Oct 19, 2020 · 56m · capital-allocators
Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160)
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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 Carrie Thome, former Chief Investment Officer of the Wisconsin Alumni Research Foundation and co-founder of NVNG. Thome details her career evolution, WARF's pioneering risk parity and alpha-separation framework, and her entrepreneurial venture to catalyze Midwestern venture capital.
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 21.7% of the talking time here. How this is scored →
Ted as informed peer 4.3 Guest teaching 3.3 Guest disagreement 1.0 Ted pushing back 1.3
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:45 Pushing back against market-timing interest rates
Carrie politely dismisses the common market assertion that interest rates had to rise, noting that European and Japanese rates had gone negative and allocators shouldn't try to time bond markets.
Hardest push from Ted ▶ 39:11 Ted questions risk parity viability in a low-rate regimeTed presses Carrie on whether the all-weather risk parity model is fundamentally broken if the multi-decade bond bull market and hedge fund alpha engines have diminished.
Biggest teaching moment ▶ 11:29 Carrie explains the $900 patent foundation model of WARFCarrie educates Ted on WARF's unusual structural origin in 1925 as an independent entity created by nine alumni contributing $100 each to manage the Vitamin D irradiation patent.
Ted holds their own ▶ 17:54 Ted drills into the volatility targets and governance trade-offsTed demonstrates deep allocator expertise by questioning whether the foundation's board governance allowed them to dial up leverage when portfolio volatility dropped below original target levels.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Intapp DealCloud and Celeste AI Overview | 0 | 0 | 0 | 0 | This is a solo host segment consisting of sponsor messages for Intapp DealCloud and Admired Leadership. As a monologue/ad read, all interaction and pushback scores are zero. | |
| Introduction to Carrie Thome and Episode Overview | 3 | 2 | 1 | 1 | Ted introduces Carrie Thome and prompts her on her early life in Wisconsin and start at the State of Wisconsin Investment Board (SWIB). Carrie explains how she fell into institutional investing and private equity by chance rather than deliberate planning. | |
| History, Tech Transfer, and Mission of WARF | 4 | 5 | 1 | 1 | Carrie educates Ted on the unique 1925 origins of WARF as an independent foundation funded by nine alumni pitching in $100 each. Ted asks clarifying questions about whether subsequent donations or cash flows drove the $3B endowment, and Carrie details the pivotal role of patent royalties like the Vitamin D discovery. | |
| Transitioning WARF to an All-Weather Risk Parity Strategy | 6 | 4 | 1 | 2 | Ted probes the portfolio overhaul from an 85/15 high-volatility model to an all-weather Bridgewater risk parity strategy, exploring governance and committee appetite for leverage. Carrie details the board dynamics and the discipline of adhering to equal-risk allocations during the 2008 financial crisis. | |
| Beta Portfolio Implementation and Systematic Rebalancing | 6 | 4 | 1 | 1 | Ted and Carrie discuss the mechanical implementation of the beta engine across equities, fixed income, and inflation assets using derivatives overlays. Carrie describes their systematic daily monitoring and rebalancing triggers managed via Clifton/Parametric. | |
| Constructing the Alpha Engine and Manager Selection | 5 | 3 | 1 | 1 | Ted explores how WARF constructed its alpha overlay without accidentally taking directional equity beta. Carrie explains their approach to hedging out market beta from traditional and hedge fund managers while blending established quant shops with niche international talent. | |
| Ridgeline Investment Management Technology Sponsor Message | 6 | 4 | 2 | 3 | Following a sponsor break, Ted challenges the viability of a risk parity model going forward if bond yields and hedge fund performance tailwinds evaporate. Carrie counters by arguing that macro predicting is fraught and that all-weather portfolios are about structural risk diversification rather than timing interest rate movements. | |
| Founding NVNG and Bridging Midwest Venture Capital | 4 | 4 | 1 | 1 | Carrie discusses founding NVNG to bring institutional venture capital networks and corporate innovation to Wisconsin's academic and startup ecosystem. The segment concludes warmly with standard rapid-fire personal questions. |
Statements from this episode (14)
Thome: WARF still carries its original 1925 $900 as paid-in capital
“That 900 dollars is still on the books as paid in capital.”
Thome: WARF's $15M Kellogg's licensing grew into a $2B–$3B portfolio
“They were able to license that first technology off to Kellogg's, and it ultimately generated something like fifteen million dollars that they were then able to invest, and that grew the portfolio that ended up being the, you know, two to three billion dollar …”
Thome: WARF originally ran an aggressive 80/20 equity-heavy portfolio
“But when I got there, the traditional portfolio was still, there was definitely a venture-ish, high risk taking aspect to the group because we had a portfolio that was 80% equities and 20% fixed income. And if you broke apart the fixed income, five percent of …”
Thome: WARF avoided internal tactical allocation, citing geographic and talent constraints
“We weren't tactical. We knew how hard it was just to find active managers that could consistently do it. The idea that we were going to be able to pull this off in Madison, Wisconsin didn't seem terribly realistic, and if I did that, then I was betting on team…”
Thome: WARF's beta allocation was split equally across equities, bonds, and real assets
“It was about a third. So it was a bit of a third equity exposure. Then it was about a third of the fixed income. And then we had, we did commodities and real estate and the natural resources and the real assets fell into that other third, the inflation protect…”
Thome argues private equity alpha cannot be separated from beta
“Private equity for sure. You can't separate the alpha from the beta. That's just one package.”
Thome: WARF eliminated beta from hedge funds and hedged traditional managers
“Hedge funds had to have no market exposure, and to the extent that we were still in traditional managers, we hedged out their beta exposure to match what we were targeting.”
Thome: WARF cut quant managers after observing total correlation in 2007
“There was a, when Tom ran the portfolio, I think we had every quant manager of notes that you could get. Not surprisingly, we found in 2007 that they all correlated together, so we got rid of some of that.”
Thome: WARF retained Bridgewater Pure Alpha but phased out All Weather
“I've always enjoyed working with a relationship, as you can guess, with Bridgewater. That was one of the very first products we put in there, and we kept that pure alpha, and the all-weather, we eventually lost the training wheels, and we stopped using pieces …”
Thome: WARF reduced hedge fund exposure due to unfavorable fee-to-risk ratios
“When I left, we were in the process of hedge funds, as you know, really were struggling. We were at the process of ratcheting down that exposure and instead building the cash back up because we just didn't see if there was the opportunity for the risk we were …”
Thome: WARF ran a $6B notional portfolio via 2x leverage
“The rough numbers were shy of three billion dollars in total. And we had some other assets that had come in from the private foundation that we oversaw their assets. And we had about six billion of notional exposure. If you included the derivatives and the lev…”
Thome: WARF hit top first percentile 10-year performance post-2008
“You know, you go through the financial crisis and coming out of that, when you came out of that on the long-term basis, at one point, we were top one percentile over the ten-year period.”
Thome: WARF's levered bonds and alpha overlay delivered 200 bps excess return
“The levered bonds were the best performing asset class we had, which I think surprises some people. And we built a really good alpha engine, and it delivered. It was targeting 200 basis points of added return over the market exposure. That's what we targeted. …”