Jul 27, 2026 · 1h 15m · capital-allocators
Rebuilding the NYU Endowment – Michelle Knudsen (EP.513)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Michelle Knudsen, Chief Investment Officer at New York University, on executing a comprehensive overhaul of the university's $8 billion endowment. Knudsen details her career journey across Goldman Sachs, Partners Capital, and the Mellon Foundation while sharing actionable insights on modernizing endowment governance, structuring multi-asset portfolios, evaluating emerging managers, and building a high-performing investment team.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 18.3% of the talking time here. How this is scored →
Ted as informed peer 4.0 Guest teaching 4.7 Guest disagreement 0.2 Ted pushing back 0.3
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 30:06 Clarifying board interaction on size thresholds
Michelle gently dismisses Ted's suggestion that a 3% threshold creates awkward edge-case tension by highlighting that conservative governance welcomes early board consultation.
Hardest push from Ted ▶ 36:06 Ted questioning hedge fund leverage contagionTed presses Michelle on systemic contagion risks when allocating aggressively to leveraged, trading-oriented hedge fund platforms.
Biggest teaching moment ▶ 46:20 Revising the role of historical track recordsMichelle articulates why backwards-looking track record metrics should only serve to generate forward-looking questions rather than driving investment conclusions.
Ted holds their own ▶ 38:36 Ted framing duration and valuation friction in ventureTed demonstrates deep allocator expertise by challenging how Michelle balances long illiquidity horizons with sky-high late-stage tech valuations.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Capital Allocators Announcements and Open Roles | 0 | 0 | 0 | 0 | Monologue segment where Ted makes announcements about Capital Allocators hiring open roles and hosting summits. | |
| Sponsor Highlights: AlphaSense, DealCloud, and Admired Leadership | 0 | 0 | 0 | 0 | Standard sponsor reads covering AlphaSense, Intapp DealCloud, and Admired Leadership with zero guest interaction. | |
| Career Beginnings and 2008 Financial Crisis Lessons | 4 | 5 | 0 | 0 | Michelle details entering Goldman Sachs right into the 2008 financial crisis, highlighting risk management, downside planning, and cross-firm communication. | |
| Underwriting Dynamics Across Client Profiles at Partners Capital | 5 | 6 | 0 | 0 | Ted prompts on portfolio construction across client profiles; Michelle explains the distinct mandates between PE GP private clients and institutional endowments. | |
| Scaling Partners Capital and Sourcing Emerging Managers | 4 | 5 | 0 | 0 | Michelle discusses how Partners Capital scaled from $6B to $30B and why opening a NYC office was essential for underwriting emerging managers on the ground. | |
| Portfolio Transformation at the Mellon Foundation | 4 | 5 | 0 | 0 | Michelle describes moving to Mellon Foundation to manage a single portfolio, building a liquid returns engine to prepare for slowing PE tailwinds. | |
| Stepping into NYU and Assessing the Endowment | 4 | 5 | 0 | 0 | Michelle reflects on arriving at NYU, finding a historically conservative, committee-run $6.5B portfolio that required a growth overhaul. | |
| Redefining Endowment Governance and Decision-Making Boundaries | 5 | 6 | 1 | 2 | Ted probes whether the 3% committee approval threshold creates awkward borderline cases; Michelle clarifies that conservative governance means proactively involving the board early. | |
| Establishing NYU's Core Asset Allocation Framework | 5 | 5 | 0 | 0 | Michelle details NYU's asset allocation: 65% public/private equity, 25% absolute return/opportunistic, with every investment competing against equity return hurdle rates. | |
| Leaning into Trading-Oriented Hedge Funds and Gap Risk | 6 | 6 | 1 | 3 | Ted challenges Michelle on contagion and leverage risk across platform hedge funds; Michelle explains how NYU models gap risk and stress scenarios separately from day-to-day risk. | |
| Expanding Venture Capital and Private Asset Deployments | 5 | 5 | 0 | 1 | Ted asks about deploying liquidity into venture given long durations and high late-stage valuations; Michelle explains their multi-stage barbell approach. | |
| Sponsor Highlight: Modernizing Asset Management with Ridgeline | 4 | 5 | 0 | 0 | Following a sponsor read, Michelle discusses how NYU leverages university scale, mission, and responsive partnership to win allocations with top GPs. | |
| Manager Diligence: Synthesizing Data, Opportunity Sets, and People | 5 | 6 | 1 | 0 | Michelle details manager due diligence, emphasizing backward-looking data as an impetus for questions rather than direct decision drivers, alongside evaluating organizational structure. | |
| Portfolio Transformation Progress and Long-Term Stress Testing | 5 | 6 | 0 | 0 | Michelle reviews turning over one-third of the $8B portfolio, expanding into emerging managers, and applying rigorous multi-year stress tests against structural regime shifts. | |
| Recruiting and Building the NYU Investment Team | 4 | 5 | 0 | 0 | Michelle describes assembling an investment team where 10 of 12 members are new, prioritizing continuous improvement, humility, and in-office collaboration. | |
| Iterative Diligence Processes and Structured Team Forums | 4 | 5 | 0 | 0 | Michelle details shifting team debate to 70% through diligence to avoid defensive posture and pulling forward committee reviews into an early pipeline stage. | |
| Leveraging Artificial Intelligence for Investment Workflows | 4 | 5 | 0 | 0 | Michelle shares concrete AI use cases in note structuring, meeting synthesis, and longitudinal extraction from audited financial statements. |
Statements from this episode (24)
Institutional committees have lower risk tolerance than private equity GPs
“We found that the risk appetite of those investment committees when you're serving as a fiduciary for an institution was lower than for many of our private equity GPs.”
Endowment portfolios funding spending are far more sensitive to year-end drawdowns
“If your portfolio is driving a spend level, you're more sensitive to a December 31st mark that is substantially below where it was the year before.”
Underwriting emerging managers adds business risk alongside investment risk
“When I joined partners, we rarely underwrote emerging managers. The view was our job is to take investment risk. You're also taking on a business risk when you underwrite a new manager.”
Serving multiple clients forces compromises on portfolio construction for scale
“When you're serving multiple clients, you have to make compromises on the portfolio because you can't underwrite 25 different great portfolios. You need economies of scale.”
Knudsen revamped NYU's endowment governance and asset allocation in three months
“Within three months, we had a new governance structure. We had a new asset allocation framework. We had started triaging and re-underwriting every line item in the portfolio.”
NYU endowment delegates manager selection to internal team up to 3%
“When it comes to manager selection, we rely on the expertise of the team who have spent their careers Getting to know the managers, understanding the landscape, the manager selection decisions rest with the team up until a certain point. Once you have a manage…”
Public and private equity comprise roughly 65% of NYU's endowment
“The asset class buckets that we have today on the equity side between public and private, it's about 65% of the portfolio.”
NYU's endowment targets roughly 25% allocation to absolute return strategies
“Our absolute return and opportunistic bucket we're building, but is expected to be about 25% of the portfolio.”
NYU uses high-leverage, trading-oriented hedge funds for its absolute return bucket
“One is on the hedge fund side, where when I was at the Mellon Foundation, we were relatively early to underwriting hedge fund strategies that are more trading oriented, that run higher levels of leverage, where you don't have necessarily a single persistent so…”
NYU's endowment held less than 15% in private assets before Knudsen
“When I got to NYU, less than 15% of the endowment was in private assets.”
NYU is substantially growing private market allocations while peer institutions retreat
“Our team has the view that there is still a lot of value to be had over the long term in private markets. Maybe not every private market. We want to be more discerning there. But we have the ability, and we have been growing that portfolio Substantially over t…”
Managing only to tail-risk stress scenarios prevents taking sufficient day-to-day risk
“We're looking at that separately from our day-to-day expectations of how the returns are going to correlate, because if we only look at those stress scenarios, we won't take enough risk on the day-to-day.”
NYU seeks venture allocations spanning from incubator to pre-IPO stages
“We set out to build a balanced portfolio where we wanted to have allocations everywhere from early incubator stage of venture capital straight through to pre-IPO, now IPO-ing companies that have been growing massively.”
NYU prioritizes size-constrained, nimble public market asset managers
“We're looking at that with Asset managers who can be more nimble, which means they have to be size constrained. That's been a big area of focus for us over the last couple years.”
Historical track records should prompt questions rather than drive investment decisions
“In general, that's how we think about any backwards looking data is it should be the impetus to ask questions, but not the basis on which we should make decisions.”
Manager vehicle structures frequently mismatch the duration of the opportunity set
“Some of that also comes down to the structure that the manager is offering the investment in, where we've seen a lot of mismatches in recent years between an opportunity set Maybe the duration of that opportunity set and the structure that a manager is offerin…”
NYU has turned over or re-underwritten two-thirds of its $8B portfolio
“To put some quick numbers around it, NYU's portfolio today is about eight billion dollars. We've turned over a little more than a third of it in the last two years. We've re-underwritten another third of it.”
NYU's emerging manager strategy includes backing Fund Is and new hedge funds
“In the two years that I've been at NYU, we've backed A fund one, a new launch hedge fund, a couple fund twos started looking at how do we build relationships with not just the current generation of great managers, but also the next generation of great managers…”
Knudsen replaced 10 of NYU's 12 endowment team members since June 2024
“The team today is 12 across the investment team and the operations team. 10 of the 12 are new since June of 2024.”
NYU's endowment shifts core internal diligence debate to the 70% completion mark
“We've changed that where the big conversation isn't at the end. It's about 70% of the way through the research process, where the deal team has gone away, they've done a lot of work, they've probably decided this is something that they think they want to do, s…”
NYU pulls investment committee input to the beginning of the research pipeline
“What we've done is we've pulled their opportunity to input to the beginning of the research process. In each of our committee meetings, we put forward a long list pipeline. What I tell the committee is most of these things are going to fall away. As we're goin…”
NYU's endowment uses Claude, Gemini, Granola, and Whisperflow for research
“Whether it's using Claude or Gemini to take raw notes, put them into something that is a format we can all consume, or using Granola or Whisperflow to capture thoughts, record them for writing for other members of the team, trying to use these tools to do a be…”
NYU uses AI to extract time-series data from manager audited financial statements
“All of the audited financial statements that we get for our managers, we read them looking for specific pieces of information. They're also interesting time series of data. Trying to use some of these tools to create a better picture over time of how individua…”