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Robert Wallace

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64
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2025-08-27
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2025-08-27
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  1. “I mean, I think it's probably maybe to back up and say, It's when you have private equity and early stage venture capital and things like that in your portfolio, you have to understand that the dispersion of outcomes in those asset classes is very, very wide. And they're very expensive to access. And you need to be absolutely sure that you understand your ability to be in the top of the range with your work net of these enormous fees that you pay to access the asset class because the middle of the range is not very good. And there's a huge left tail, you know, below the middle of the range where half the investor's outcomes sit, that's really quite poor. It's certainly less attractive than US public equity, for instance.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Growth in the United States, but we've had a lot of multiple expansion on top of it. So when you have that type of result in a major asset class like US public equity, a more diversified portfolio like endowments tend to run for reasons we can talk about, important reasons will look a little less good, I think, than just a single asset class portfolio that happens to be all in US equity. So people kind of say that the endowment model is dead because of that.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Yeah. Well, I mean, it certainly gets a lot of attention in the media. You'll hear things frequently or read things that, you know, the endowment model is dead. And I think one of the challenges is that public equity markets have been so strong. I mean, particularly the U.S. public equity market has been so strong for the last 10 or 15 years, really coming out of the 08 crisis. I think it's just been on a nearly historic bull market punctuated by only a couple corrections. And so valuations now in the US are at near all time highs. I think the only time the U.S. market's been more highly valued on several important metrics, it was 1999 than it is currently. And so we're at a very high level of valuation. That's what happens after a 15-year bull market. You have multiple expansion, outpacing earnings. We've had tremendous earnings.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Understanding how their opportunity is set evolves, being able to lean into the wind, being able to help them be contrarium when their opportunity set is particularly attractive. So that usually means their performance has recently been poor when their opportunity said is attractive. And you need to really know your partner and have huge confidence in their work and whether you're aligned with them. To send them money when their performance has been poor. So we do that routinely, but to have that type of partnership with people, you can't have too many of them. So we wanted to go from 300 to something less than 100. Which should not be at a high level, not be too hard, not too demanding.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Kind of low conviction investment. So one of the things that, and it had done okay, but there was an opportunity to make it better. And the way that I thought we would make it better is we needed to have a much higher conviction, more concentrated portfolio with fewer partners that were more carefully selected, and really critically important, Nikolai, with whom we could develop a strong, trustful knowledgeable relationship. You know, we think of them as partners because we're really working in hopefully a constructive and supportive way with our partners.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Yeah, so I arrived in 2015. A portfolio was about $20 billion. And one of the things that I noticed was we were dramatically overly diversified, not at the level of asset allocation. That was fine. You want to be diversified in terms of your asset allocation. But within each asset class, we had far too many investments. So for us, that means we had far too many external partners. We had 300 external partners helping us manage a $20 billion portfolio. I remember real estate was 8% of the portfolio in 2015 and we had 53 external partners helping us manage 8% of the portfolio. So, you know, dramatically overly diversified. And the reason for that was the culture of the office here and the decision making model that the office had been following fostered that type of very diverse.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Where you're working with external partners to actually execute the individual security level decisions in your portfolio, that ability to understand your partner, to understand what motivates them to understand their skill, their level of discipline, their temperament, their character, and their alignment of interest with you and your institution. Alignment of interest, if kind of principal agent mentioned, was something that David paid enormous attention to.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “First principles thinking and a lot of rigor to the way he invested capital. And the other thing that I learned from David is the importance of sort of paying attention to the intersection of supply and demand and fear and greed. He was fantastic at understanding where the opportunity set was in that space. And he was part scientist, but also part psychologist. And I think I saw him put that into practice. He was incredibly good with people. He had very strong ability to reason qualitatively as well as quantitatively. And that turns out to be a really important skill when you have a model like we do at Stanford and like David pioneered at Yale.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “First principles means thinking from a premise, a logical premise and supporting each step of your decision-making process with logic informed by data, and that's where the rigor comes in. You want to have a lot of data supporting what you do in your investment work. And that's really one of the things that I think differentiates investment from, say, speculation, right? So investors are very disciplined. particularly if you're managing a perpetual endowment that has a very, very long-term horizon like a sovereign wealth fund, you know, you need, you really need to be very, very disciplined because you're making decisions that are often five or seven or ten or even 12 or 15 years out in terms of their investment horizon. And so it really matters what you're doing with each decision that you make. And so David was great about bringing”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “I think a few key things. The importance of thinking from first principles and having a lot of analytical rigor backing up your work.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Those core goals are the same. And so, I mean, everybody might have a different take on the amount of risk they need in their portfolio to hit their expected return. Some people might say a 60-40 blend is more appropriate. Others might say 80-20. I think 7030 is roughly probably in the middle of the pack. And the difference is really mostly would come in how you execute, how you execute on that general strategy, what constitutes the 70, what constitutes the 30. I'm sure we'll get into that. But I think at the highest level, most endowments are managed reasonably similarly these days.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Percent of your endowment every year and higher education price inflation is three or four percent. You need an expected return in your investment program of around 9%. So the goals we have for the endowment suggest an investment strategy that has an equity bias because we need a pretty high return. So roughly 70% of the portfolio is invested in equities here of one type or another and 30% is in things that are less risky than equity. And when we put all that together, we think we have a chance of being able over the very long run to provide a material level of support for the students and scholars at Stanford and still preserve purchasing power. And that's really the crux of the investment strategy.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “And so, and research is supported with that $2 billion, of course. So that's goal number one. You want to be impactful to the current students and scholars at your institution. The second goal, and that $2 million is about 5% of the endowment. The second goal is we want to be at least as supportive for all future generations of students and scholars. And there's a little tension that comes when you have both of these goals, one pushes you towards an investment program that has a lot of stability, and the other pushes you towards wanting to preserve purchasing power so that you can spend 5% a year and also offset the erosion that accompanies inflation and the inflation that we care about at Stanford is higher education price inflation, which tends to run a little bit higher than consumer price inflation. So if you're distributing”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Yeah, it's actually reasonably simple. So we start with, like any institutional investor, we start with the goals we have for the endowment. And if you're a perpetual educational endowment like Stanford, you generally have two primary goals. The first is you want your endowment to provide a material amount of support for the current generations of students and scholars. So this year we're distributing about $2 billion from the Stanford Endowment to support the current operating budget of Stanford. And that support is one of the reasons that Stanford is one of the least expensive private four-year colleges to attend in the country. It's one of the reasons that nearly 90% of undergrads at Stanford graduate with no student debt. And it's one of the reasons that we can offer need-blind admission to undergraduate students.”

    2025-08-27 · In Good Company with Nicolai Tangen · Robert Wallace: Managing Stanford’s Endowment, Balancing Risk, and Driving Innovation · IDENTIFIED FROM THE TRANSCRIPT · source