Baylor University

“We think about everything in terms of 10% market moves. If the market were down 10%, would we add? Maybe. Depends on what the value is. If the market was down 20%, would we add? For sure. And then we think about how many times we want to be able to add to the …”

“So we know going into it, that in markets like, 2015 to 2019, we're probably gonna trail. And we're okay with that because in 2020 and 20 22, we outperform.”

“And because we're running an active allocation portfolio on the marketable side, we can only be in liquid categories. We would participate in US high yield and European high yield, but we would not participate in Asian high yield because it's easy to buy somet…”

“Look, when things are going right, and you're making lots of money, and people are knocking on your door trying to give you more money, we're going to be pulling money during that time. We just are. That's how we roll. And that shouldn't bother you because eve…”

“One of the key characteristics that we look for is humility, because in this business, you hope to be right, 55% of the time. Well, that means you're wrong 45% of the time, and so for the person who is unable to admit that they're wrong, that doesn't work for …”

“So, 10 years ago, there was a private public ARB in the MLP space. You could cobble together the MLP Greenfield at three, four times EBITDA, and then you could sell it to the public markets at 12 or 14 times EBITDA.”

“Yeah, so it's all through managers. We don't do anything directly.”

“We are not afraid to hold cash if we feel like we're not getting paid for the risk that we're taking. So if we're not meeting that opportunity cost hurdle, we'll hold cash, and it doesn't matter to us if we're getting paid for it or not because there's this op…”

“For example, in 2016, high yield energy in particular, that was the downdraft in the energy markets when crude prices really came in. The joke at the time was that 60 was the new par. And by the end of 2016, that had come around and we were out Of that positio…”

“So for us, that's tech, healthcare, the consumer, and then we do have some private energy. We do have some private financials. Both of those are cyclical, but we've moved most of the cyclical stuff to the public side because we can trade around that.”

“We were buying long vol in 2017, 20 18, and just held on to it, and that was what gave us ballast in 2020 when the pandemic hit.”

“We probably have Three of those set up. Now we might add another two, but that fundamentally changes what your portfolio looks like and how it acts because you have bigger allocations of capital there than you did previously.”

“We allocate, broadly speaking, between zero and a hundred million to individual managers. And we have some managers right now that have a hundred million dollars from us, and we have other managers, strategies that have 250,000 dollars, and the high yield stra…”

“So in 2019, we were having trouble finding things that had 15, 20% return opportunities in that environment. And so I think the endowment here at that time was maybe 1.3 billion or something like that. We had 80 million dollars in long ball and a hundred milli…”

“Setting that aside, it increasingly seems to me that something around fifty-fifty feels right, and the reason for that is because of the valuation lag that occurs in private markets.”

“And so we can just follow what the high yield credit spread is. And when it's 300 over, like it is now, you could bet that we're not involved. But if it's 2000 over, like it was in oh eight, then we probably are involved. So we run our portfolio more that way.”

“If that's the case, then the opportunity cost is five percent a year, and so that's how we think. You have treasuries that are two-year, five-year treasuries that are five percent plus five percent, and the hurdle's 10%.”

“It's not particularly working right now, but that's okay because we're long-term investors. It's small caps.”

“But in 2022, we basically tripled our biotech exposure when the small cat biotech was down 60% over the year.”

“In fact, if you look at the last 13 years, the vast majority of the managers that we have parted ways with have outperformed their benchmarks.”

“There are great quant managers. Fantastic. But if there's a quant manager, I don't know when to allocate to it or take money away because I don't understand the black box. No one lays out their quant algorithm. Cause if they did, you could be like, oh yeah, we…”

“We're talking about, for us, I think the endowment now is around 2.2 billion, something like that.”