Apr 23, 2020 · 32m · capital-allocators
Andrew Golden – Navigating Princeton's Endowment Through (Another) Crisis (Capital Allocators, EP.133)
0:00 / 0:00
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 Andrew Golden, President of the Princeton University Investment Company (PRINCO), to discuss how institutional endowments manage market volatility, preserve liquidity, protect organizational culture, and evaluate manager partnerships during a major economic crisis.
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 19.8% of the talking time here. How this is scored →
Ted as informed peer 3.6 Guest teaching 4.4 Guest disagreement 1.6 Ted pushing back 1.1
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 20:13 Frustration with drawdown vehicles
Andy forcefully criticizes public market managers creating contractual drawdown vehicles, arguing it creates an unfavorable tragedy of the commons for allocators.
Hardest push from Ted ▶ 13:09 Pressing on tactical allocation sizingTed presses Andy to specify the concrete order of magnitude and percentage sizing of their tactical market bets rather than accepting vague descriptions.
Biggest teaching moment ▶ 16:57 Institutional university liquidity vs endowment cashAndy corrects the premise that university tuition risks drive tactical endowment deployment, explaining how Princeton manages liquidity centrally across the wider institution.
Ted holds their own ▶ 11:55 Drilling into tactical rebalancing vs strategic asset allocationTed demonstrates allocator depth by breaking down how volatility-driven risk rebalancing deviates from long-term strategic asset allocation targets.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Remote Work Dynamics, Daily Routines, and Team Etiquette | 3 | 3 | 1 | 1 | Ted opens with a simple open-ended question about daily routine during the pandemic lockdown. Andy explains how PRINCO adjusted its team routines, meeting formats, and the psychological strain of remote video calls. | |
| Balancing Urgent Execution with Team Culture and Mentorship | 5 | 4 | 1 | 2 | Ted presses on portfolio rebalancing, tactical overlays, and asset allocation mechanics during market turbulence. Andy elaborates on taking marginal bets against the US market and using liquidity buffers. | |
| Epistemological Humility and Refocusing on Core Partnerships | 4 | 6 | 2 | 1 | Ted inquires about market-cap and sector-level adjustments. Andy gently redirects away from day-to-day market micro-moves to emphasize epistemological humility and primary partnership stewardship. | |
| Unified Liquidity Management Across Princeton University | 4 | 6 | 2 | 1 | Ted asks whether university operational liabilities like tuition uncertainty dictate endowment asset deployment. Andy clarifies that liquidity management is treated holistically across the university rather than purely inside the endowment portfolio. | |
| Structural Pitfalls of Pre-Committed Drawdown Vehicles | 3 | 5 | 3 | 1 | Ted asks if managers are calling for capital, prompting Andy to deliver a critique of pre-committed drawdown vehicles in public markets, which he argues create a tragedy of the commons for allocators. | |
| Evaluating Long-Term Manager Partnerships vs Short-Term Gains | 4 | 4 | 1 | 1 | Ted asks about pipeline underwriting in a remote environment. Andy discusses PRINCO's trade-off between durable compounding relationships versus transient opportunistic high-IRR deals. | |
| Redesigning Internships and Advancing Diversity in Asset Management | 3 | 4 | 1 | 1 | Ted asks about durable operational adaptations. Andy discusses rethinking internship programs for remote environments and expanding outreach to improve diversity across investment management. | |
| Inquiries Received and Unconventional Investment Pitches | 3 | 3 | 2 | 1 | Ted asks what has surprised Andy in terms of incoming pitches. Andy jokes about receiving pitches for niche strategies like sports betting funds while high-quality core assets are on sale. |
Statements from this episode (19)
Golden: Early COVID-19 volatility surpassed the 2008 Lehman Brothers collapse
“During what I think is objectively the most volatile markets in my career, even compared to the Lehman days, you gotta understand Is there anything particularly unusual going on?”
PRINCO requires every investment team member to record advance votes
“Every time we have a major decision, we move the entire investment team from the room we normally sit in to a board-like room. And everyone, even if they're in their first week, they're a twenty-year-old fresh out of college, attends that meeting and has to wr…”
Developing internal talent requires showing juniors how decisions are made
“You can only grow your own talent if you don't grow well, at least if they see not just the output of decisions, but see the how the sausage is getting made.”
PRINCO prioritizes post-crisis culture over exploiting immediate market opportunities
“In terms of big worries right now, a surprisingly large share of my worries are not about getting through this crisis, not even about Exploiting as much of the opportunity created by the crisis as possible. It's more about what happens after the crisis and how…”
PRINCO entered the 2020 crisis with a significant bet against US stocks
“We had also not done that evenly and had a fairly significant bet against the US stock market. Which was helpful in March.”
Golden in April 2020: China is the least troubled financial market
“China is the least troubled area in terms of markets right now.”
Over half of Princeton's portfolio is in non-marketable investments
“About half, more than half the portfolio is in non-marketable investments, and you got already this underweight in the US, so you can only underweight so much.”
Investors are likely overconfident about understanding their portfolios during crises
“Like, yeah, you probably are overconfident in your ability to Know what's actually going on in your portfolio, let alone know what's going on in the world.”
Universities must evaluate liquidity holistically rather than isolating the endowment
“One of the lessons that we actually learned as opposed to were reminded of during the global financial crisis was a benefit of looking at liquidity in a unified way across the university. So it's not so much about how we're deploying liquidity within the endow…”
Princeton built emergency liquidity reserves outside its endowment post-GFC
“The intersection is that coming out of the global funders crisis, the university explicitly built up a little bit of reserve outside the endowment for liquidity, so that in a kind of Break glass situation, then we could defer some spending coming out of the en…”
PRINCO paused offensive capital deployment during the early 2020 market crisis
“We're really hitting pause on the offense for now, because it's just so hard to figure out.”
Dislocation drawdown vehicles force allocators to suboptimize their portfolios
“I have long been frustrated by a trend among Marketable managers to create drawdown vehicles to be used in market dislocations because it causes us to suboptimize our portfolio.”
The 2020 crisis may accelerate asset manager adoption of drawdown vehicles
“I think one of the issues that may come out of this current crisis, Is that for those few managers who were willing to just play it more informally, they're going to be processing the advantage that some of those managers with the legal draw had, and it may ac…”
Early 2020 high-quality corporate debt dislocation offered guaranteed multiples
“There was a brief moment where there's such dislocation across high quality corporate debt that had to take precedence of like, because you were pretty much guaranteed a multiple. You didn't know what your IR would be because you didn't know the time.”
Allocators must pace crisis deployments like a buffet line
“The analogy that We've often used in trying to describe it to ourselves, also to our managers as, hey, it's a buffet line, right? And you got a plate and you don't want to fill up your plate too early because often the lobsters at the end, they start out with …”
PRINCO refuses to back new managers for short-term market opportunities
“And we Have never, and can't imagine we ever would create a new relationship to seize upon an acute opportunity, because then what happens when that opportunity goes away?”
Long-term compounding manager relationships beat short-term high IRR bursts
“For relationships that can compound over a long time into something Really big, even if there's a lower nominal return to that, if you don't have that kind of reinvestment risk, you may want to choose that relationship over something that has more of a burst o…”
Allocators avoid offbeat strategies when traditional assets are cheap
“I think it's also interesting that the really kind of off the beaten path investments, like a Sports betting fund. That's interesting that you would think that I would think that what I need right now, when very traditional things are on sale, is to go far afi…”