Oct 9, 2017 · 55m · capital-allocators
Jason Klein – Investing to Cure Cancer (Capital Allocators, EP.28)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Ted Seides interviews Jason Klein, Chief Investment Officer at Memorial Sloan Kettering Cancer Center, exploring how MSK constructs its $4.5 billion multi-asset portfolio, evaluates exceptional manager talent, and aligns institutional investing with the hospital's mission to cure cancer.
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 27.4% of the talking time here. How this is scored →
Ted as informed peer 4.8 Guest teaching 4.0 Guest disagreement 0.0 Ted pushing back 1.1
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 38:37 Defending the post-commitment premortem timing
In an overall exceptionally polite and collaborative discussion, Jason gently counters Ted's suggestion that premortems should precede commitment by explaining why maintaining psychological commitment is essential to the premortem exercise.
Hardest push from Ted ▶ 18:23 Ted challenges 100 bps illiquidity quantificationTed directly challenges Jason's 100 basis point annual illiquidity premium rule of thumb, questioning how one can cleanly isolate that delta when comparing a public tech picker to early-stage venture capital.
Biggest teaching moment ▶ 41:30 Jason explains the STAGE framework breakdownJason educates Ted on why traditional asset classes broke down during the GFC and explains MSK's proprietary STAGE framework for slicing underlying risk drivers rather than relying on standard labels.
Ted holds their own ▶ 21:21 Ted points out missing entry valuation parameterTed actively steps in to point out that Jason's structural framework left out entry valuation, forcing Jason to incorporate entry price into his three-legged stool paradigm.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Connecting Investments to MSK's Mission Through 'Memorial Moments' | 4 | 3 | 0 | 1 | Ted opens with a personal connection to MSK via Cycle for Survival and prompts Jason to describe their weekly Memorial Moments. Ted makes a light observation about a cancer center operating like a competitive business, which Jason cordially affirms. | |
| Building a Multi-Asset Class Toolkit from Bottom-Up Private Equity Skills | 5 | 4 | 0 | 1 | Ted asks how bottom-up private equity skills translate into multi-asset allocation. Jason explains his progression at MoMA and MSK, outlining his core beliefs about research in quirky niches and aligning with a single client's risk appetite. | |
| MSK Asset Allocation Targets and the Illiquidity Premium Framework | 5 | 5 | 0 | 1 | Ted asks Jason to break down the asset allocation percentages and compare illiquid versus liquid investments. Jason outlines his portfolio targets and explains his rule-of-thumb heuristic requiring a 100 basis points illiquidity premium per year. | |
| Evaluating Illiquidity Premiums, Structural Terms, and Research Engines | 6 | 4 | 0 | 2 | Ted pushes on how to practically quantify a 100 basis point premium across public vs venture managers. Jason explains the concrete structural terms (fee breaks, carry crystallization) and the qualitative aspects of a manager's research engine. | |
| Manager Selection: The Three-Legged Barstool and Entry Valuations | 6 | 4 | 0 | 2 | Ted notices that entry valuation was missing from Jason's initial list and inserts it into the discussion. Jason agrees, explaining his three-legged barstool framework (philosophy, strategy, process) and how market entry valuations fit into the surrounding environment. | |
| Differentiating Manager Character: Internal Competitiveness and Self-Learning | 4 | 4 | 0 | 0 | Ted asks for specific character traits that separate selected managers from rejected ones. Jason highlights internal competitiveness, continuous self-learning, and intellectual curiosity through concrete examples. | |
| Sponsor Message: Ridgeline | 1 | 1 | 0 | 0 | Ted delivers an ad break for Ridgeline before circling back to discuss intellectual curiosity and productivity in managers. | |
| Flexible Mandate Managers vs. Niche Opportunity Sizing | 5 | 4 | 0 | 1 | Ted inquires about manager turnover and sourcing pipelines. Jason contrasts long-term flexible mandate managers (FMMs) with short-term niche opportunities, summarizing their strategy as an iterative two-step game plan. | |
| Due Diligence Mechanics: Qualitative Corroboration and the '30 Questions' | 5 | 5 | 0 | 0 | Ted asks about the due diligence workflow behind the scenes. Jason walks through off-list referencing, quantitative track record decomposition, and MSK's team-wide '30 questions' review. | |
| Storyboarding and Conducting Post-Commitment Premortem Analysis | 6 | 5 | 0 | 2 | Ted probes on the timing of post-commitment premortems and whether conducting them post-funding makes allocators biased. Jason acknowledges the tension and explains how the exercise provides a forward-looking monitoring checklist. | |
| Leveraging the Investment Committee Efficiently and Respectfully | 5 | 4 | 0 | 1 | Ted asks how MSK engages its high-profile investment committee without wasting their time on small manager allocations. Jason explains using advance strategy dashboards and pre-meeting materials to keep committee discussions focused on high-level risk. | |
| Bottom-Up Implementation and the Five-Lane Highway Analogy | 6 | 5 | 0 | 2 | Ted and Jason discuss the viability of conventional asset allocation buckets in a low-yield environment. Jason introduces the STAGE framework and his five-lane highway analogy, explaining how bottom-up implementation interacts with top-down risk limits. | |
| Macro Environment Concerns: Mispricing of Capital and High Multiples | 4 | 4 | 0 | 1 | Ted asks what worries Jason most about current capital markets. Jason cites the mispricing of capital driven by artificially low interest rates pushing valuation metrics into top deciles. |
Statements from this episode (19)
MSK Investment Team Starts Weekly Meetings with Scientific 'Memorial Moments'
“So every Monday morning, our team gets together, organizational meeting, full team, and we'll begin with what we call Memorial Moments. There, what we're doing is we're either sharing some sort of research that's going on at the organization, some sort of ad t…”
Klein: Public and private equity share identical core dynamics despite different structures
“When it comes to public equity, well, that's really sort of similar dynamics and drivers as private equity, but different structures.”
Klein: Deep specialized niche research creates substantial institutional investment edge
“The investment world is is a is a series of smaller worlds that are quirky, that are funky, that are differently understood, that are driven by some set of underlying fundamentals in the longer term, but many sets of technicals in the near time. Taking the tim…”
Klein: True institutional risk is loss sensitivity and liquidity, not volatility
“And by risk there, I don't really mean standard deviation or volatility, but I mean, what's the sensitivity to loss? What's the sensitivity to accessing their capital? How does their capital figure into their plans and their aspirations? And understanding How …”
Klein Outlines Memorial Sloan Kettering's Target Portfolio Asset Allocation
“The pie looks like using the conventional asset allocation framework that we have, Global equities, roughly 30%. Hedged equities and uncorrelated strategies, roughly 30%. Private equity strategies, all in, roughly 20%. Real asset-based strategies, roughly 10%.…”
Klein: Memorial Sloan Kettering targets a 100 bps annual illiquidity premium
“And then we came up with a Simple heuristic. Basically a hundred basis points per year. We think that we should be getting in terms of an illiquidity premium to lock up our money.”
Klein: Manager track records must link back to ex-ante research engines
“Ideally, you'd have a manager that has been doing
The same strategy for a long period of time.
So we should be able to see our way mapping a manager's research engine to the returns that they actually have produced.
And then if you have that benefit of the tra…”
Klein: Internally competitive managers make better partners and collaborators
“I would say an internal competitiveness or competitiveness that is internally oriented. Like to find people that are driven, but driven to compete mostly with themselves to do as best as they can. As a result, hopefully that will propel them if they're skilled…”
Klein: Exceptional managers are driven by production and contribution over consumption
“I think the third one would be a, what I would sort of describe as productivity, meaning an interest in being productive. We find that there are people in this world, there are managers in this world that have, by any measure of success, certainly any measure …”
Klein: Flexible mandate managers are ideal partners for perpetual investment
“Flexible mandate managers, which is sort of the ideal for us. If we spend the time to research, find the people, understand their worldview, understand their philosophy, understand their risk taking, if we are aligning ourselves with them, Then we can hopefull…”
Klein: MSK Freely Shares Ideas Because Cancer Centers Do Not Compete
“One of the big benefits about investing on behalf of the cancer center is we're not in competition with anybody. We're here to help patients. Happy to be collaborative. In a trusted sense, never break a confidence, but happy to be collaborative with people and…”
Klein: MSK maintains a fully invested portfolio with minimal turnover
“Again, coming back to the turnover question in practice, the answer is, is that we're not turning over the portfolio all that frequently at all. So we have the benefit of being, of having a fully invested portfolio without a whole lot of turnover.”
Klein: MSK tests manager allocations using a '30 questions' diligence framework
“One of the earlier stages of the gestation period, as it were, something that we call 30 questions. We've got a group of 30 questions that we've put together. Again, it's meant to be informative. It's not meant to be prescriptive, but we're looking at, do we u…”
Klein: Post-commitment premortems uncover overlooked risks and create monitoring checklists
“What we have found is that creative thinking, once you're fully committed, It lets you take a step back and identify things that, from a different perspective, maybe you didn't do, identify earlier on, and what it also does is it gives you a sort of checklist …”
Klein: Debating 1-2% positions with elite investment committees is inefficient
“If we're pulling together that kind of a group, and we're discussing a one or two percent position, it's just not the best, highest impact that we can bring their experience to bear on behalf of Memorial Sloan Kettering.”
Klein: MSK backs flexible managers who trade across asset classes nimbly
“Really what we're interested in is nimbleness of capital. What we're interested in is managers that can make those real time or more real time trade-offs across asset classes and in a much more nimble format than we're ever going to be able to do.”
Klein: Manager Opportunity Set Shrinks as AUM Increases
“As AUM rises, the opportunity set tends to fall. So as you gravitate towards larger managers, that larger capital base acts as a constraint on the opportunity set itself. So there's a sweet spot. That sweet spot might be measured in a small billions or a high …”
Klein: MSK Divides Managers Evenly Across Three Flexibility Tiers
“Probably a third of the managers have a very meaningful degree of genuine flexibility across many different asset classes. I'd say another third of the managers Have meaningful flexibility within their asset classes. So for example, global equity is a global e…”
Klein: Platforms Like Seeking Alpha Offer Allocators Genuine Investment Edge
“You look at the kind of information that people are sharing On Stock Guru, or Seeking Alpha, and you realize that a lot of the people that are sharing that information, or on Quora, for example, you realize that a lot of the people that are sharing information…”