May 5, 2022 · 40m · capital-allocators
Steve Drobny – Where the World is Going at Clocktower Group (Manager Meeting, 30)
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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 Manager Meetings, endowment chief investment officer Paula Volent interviews Steve Drobny, founder of Clocktower Group, to examine macro hedge fund seeding, geopolitical research frameworks, and non-consensus venture investing in fintech and climate tech. Drobny critiques the traditional Yale endowment model, arguing that today's volatile macroeconomic environment demands dynamic top-down allocation, global on-the-ground intelligence, and uncorrelated diversification.
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 15% of the talking time here. How this is scored →
Ted as informed peer 4.7 Guest teaching 3.5 Guest disagreement 1.3 Ted pushing back 0.4
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:30 Endowments are not the smart money
Steve openly rejects the prestige attached to university endowments, arguing they are driven by consensus committees that allocate to safe, obvious strategies.
Hardest push from Ted ▶ 19:14 Challenging the lemming behavior of the Yale modelPaula presses Steve on whether endowment managers have blindly copied Swensen's model, prompting him to evaluate whether his 4.0 thesis still holds.
Biggest teaching moment ▶ 20:05 Deconstructing the Yale Model's macro tailwindsSteve educates the audience on how the traditional endowment model's multi-decade outperformance was primarily a leveraged play on collapsing interest rates and low volatility.
Ted holds their own ▶ 9:00 Mastery of macro hedge fund history and literaturePaula demonstrates thorough expertise in alternative asset management by citing Drobny's seminal texts alongside specific legendary short sellers and macro operators.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Global Macro Strategy as an Essential Portfolio Diversifier | 6 | 4 | 1 | 1 | Paula sets the stage with deep domain familiarity, referencing Drobny's 2005 and 2021 books and prominent macro managers. Steve explains macro's structural role as an uncorrelated diversifier when traditional equity and bond models fail. | |
| Identifying and Seeding Emerging Macro Managers | 5 | 4 | 1 | 1 | Paula asks how to identify emerging macro talent given the rarity of managers like Druckenmiller or Soros. Steve details the institutional barriers to launching independent funds today versus joining multi-manager platforms. | |
| Asset Management as a Service and Geopolitical Frameworks | 5 | 3 | 0 | 0 | Paula cites Drobny's premise that hedge funds must act as service providers and asks about Marco Papic's geopolitical research. Steve explains Clocktower's framework-driven approach to macro intelligence modeled on Bridgewater. | |
| Investing in Onshore China and Intelligence Gathering | 5 | 4 | 2 | 1 | Paula questions the viability of investing in China amid geopolitical friction with Russia and the West. Steve strongly asserts that large allocators cannot afford to ignore an economy comprising 15 to 25 percent of global GDP. | |
| Portfolio Management 4.0 vs The Traditional Yale Model | 6 | 5 | 2 | 1 | Paula challenges conventional reliance on the Yale Model, asking whether allocators have acted like lemmings. Steve breaks down how endowment portfolios became levered equity bets that relied entirely on a four-decade regime of falling rates. | |
| Sponsor Message: Ridgeline Investment Management Tech | 4 | 3 | 1 | 0 | Paula inquires into Clocktower's non-lead venture model in fintech and its exclusion of crypto. Steve explains the decision to target established financial revenue pools while avoiding speculative blockchain projects. | |
| Geographic Shifts: Latin American FinTech, LA, and Austin | 5 | 3 | 0 | 0 | Paula and Steve discuss regional shifts in talent and venture activity across Latin America, Los Angeles, and Austin. Steve attributes these migrations to quality of life and the decentralization of tech capital post-COVID. | |
| Climate Tech and Sustainability as National Imperatives | 4 | 4 | 1 | 0 | Paula brings up marine ecology and climate concerns, asking what distinguishes current climate venture from past failures. Steve explains that climate tech is now driven by state-level national security, energy sovereignty, and deglobalization. | |
| Integrating Philanthropy into Clocktower's Ecosystem | 3 | 2 | 1 | 0 | Paula asks about Clocktower's philanthropic initiatives showcased at their events. Steve explains his philosophy of giving stage time to high-impact non-profit founders who lack institutional fundraising machinery. | |
| Future Outlook and Contrarian Critique of Institutional Endowments | 4 | 3 | 4 | 0 | Paula closes by noting her pivot to capital preservation and invites Steve's parting thoughts on endowments. Steve delivers a sharp contrarian take, arguing that university endowments suffer from conformist committee decision-making. |
Statements from this episode (15)
Drobny: Best investment opportunities lie in cracks outside mainstream asset classes
“We think that the real gems of the investment world are found in the cracks in between what everyone's doing. So you'll never find us doing multifamily housing. You won't find us doing LBO private equity.”
Drobny: Bonds and short sellers no longer provide effective portfolio diversification
“Bonds aren't a diversifier anymore. There's not many short sellers left. You mentioned Jim Chana's, who's a legend and incredible, but there are not many short sellers left. It's very hard to find diversifying strategies anymore.”
Drobny: Private markets are effectively long equity; macro provides real diversification
“Venture strategies, private equity, real estate, they're all equity strategies, and so if you look at your portfolio, you're going to be long S&P, basically. So macro provides a diversifier, and if it's not working, great, the rest of your portfolio is working…”
Drobny: Launching hedge funds on $5M from friends and family is dead
“So running around with your hat out, raising fives and tens from your rich uncle doesn't really work anymore, which is how Stan and George and Paul and all these guys started. I mean, some of these funds started with seven million dollars, with twelve million …”
Drobny: Bridgewater became the largest hedge fund by prioritizing client research
“Bridgewater's perfected this. They have the Bridgewater daily, which is for most institutional investors, a required daily reading. They spend a lot of money, a lot of energy, a lot of people. To do that, and as a result, voila, they have the world's largest h…”
Drobny: Post-2016, fiscal policy and geopolitics matter more than monetary policy
“In the zero rates world, I thought we were shifting to a place where really it's fiscal and geopolitics that matter, especially after 2016 when you had Brexit and Trump. I think the world really changed and Marco came on board and has just crushed it for our c…”
Drobny: Russia is smaller than Texas; China is 15-25% of global GDP
“You could ignore Russia because their economy is smaller than the size of Texas. But China is somewhere between 15 to 25% of global GDP, depending on how you count and what numbers you believe.”
Drobny: The modern Yale model is effectively a levered S&P 500 position
“The problem with it today, as we discussed, is that most of the investments are equity allocations, and so you're basically getting a levered S&P position.”
Drobny: 14 years in, crypto lacks any use case beyond speculation
“And so right now I hear the word constantly, we're in the early innings, but crypto has been going on since 2008 now, so we're 14 years into it. And there still isn't really a core use case other than speculation and capital raising. There's no businesses that…”
Drobny: Financial services represent massive profit pools ripe for fintech disruption
“And by the way, the thesis behind FinTech is that in every country in the world, financial services is generally somewhere between 10 to 20% of market cap and GDP. And so if you can disrupt that, that's a big piece of profits and revenues to go after and build…”
Drobny: Latin American tech talent is returning home from US hubs
“So you've seen a lot of talented entrepreneurs who were originally from Latin America, who moved to San Francisco or New York, all moving home to do startups, because now there's capital that you can fund businesses.”
Drobny: Post-Brexit, LA has replaced London as the global jet set hub
“I think LA is the new London in the sense that London used to be the place where the global jet set got together because the non-doms were there and it was just a global place. But Brexit has kind of killed that. And LA kind of has taken up the mantle in that …”
Drobny: Public ESG ETFs are filled with non-ESG companies like Amazon
“It's really hard to do in public markets, because when you look at these ESG ETFs, they're full of Amazon and Google and things that aren't really ESG.”
Drobny: Bad philanthropists excel at fundraising; great philanthropists generally struggle
“Generally great philanthropists don't know how to raise money. Bad philanthropists know how to raise money because it just becomes like a fundraising machine that goes towards admin And more fundraising versus the actual philanthropy.”
Drobny: Endowments are not smart money; committees just fund obvious investments
“People think endowments are the smart money, and I disagree. I think endowments are often run by committee And of a dozen smart people in the room that are paid a lot of money that give money to the obvious stuff. And committees kind of push people towards tha…”