YouSaid · the spoken record

Letitia Johnson

lines on the record: 77
first: 2024-04-29
most recent: 2024-04-29
sittings or episodes: 1
sources: podcast

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“Competition for capital across the entire portfolio, more flexible framework is to lean into relationships. That's the door between these two realms. And it's been an amazing learning and something that we're leaning heavily into at the endowment.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“And when I joined the Amherst team, I could see this and the committee itself was extremely supportive of an approach that leaned into that clear edge that Amherst had in its portfolio. I always talk about the Amherst portfolio as being a gift. It was an incredible gift. It's an amazing portfolio of relationships. And when you have that history of success, you can actually very naturally make this argument that this is what we should be doing going forward. They did have a more traditional policy portfolio that was written down in paper, but in actuality, the way that they had managed the portfolio over time was a much more bottom-up, flexible framework. The thing that Amherst gave me was this bridge from what I had learned at Cambridge to what we were doing at Amherst now, which is the way that you do the bottom up.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, well, so this is where I feel like I hit the absolute jackpot and I still can't even really believe my luck. When you look at the history of the Amherst portfolio, they have had unbelievable success and productivity in supporting managers for very long periods of time and really leaning into relationships across a wide variety of asset classes. We are talking 10, 15, 20, 30-year relationships being”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's the answer. And I share all of these three things because basically I had this aha moment where I realized the plan is not the thing. It's the execution. That is the thing. There is no secret. And of course, I should know this. I went through all of Cambridge realizing there's no secret. I knew, but I thought, oh, the investment office world must be different because it's this amazing world. And it is amazing. But yes, there is no secret. The idea is to have a great plan and then do it really, really well.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was like, why am I going to dedicate my life to being a CIO when Andy Golden has already figured it out? And he just told everybody, so we're not. Around the same time, Seth Alexander and the MIT team wrote the 10-year letter. And I read that letter. And I was like, oh my gosh, MIT is doing it. They're doing the bottom-up portfolio management process. This is amazing. And then upon further reflection, I was like, wait, MIT is a very competitive place. Why are they telling everybody how they do it and telling their secret? Right before I started, I had lunch with a CIO that has a tremendous track record and it's completely amazing and I respect them a ton. I asked him, I was like, what's your secret? And they said to me, people in process. And I was like, are you joking?”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I will never forget sitting in my house, my baby Zelda's on my lap, and I'm listening to your first interview with Andy Golden. And it was an amazing interview. I just absolutely loved it as you were going through it. And then at the end, I remember sitting there feeling a tremendous amount of angst because my main takeaway from that was, oh my God, Annie Golden has figured it out. He has told everybody the playbook. What more is there left to do?”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Decisions. And I was trying to do that basically with some of my clients. And it is an incredibly hard thing to do in the governance structure. It's just so, so hard. And that mostly has to do with issues around short versus long-term feedback loops and thinking. So it's becoming increasingly clear to me that I would like to try and invest. It's hard for me to do that here. I would love the opportunity to do that somewhere else. Also, I would say having a bunch of clients is terrific. I loved all my clients, but having just one institution that you can work for is incredibly powerful and of course frees you up to do a lot of deep thinking in terms of the managers and the portfolio itself. So I have three children. And on my third, this is in the fall of 2017 during maternity leave. I first found podcasts and I started to obsessively listen to Patrick O'Shaughnessy and Ted Side.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Always had in the back of my mind being a CIO. And by the time I had sufficient time under my belt at Cambridge, the choice before me was in state Cambridge and act in that capacity or actually become a CIO. Towards the back third, I would say of my Cambridge experience, I was starting to become totally disenchanted by the asset allocation model. I was looking at the way decisions were made and thinking to myself, this is not the way I want to make decisions. I am not good at predicting what asset class is going to do well over the next couple of years. I have some serious reservations about these long-term expectations around asset class performance. Also, all of these asset classes overlap. These delineations in asset classes don't actually reflect the manager opportunity set. I would much rather focus on decisions that I think I can have conviction in, which for me at that point were just bottom-up managers.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Consideration the history or the portfolio itself, then the whole thing doesn't hold. So, what you're really trying to do in any kind of a governance structure is figure out a solution that has the highest probability of sticking for the longest period of time because we are in the investment business, things don't work all the time. You need a process and a solution that is as robust as possible. And you can get that robustness through something that truly reflects the assets around the table.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the first thing I'll say on that is that there is no one size fits all. The way that you make decisions and the way that you govern these portfolios has to take into consideration the portfolio itself, the history of the pool, and the people around the table. And that includes the advisor that you've chosen. That includes the committee members, that includes the staff. The people are incredibly important. The history is extremely important, and the portfolio itself is really important. Every solution needs to reflect those things. And I would say when you are in the process of figuring that all out, the solution that you come to has to have very clear delineation of roles and responsibility. A lot of institutions fall down is if it's not clear who is deciding what. The other place where you can fall down is if you have a solution that might be clear, but it doesn't even remotely take into account”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“So once that gets brought to a committee, a thousand investment committee meetings, what happens in the committee meeting that creates the difference between a highly functioning group and one that struggles?”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“In terms of just general portfolio approach and asset allocation, asset allocation doesn't tend to vary that dramatically. Most endowments tend to have an equity bias. Their bonds are going to be somewhere between 5% and 10%. Their shapes of the portfolio that are fairly common. There's a real difference that comes in in the manager selection piece. And I think one of the things that I started to realize over time is that the manager selection piece is as important and as impactful on the returns that you get as the asset allocation piece. And in fact, the manager selection piece meaningfully impacts the asset allocation piece because when you look under the hood, it turns out you can't neatly fit managers into boxes anymore. So the resulting portfolios, yes, they would look quite different and they would have different profiles even if you have a similar asset allocation.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm curious about variability around that. So take an example of two pools that might have looked the same. And then you have behind that two different investment committees and two different consultants. And so maybe there's a common sense asset allocation structure that fits for both of them. But how wide of a range would you get from that to what was ultimately in the client portfolios based on the people involved?”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cambridge, and everybody's just going to use it because it's so efficient, and this is the answer, and blah, blah, blah. And it turns out, no, no. That is not what happened. So you push it out and then all the consultants come back to you and they say, this is not the way I do it And what I realized through that process is a few years in when we're in this why is this IVR template not sticking? And the answer is the client is not the only driver of what ends up happening in the room. Obviously the consultant is a huge driver of that. If you look at the different portfolio solutions that you arrive at, there are views from the consultant. There are views, of course, from the investment committee.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, so many. When I first started at Cambridge, the head of research was Ian Kennedy, and he was looking for somebody to help him revamp what they called the investment planning review, which was all of the asset allocation and policy work and just goals work that you would do when a new client walked in the door. So of course, I was like, oh, yeah, 100%, I would love to do that. Ian, I will work with you to do that. Basically, ever since that day, I have been grappling with this question of what is the right solution for endowments? How do you manage these assets? I mentioned this because I was going through this. You assess the needs of a client and you decide this is how we should invest based on the needs of a client. And then you go and you take that template. And the idea was we're just going to push it out to the different consultancies.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you actually have to come up with a completely different solution for how to invest these assets. That's just one example of how it obviously matters what it is you're trying to do and what is actually going on with these pools and also endowments are super interesting. They are a passion of mine, but they are just a small slice in the globe in this institutional asset investing field.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“In terms of the breadth, different objectives can have really meaningful implications for how you might manage it. And I'll just use an example. I worked very closely with Margaret Chen for many years, and I worked with her on the settlement trust clients, the quick and dirty honest trust is they tend to be low to mid single-digit billions. So these are large pools that were created out of the bankruptcies of these companies to pay out claims against asbestos litigation for people who are exposed to asbestos. call it 10 to 30 years ago. They pay out half their value in five years. And then there's this very long tail, the way that these pools are managed and overseen is they hire an advisor and then they meet monthly with the trustees that oversee the trust as well as all of the lawyers that are involved on the litigation side. And so this is a very different set of people. Then the investment committee for the Museum of Fine Arts Boston.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I started at Cambridge in 2006. I was there for 13 years. Cambridge just separated into two general groups. There's the client group and the manager group. So I was in the client group. When I started, we got stopped on, call it a dozen different clients, but the client spanned a bunch of different asset categories and different consultants. So you got a taste for pensions, hospitals, endowments, community foundations, private clients, you name it, we saw it, and you were working with a bunch of different consultants, all of whom have quite different views on how to invest. Over that time, I had probably about 25 clients and I went to over a thousand committee meetings.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Love school. So investing plus school equals endowment management. I was completely sold on the concept. I got incredibly lucky with Cambridge Associates that took a chance on hiring me. And that's how that happened.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so I gamed at Yale, you might imagine that was a shock to the system. I really had no idea what I was getting into. And the first year was just drinking from the fire hose. In the later part of my first year, I read an article in the Yale alumni magazine about David Swenson. And there's a lot of connectivity between the school of management and Cambridge Associates. So I just started finding out about this world. I had a very close friend from growing up who had actually worked at Cambridge Associates. Investing is the real world application of math and the human, which is, oh my God, right brain, left brain, I love this. I took a class with Nick Barberis, who's this amazing professor at Yale. It was his first year there. He taught us behavioral finance, and that just completely clicked. I just thought, this is so incredibly cool. I love this combination. So investing was very interesting. And then this idea of working for a school, this is catnip for me.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very basic things like treat your employees well and be honest. It's important how you're managed. And it matters in terms of the productivity of the crew and how profitable the business is going to be and who your next client is going to be. Oh, and by the way, how beautiful the garden is. It all matters. And it's funny because I had all these jobs. I worked for an ecology grad student in college. I worked for a fruit fly lab. I did all these really random disparate things. And my main takeaway from all of those experiences was the most important thing in terms of your quality of life are the people. It doesn't matter what you're doing. Are you picking books? Are you pulling weeds? Are you trying to figure out some science? Doesn't matter. It's just the people.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I ended up running the maintenance crew for a garden company, so I was able to write an application about managing people, because I had actually some views after that experience on how to manage people. My pet theory is that they looked at my application and were like, this is the weirdest application we've ever seen. And they just decided to take a chance.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I actually was I moved out to California. My boyfriend got a job at Stanford. He is now my husband. I was a gardener in organic farmer in my summers in college. So I thought, well, I need to pay rent. I don't know what I want to do. I need to make some money right now while I figure out. So I started the phone book literally back in the days when there were actual phone books, called every garden company in the phone book and got a job at Janet, Bell and Associates. Didn't take that long. That was two years. It was truly a transition time for me. trying to figure it out. And at the end of that, I realized I never want to be in a situation where I don't have control anymore. And I thought getting an MBA would be a really good way to do that. And I was able to coordinate grad schools with my husband and we both went to Yale.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so I had a ton of fun in college, but of course, zero skills. None. And we can talk about my funny couple of years right out of college where I did nothing that was even remotely investment related. I had no idea what I wanted to do”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“A big underpenny was what you get in a very natural, and it's almost like a passive way you just experience a completely different cultures, knowing that they exist and having an appreciation for them. And then the other piece in terms of the impacting my career and how I think about the world, it's just, it's a very big world and there's a lot out there.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“I grew up overseas. I was born in Singapore, lived in London, Tokyo, and my parents moved to India when I went off to school. It was a unique childhood. And that international adventure was a huge part of my childhood and school. I loved school. From a very early age, I loved math and I loved reading novels. So right brain, left brain was something that has been the heart of my existence and of course carries through today. I went to undergrad at Brown and Brown like Amherst has an open curriculum so there are no requirements. I was a math major and I finished that within two years and then I took all English courses in bio courses. So this is incredibly nerdy, but the day that the course catalog came out was one of my favorite days of the year. Which is so embarrassing to admit, but it really is true.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess on today's show is Letitia Johnson, the chief investment officer of Amherst College, where she manages the school's $4 billion endowment. After 13 years working with twenty five clients and attending over a thousand investment committee meetings at Cambridge Associates, Letitia came to a view about how to invest that differs from many similar pools of capital, and she's put that to work over the last five years. Our conversation covers the subtleties of managing an endowment with a concentrated bottom-up manager-selected approach for the long term, including portfolio construction, risk and liquidity management, long-term investing, and competition for capital.”
2024-04-29 · Capital Allocators · Letitia Johnson - Concentrated and Long-Term at Amherst College (EP.382) · IDENTIFIED FROM THE TRANSCRIPT · source