problem. With that said, what could be a problem is if the manager themselves, the volatility that they're experiencing, does that cause their business to suffer? And so it's an existential threat. That's the flexibility. Yeah. So it could variably right that if you stayed long enough with that manager that you'd be proven correct, but they may not be in it.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“What happens over time, particularly write a let's just think of a long only manager, maybe private equity, a concentrated manager whose relatively low turnover somewhere along the way is likely to have a rough batch of performance. And sometimes that's just expectations and it's a trough and you want to stay your ground. And other times you look back and say, oh yeah, they were concentrated, but they were just wrong on too many names and never worked back. How do you think through when to hold them and when to fold them?”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Before we go on to the third one. We've already talked about how you've sourced in some ways and really leveraging the alumni community and the investment committee. I'm always curious, so the notion, this combination of long-term investing and partnering with extraordinary managers is great when you buy them. But when we're applying Kenny Rogers to this, you got to know when to hold them and no one to fold them. That's a good question.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Partnering with great extraordinary managers, which I would say at our size of right now $8.5 billion were to sweet spot. And I don't know exactly where that sweet spot is, but it's probably four or five billion up to $15 to $20 billion. So we're kind of right in the middle, a sweet spot where it's small enough I can do interesting things, but big enough that I can employ an extremely strong team.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because you're constantly buffeted with different views of the market of whether the Fed is dovish or hawkish or taxes are going to go up or down or Europe is falling apart or now it's doing well or what's going on China. And every publication, whether it's CNBC, Bloomberg, Fox News, business channel, people are just being buffeted by different macro views. People are able to express those views through ETFs very easily. And people have become much more short-term in their focus. And so trying to maintain the discipline of being a long-term investor and knowing that a lot of our edge is going to be getting to our second point, which is partnering with managers that we think really are value added over a long period of time. To be very bottom”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the first one is the fact that we're a long-term investor. Everyone says they're a long-term investor. And getting back to some of the things I talked about before is, can you build a decision-making framework, a governance framework, and a team that will enable you to do that knowing there are so many impediments, whether they're behavioral biases, whether they're organizational constraints to cause you to not behave that way, whether they're market constraints. I would argue that the world has become much more short-term focused, has become much more macro focused, and one of the dirty little secrets of the rise of ETFs, one of the values is you can express in a lower cost way various views the market, but that's also one of the downsides.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, your seat today is at the University of Virginia, UVIMCO, and one of the things, usually when we turn to how someone's thinking about allocating capital, I love to ask people, what do you believe about investing that governs how you think about asset allocation implementation? And in your case, there are five core principles that you brought that are repeated in your annual letters. And I'd love to ask you questions about each one, but why don't we start by just Saying, what are those five core principles?”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's a good question. I'd say three to four years at least. Because even there, there was stability in the board, but you're having turnover. I had in my six and a half years there, I had three chairs, all of whom were fabulous and played the role of chair the right way of being very good at getting comments out of the rest of the board and giving feedback or fabulous. But it takes a while. So you're constantly evolving.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a good way to describe it. Let's make sure that the committee and everyone's on board with each incremental initial decision to build confidence so we can stay for the long term. How long did it take from the day you got there till a day where you felt that the portfolio reflected your views from both an assay allocation perspective and a manager implementation perspective?”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Part of the secret sauce of what we do and what I know my peers do at other universities is that alumni network, which then kind of at a pinnacle is our board because we're constantly looking for members of our alumni that were kind of would be well suited as where they are in their career. Can they give us time to be on our board? And we get a lot of value.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's one of the, I think, underappreciated parts of this position, because a lot of people will say, unlike an investment management firm where you have multiple clients, and the challenge of that is you're constantly having to educate, you have to do the same thing with us. And sort of the people that do well ones that really embrace that as opposed to viewing that as just, you know, it's a waste of time because it's not. I mean, A, you're creating more stability for the organization and the investment process. You can act more as a long-term investor, as opposed to being constantly whipsawed. But B, we learned some of our best ideas from our board slash investment committee. There's a big percentage of things that we've done that have either been sourced or the diligence was assisted by using that board. And that really is.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's probably one of the things that's so underappreciated in your seat of how important it is to communicate to your core client who is not just the university but the important decision makers that comprise an investment committee. At the same time those tend to be term seats. So there's this constant need to educate and re-educate and continue that process over time.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“I love, and we were talking earlier about how you're spending your day today here in New York. And one of the things you said is you like to have one-on-one meetings with the people on your investment committee with great regularity.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Over communicate and when you're going to do a new strategy, a new manager is really lay out the case well. So again, there'd be less likely to just do the wrong thing at the wrong time.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“I really learned at VRS. So then you fast forward to when I was at Georgetown and you've gone from a situation where a fabulous university undersized endowment that is being managed by the investment committee with the help of a consultant and you're moving to an internal investment office of trying to understand how do you manage that that again is consistent with the risk tolerance of the institution, the desire to be better then because I think again managing by a part-time investment committee is a challenge way and there are a lot of pools of capital that are invested that way but then bringing someone on you have to have an understanding that you need to communicate a lot they have to be aware of everything you're doing”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Manager level, you start off small, you do it well, and then you grow it. But understanding how you move things forward in a very public setting and having a qualitative assessment of the risk tolerance that an institution can bear. You can do all sorts of quantitative measures of what an institution should be able to bear, but it's really more that qualitative component, which is how do they react in prior drawdowns? How do they react in prior situations where they underperform not the absolute sense but relative peers, relative benchmark is the board stable? Is the team stable, meaning if there's been a lot of turnover, you're probably going to be more likely to do it was a rational moves and getting out at the bottom. And so having that question.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“And everyone kind of will poo-poo the notion of this being so benchmark focused or peer focused. And I agree in theory if you're managing your own money. But if you're managing someone else's money, you have to at least have an understanding that there's probably some either absolute loss or relative loss that you can't go beyond and really continue to sit in that seat. And so that's something that was, I really understood. So with that said, you also don't want to get Lord into just being a caretaker. The worst thing you can do in an investment world is just saying whatever worked in the past is going to continue to work in the future. You need to constantly be looking for new ideas. And the new ideas could be at the security level. They could be at the strategy level. They could be at the”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“In a relative sense, and when I use risk, I don't mean it in the classics case of absolute loss, loss of capital, but more just how much you're underperforming.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the observations which, again, you get back to whether it's tracking error or it is risk tolerance is this notion of whether it's risk at the entire portfolio or whether it's risk of how much you're deviating from your benchmark or your peers. There are certain points past which you just don't want to go. So if you're just too much of an outlier and all of a sudden it doesn't work, if you're investing in a very public setting and to the extreme is a public pension, you know that this might be the right thing to do and it's going to work out in the long run, but it could very well be that you're not there to experience the long run. And so having, and there's no way to quantify that every institution is very different in terms of their willingness to take risk in an absolute sense.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are when something doesn't go well is just pulling the plug at the wrong time. And at the kind of the one extreme, it is when things don't go well of a sort of at the macro level, 0809, and you had a certain risk tolerance you had thought you were kind of were managing to, but then all of a sudden there's this sort of desire, which could be rational but is probably irrational to just de-risk at the bottom. And there are many smaller versions of that, whether it's, okay, let's invest. So you go back to the early 1990s, a lot of big pools of capital, their first foray into the emerging markets were at the prior peak of emerging markets in the early 90s. And everyone got in and then they underwhelm for a period of time. And a lot of people just pulled the plug at the wrong time.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“There was. Yeah. And so before I get to that, let's go back to VRS. One of the things I learned more than anything at VRS was being exposed, how large pools of capital were being managed, but also saw across sort of pure universe some of the bigger mistakes that are made by large pools of capital, large investors.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a super interesting conversation in this world where people are trying to reduce fees and do more themselves. The classic dichotomy from the past was Yale and Harvard, where when Jack Myer was at Harvard, it was mostly an internal effort. And when many years later he decided to leave, Harvard was left with basically a pile of cash to put to work, whereas Yale's model likely sustains itself past Dave Swenson for many years because it's mostly very well selected external managers. It's a really fun discussion. I really want to circle back to a higher level of how you're thinking about things. Let's touch a little bit on UFVRS and took over CIO at Georgetown. Yes. And that was really a built, that”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“What do you do with that portfolio? And then what do you do with that portfolio? And you would have to certainly have the discipline to shut it down. But I've seen too many instances where that doesn't happen. And so trying to figure out what is our sustainable edge, I don't think that's it right now. We constantly focus on it, is that in a lower return world, fees take a disproportionately larger percentage of the total return and anything that can be done to knock those down a bit is going right to our bottom line. So trying to figure out ways that we can reduce fees without sacrificing quality is a conundrum that we constantly try to address. We do a little bit by co-investing on the private side, but it's not that scalable either.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the team, and it doesn't become a distraction to the team. It doesn't become the situation where they are viewed as the rock star and then the other players are not the rock star. So there's a lot of ancillary issues that need to be addressed because my view is what makes us effective is that we work well as a team and we are a little more generalist than some of our other competitors, they all think as capital allocators what is the highest and best use of capital as opposed to filling up a bucket and anything that would negatively impact that current collaborative setting would be a negative. And then can you keep that person on the team? Is there something that would be versus someone that comes in, views as an opportunity to get seated, to develop a track record, and then uses that. Go out and raise a fund externally”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Case with Harvard. That's not going to be necessarily sustainable. And then we just have to figure out if we were to, because I think we might be able to just based on what we learned from our managers, figure out a way of putting”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Plus billion dollars pool of capital. So then the question would be versus, again, the large Canadian funds, GIC, sovereign wealth funds, where they just have hundreds of billions of dollars to invest and they have to figure out ways they can just eke out and earn anything extra 50, 100 basis points, and you have to be a little more passive in the way you can scale that. For us then, if we were to, again, our ideal manager is one that is concentrated on the public side. They generally are small, to try to find someone that can compete with that, we have to make sure that it's sustainable, meaning if they don't have any relationship with the UVA, we're going to have to pay them a market wage. I think that becomes potentially the distraction within the UVA community.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, there's no, this is a tough one. I mean, this is something that we've been debating internally. Is there a way that we can do internal management? And we've gone in many circles. And ultimately, what I try to always come back to is, you know, what is our edge? What is not only our edge up front, but what is a sustainable edge? In the instance of VRS, and you certainly see this a lot with some of the large public Canadian funds and other funds that have very big pools of capital to deploy, they can't be as active, meaning taking the type of tracking error that we take, hiring very concentrated managers that are generally very capacity constrained, they're not going to be able to access them in as much of a meaningful way as we can. So A, those strategies don't compete the strategies of VRS employees, may not compete as effectively in A.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“And today more and more we hear about others family offices or endowments, people thinking of investing directly, might be co-invests in private equity or different direct investments in part to defray the layer of fees. What's different as an organization like VRS, we talk about it with University of Virginia today. Of having a quantitative team internal and maybe a fundamental internal and what works and what doesn't.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of factors that a lot of quantitative managers look at, but being able to employ that in a extremely low cost manner, but knowing that probably the best way to implement that is in a very low tracking error approach. So tracking error on the order of, say, 100, 200 basis points, because knowing that if you tried to have too big a tracking error, if you really underperform for a period of time, you'd have to have the hard decision, constant difficult decision, what do we do with this? And how does it compete with the external managers? So it was intentionally done at a relatively low tracking error, and then kind of pushing the envelope in terms of adding strategies, whether it's different cap sizes, different styles, different geographies.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, one is VRS, at that point it was very much of an experiment of whether they could do some internal management. And at that point, it was only about $100 million that was being managed internally. And very talented investor named JT Greer started this as a process and trying to learn off of a number of the quantitative managers that were employed by them at the time. And so it was built out and then seeing some of the challenges of how do you kind of maintain what you could do as an institution like that and have any kind of edge of an investing and as it pertained to some of the quantitative strategies because we actually took in a lot of those which are still done today in terms of looking at value, looking at earnings quality, looking at a number.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“That. And part of it was kind of a return to the quote unquote real world. But B, is I've really enjoyed the experience I had on the investment committee and it still allowed me to be in the classroom. So I still taught two classes One class per semester, fixed income one semester, and investments the other semester. So it allowed me to still be in the classroom, maintain the relationship with UVA, but then go on to be, as you say, an allocator.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“the long time serving CIO at the University of Richmond, who then went on to found private advisors, was on. It was a very good investment committee. So I was very drawn in to that as a way of investing and allocating and the issues that arise with that, whether it's a manager selection, where do you focus your efforts in terms of how you allocate across the managers, across the different strategies? At a board retreat, an annual board retreat, Nancy Everett had just lost her head of public equity to go to an investment firm, and she asked me if I would ever consider taking that position and then overseeing a couple of people. One was they had some internal management that was quantitative oriented. They had external managers, both international U.S. And I did, I agree to do that.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is somewhat serendipitous is so I'm a professor at UVA teaching finance and I was appointed to the state pension the Virginia Retirement Systems Investment Committee in early 1998 and it really opened up a whole window into how large pools of institutional capital are invested large asset owners at the time VRS was probably thirty billion ish in size but just being involved with that which was a very well run institution woman named Nancy Everett was the CIO just a wonderful person wonderful investor wonderful leader was very involved with that Joe Grills a retired CIO of the IBM pension was involved with that”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“I remember I was on the capital markets desk Stock market crash of eighty seven october eighty seventy seven. We're on the debt side Everything just stopped. There was no new issuance. Everyone was following what was going on the equity markets. One of the things that was really made a big impact”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“First job out of NBA. Was at DuPont and their corporate finance group. Kind of the range of experiences I had between working for a large multinational corporation like DuPont being exposed to how their capital allocation decisions were being made, then worked at Fannie Mae and the corporate finance at Fannie Mae, but exposed a large part of the fixed income market. And then did debt capital markets at Goldman Sachs? Had very different experiences had a large influence in many respects in terms of how value is created and destroyed at large corporations. A lot of people don't have the benefit of having done that.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Remember talking about that, but always thought I was going to be an engineer, more of a math science person, but majored in economics, got an MBA, did corporate finance.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“As BA in economics from William Mary, an MBA from the University of Rochester, and an MA and PhD in economics from the University of Virginia. Our conversation covers tricky issues involving the internal management of portfolios alongside external manager allocations, UVIMCO's five core principles, and the consideration of absolute and relative metrics in asset allocation and performance. Our deep dive on UVIMCO's core principles and asset allocation provides an inside look at the subtleties required to maintain seemingly simple tenants. I'm quite sure everyone that touches the University of Virginia will come away thrilled that Larry is the steward of their capital. I hope you enjoy the show, and if you do, please tell a friend, just one friend, and help spread the word. Please enjoy my conversation with Larry Koshar. Lar”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's show is Larry Koshard, the CEO and Chief Investment Officer of the University of Virginia's Investment Management Company, also known as UVIMCO. In this role, Larry provides leadership, connectivity to the university, and responsibility for the university's eight and a half billion dollar long-term investment pool. Before joining UVIMCO in 2011, he served as Georgetown University's first in-house chief investment officer. Prior to that, he was managing director of equity and hedge fund investments for the Virginia Retirement System. From 1997 to 2004, Larry was an adjunct and later full-time professor at Virginia's McIntyre School of Commerce. He spent his formative professional years in debt capital markets at Goldman Sachs and in corporate finance at Fannie Mae and DuPont.”
2017-06-12 · Capital Allocators · Larry Kochard – Endowment Professor (Capital Allocators, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source