0/ @patrick_oshag had former Notre Dame CIO Scott Malpass on the pod, Malpass took ND's endowment from a 3 person team (a priest, a receptionist & himself) & $425M in 1989 to ~$14.0B when he stepped aside last year w/ endowment spending going from $19.5M to $425.7M over that time
1/ He became CIO at 26 w/ 2 years of work experience & is one of the more underappreciated capital allocators of the last 3 decades.
Malpass was one of the first CIO's to embrace the Endowment Model having a greater equity allocation, diversification, & investing into alts.
2/ He thinks there are maybe ~40-50 institutions in the world that can implement this model successfully (which is why most endowments underperform) as it requires significant resources, access, continuity of the team, buy-in from the capital base, etc...
3/ On the manager side he thinks ~1% or less of managers can generate true alpha. In terms of manager identification Malpass focused on the traditional investment approach, philosophy, & process line of questioning; but also really emphasized the human element. Why are they
4/ passionate about this?
What separates the top performers from those who are a flash in the pan is those that have clarity of thought about who they were, what they could do, and what they couldn't do & are tremendous at executing that over market cycles.
He spends a lot
5/ of time trying to define the skill they have, what their edge is, & whether or not this is enduring. He emphasized managers like Steve Mandel, Paul Singer, Mike Moritz & Doug Leone, etc... where its immediately obvious what makes them tick & differentiated
6/ ND was one of the first investors in Sequoia having met Don Valentine & Mike Moritz early on in his tenure at ND. Throughout all of Sequoia's success they valued the people that bet on them early, treated ND as partners, & never let success or scale get to them.
7/ In terms of incentive alignment he noted some of the conflicts in the HF industry. Mgmt fees used to be budget based (managers would give LP's a copy), w/ a focus on carry above a hurdle as they don't want to pay for beta, just alpha.
Post GFC there was some rationalization.
8/ Regardless of change he's been focused on innovation. At one point they calculated ND's venture portfolio (through funds) helped fund ~35% of companies listed on the NASDAQ
He highlights the importance of VC, the fact that there are fewer top players than other asset classes
9/ Re: PE They never allocated to large buyout funds (due to incentive alignment & the difficulty to generate a 2-3x net). He's never been focused on IRR's, much more focused on MOIC. They did move beyond VC, to growth equity, & then small & mid-sized buyouts.
10/ Malpass thinks too much size in any asset class in general is a negative towards performance. As the asset classes grow that capacity changes.
For emerging managers he mentioned focusing on capacity constraints of $250-$300m
11/ On the macro front- Bonds aren't attractive here, but they do serve a purpose as a diversifier in a complete equity market collapse & for individuals w/ tax considerations. Still constructive on equities long-term particularly given focus on innovation / IR environment.
12/ Finally, on crypto he's supportive of it, interested in the payments use case to reduce costs, bullish on CBDCs (Dollar, Yen, Euro)
He mainly invests via VC & infrastructure companies (is on the board of @PaxosGlobal) & would have a small direct allocation to crypto vs gold
Share this Scrolly Tale with your friends.
A Scrolly Tale is a new way to read Twitter threads with a more visually immersive experience.
Discover more beautiful Scrolly Tales like this.