Jan 28, 2019 · 53m · capital-allocators
Donna Snider – Inside the Investment Process at the Kresge Foundation (Capital Allocators, EP.84)
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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 Donna Snider, Managing Director at the Kresge Foundation, exploring her transition from Wall Street derivatives structuring to endowment management, internal portfolio processes, and institutional leadership.
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 20.3% of the talking time here. How this is scored →
Ted as informed peer 4.6 Guest teaching 2.9 Guest disagreement 0.4 Ted pushing back 1.0
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:46 Donna rejects hypothetical premise and corrects timeline
Donna immediately shuts down Ted's prompt by noting they have zero long/short exposure, then interrupts Ted's timeline to point out value has underperformed for a full decade rather than a couple of years.
Hardest push from Ted ▶ 31:31 Ted presses on turning internal debate into termination decisionsTed refuses to linger on general rationalizations about value underperformance, directly challenging Donna to explain the concrete mechanism for firing managers.
Biggest teaching moment ▶ 13:20 Donna details the reality check of private market fee dragDonna details the jarring realization of transitioning from the sell-side derivative world of tight bid-ask spreads to private equity's substantial gross-to-net fee spreads and lagged quarterly marks.
Ted holds their own ▶ 45:05 Ted highlights structural difficulty in hedging private venture gainsTed displays institutional expertise by noting the historical difference between publicly distributed venture shares that could be shorted versus modern private tech holdings that lack public liquidity.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Donna Snider's Background: Actuarial Science to Wall Street | 2 | 0 | 0 | 0 | Ted offers an open prompt to establish Donna's professional trajectory. Donna delivers an extended biographical narrative covering her transition from actuarial work to structured derivatives at Merrill Lynch and eventually Kresge. | |
| Bridging Sell-Side Trading and Foundation Allocations | 4 | 4 | 0 | 0 | Ted asks how Donna's trading skill set interfaced with the foundation's generalist structure. Donna explains teaching counterparties price discovery while learning the multi-point manager selection universe and private market fee realities. | |
| Restructuring the Team: Specialist Analysts vs Generalist Leaders | 4 | 3 | 0 | 1 | Ted probes team architecture and asks how junior analysts earn credibility on trips like China. Donna details transitioning analysts into asset-class specialists to avoid shallow diligence. | |
| Sourcing, Due Diligence, and Portfolio Construction Tools | 5 | 2 | 0 | 1 | Ted asks for a step-by-step walkthrough of sourcing, vetting, and memo creation among the senior leaders. Donna explains internal filtering, candidate catalysts, and top-down analytical systems. | |
| Position Sizing, Liquidity Planning, and Team Debates | 5 | 3 | 0 | 1 | Ted inquires into sizing formulas and internal voting procedures. Donna outlines Kresge's 1% starting threshold and the deliberate practice of requiring the most junior team member to vote first to prevent anchoring. | |
| Sponsor Message: Ridgeline AI Investment Platform | 6 | 5 | 2 | 3 | Ted sets up a hypothetical long/short dilemma, which Donna reframes by clarifying Kresge holds zero long/short equity and correcting value underperformance from 'a couple years' to 'a decade'. Ted presses on how debates become hard firing decisions. | |
| Implementing Internal Derivatives and Overlay Strategies | 5 | 4 | 0 | 1 | Ted asks about the technical mechanics of internal derivative management. Donna explains synthetic rebalancing swaps, shorting emerging markets to replace with US equity, and internal volatility harvesting. | |
| Industry Recognition as 'Most Wanted CIO' and Team Culture | 4 | 2 | 1 | 1 | Ted brings up Donna's ranking as the top 'Most Wanted CIO' and asks about internal office politics. Donna explains why transparent career conversations with Rob Manilla prevented organizational friction. | |
| The Evolving Role: Senior Allocator vs Chief Investment Officer | 5 | 3 | 0 | 0 | Ted asks Donna to contrast her present day-to-day work with the operational realities of a CIO. Donna describes delegating manager selection to embrace board governance, politics, and mentoring. | |
| Managing Market Cycles: Venture Gains, Emerging Markets, and Fees | 6 | 3 | 1 | 2 | Ted drills into private market liquidity, hedging private tech, and fee negotiation dynamics. He calls out Donna's skeptical facial expression regarding co-investment promises. |
Statements from this episode (17)
Snider: Sell-side structuring prioritizes product volume while investing demands filtering for quality
“My job and when I was on the sell side was create a bunch of widgets, and the more widgets I could create and get out the door, the better. And now my job as an investor is evaluating all those widgets and only picking the best. So I really switched from quant…”
Donna Snider: Allocators Cannot Make Good Decisions Without Mapping the Manager Universe
“That was the biggest lesson for me is that one data point is just that one data point, and until you know what the universe looks like, you're not going to make a very good decision.”
Snider: Junior investment talent development follows a steep S-curve after year one
“We have found that the first year young talent is with us, you're feeding them and bringing them along. And then it goes through, like, really this S-curve. Like, it's amazing. Over the short window of time, they go from one level to another level. And then yo…”
Snider: The credit market is extremely stretched and warrants no new dollars
“Look at credit, and you say credit is extremely stretched. Why would we be putting a new dollar into credit?”
Kresge Foundation sets minimum 1% portfolio sizing for manager commitments
“And we always kind of start with one percent. It's got to be a one percent position. For private funds, sometimes that's one percent over a couple funds, but for public funds where you can get out quickly if things aren't going well, You kind of got to start a…”
Snider: Investment teams should make the newest, most uninformed person speak first
“We always start with the newest person in the room and make them give an opinion. It's the most uninformed opinion in the room, But getting them to speak and speak before they hear anybody with more experience is really important.”
Snider: Kresge Holds No Long/Short Equity Managers in Its Portfolio
“We have no long short in the portfolio, so we'll have to pick another one.”
Snider: Most market-neutral long/short equity hedge funds fail to be market-neutral
“We have a belief that most market neutral long shorts are not market neutral, so they have been out of that portfolio.”
Snider: Kresge Had a Heavy Small-Cap Value Bias and Missed Large-Cap Growth
“We will all admit that in our portfolio we have a huge bias towards small cap value. And that has not been in favor for 10 years. So there is a piece of that that is on us that we missed. We didn't put large cap growth in the portfolio. We didn't.”
Kresge shorted emerging markets for US exposure via total return swaps
“We haven't really loved emerging markets in the last year and shorted emerging markets and replaced it with US. And that was just a total return swap on both sides.”
Kresge harvests the volatility risk premium internally rather than paying hedge funds
“Volatility trading, right? The implied versus realized risk premium. Tons and tons of Ph.D. Dissertations have been written on this, and so we have a give all trade on in the book, and we're not going to hire a manager to do that. We're going to put that on, s…”
Snider: Institutional Investor's Rising CIO List Implied Everyone Was Talking to Recruiters
“That list was admission that pretty much everybody on that list was talking to a recruiter, because I believe that list was mostly put together by the recruiters, and so the recruiter probably didn't nominate you if they hadn't had at least one conversation wi…”
Snider: Becoming a CIO Shifts Work Away from Sourcing and Diligence
“When I move to being a CIO, or if I have the opportunity to move to being a CIO, that's not going to be my primary job. Managing boards. Managing politics in an organization. Managing a team. Managing Team development. Staff development. Making the hard decisi…”
Snider in 2019: Venture capital paper gains are elevated and must fall
“What to do about paper gains in venture is a hot button. I wouldn't say that there's differing opinions. I mean, we all see these paper gains, and we know it needs to come down.”
Snider: Freezing venture commitments creates massive vintage-year risk
“If we just sit here and don't contribute anything, don't commit to any new venture funds for the next 10 years, you're going to have massive vintage year risk. So going zero for the next 10 years is also not the right answer.”
Snider: Kresge's highest-fee hedge fund actually delivered its highest net returns
“We did an analysis two years ago, I want to say. Where our hedge fund analyst was tasked with pull all the financial documents of every one of our hedge funds and figure out what fees we paid. And we're going to go after the people that we paid the highest fee…”
Snider: Fund managers must drop buzzwords and explain return mechanics plainly
“When you're sitting across from a manager and they're trying to explain their very fancy strategy, using all these buzzwords. That mean nothing. It's like, no, let's talk about this. I'm going to give you a dollar. You're going to turn it into more than a doll…”