The Exchanges

Q Talk a little bit about the kind of the due diligence process. So you have a search, you've, you've gone through this process with the client of understanding what that roster of candidates looks like, the three buckets, and now you start bringing people in. Do they meet you first? Do they go right to the client? And how much time do you spend?

A Well, we always spend, you know, at least a couple hours with candidates before they would go in to meet the client. Our, uh, calibration process is, you know, initial phone screening, then the in-person meeting. Again, we never, critical to our credibility in the marketplace is not compromising confidentiality of candidates. Having said that, given our network We're typically not introducing someone to a client even after we've spent time with them in person and over the phone without some sort of informal, highly confidential third-party calibration in terms of our network in the marketplace around where they've worked, who's worked for them, who they work for. And again, it's incredibly sensitive because, you know, we'd be out of business if we were Compromising candidate confidentiality, but again, that's one of the advantages of being in the business for a long time and having six or seven of us who just have that kind of network.

AI assessment note: “we always spend, you know, at least a couple hours with candidates before they would go in”

Q when it comes to a decision-making process, let's just pick out a university. There's so many different potential constituents, right? So you have the, you have the investment committee, a search committee probably within that. You probably have an existing team. You then have the university itself. You might have alumni with interest. How do you sort of triangulate on who, how you get that decision made and who's involved?

A Well, a successful search, you get all those other constituencies, you get all their input up front, so they feel included. And then you have a really tight search committee of three, maybe four people, and they tightly control the process. And they have the trust of the, of the investment committee and the board and all the other outside constituencies, including the chancellor or the president or the different alumni constituencies. And then the, from that, you, you need to have a really tight, involved search committee. And typically the lead guy on that search committee is He and I are going to be attached at the hip, and that's where the real day-to-day communication is going, and he, but the rest of the search committee is also very involved, and then from that, they're the ones that really get to two or three finalists, and then they, with the confidence of the rest of the investment committee, will recommend two to three folks that then go to the broader The key members of the board or, uh, obviously of the administration in the, in the case of an endowment.

AI assessment note: “you get all their input up front... then you have a really tight search committee”

Q Do you, in, in an attempt to be kind of client-focused, customer-centric business, how do you think about aligning your incentives with your client, And where do you see some search firms make that work the right way, and where might it go awry?

A It's a great question. One alignment is you have fewer clients, and so you have fewer off limits, so you have more access in the market, that's one alignment. Another alignment is in a boutique, we, because it's not, we're not volume oriented, we can be doing fewer searches, and if we control our costs well, the economics should be just as good, because we don't have all the overhead of a big firm. So if we're doing fewer searches by Definition, our probability for success is going to be higher. We should be doing higher quality work, more thorough work, because we're doing less, fewer searches. And that's, again, a boutique can do that if it's properly structured. The other part of that is pricing. And the, and the, and the business has evolved a lot in the last 15 years, where I think users of search are much more savvy. The days are gone where you can just say, you know, we're going to charge a third of the first year's total comp. So, but we start, we built our firm on the premise that we never did an open ended one third. We will discuss with the client going in a fair compensation range, and we will either do a flat fee, or we will cap our fees at the mid range of a certain comp range that we think we can be successful for the client.

AI assessment note: “One alignment is you have fewer clients... The other part of that is pricing.”

Q search. I'm really curious to walk through what that process looks like, you know, for me with an eye towards, hey, how similar or different is this from an allocator looking at a manager, a manager looking at a stock or an executive team or something like that. So why don't you start with, How does the, the sourcing process begin? How do you frame out what you're looking for?

A Well, I think the first thing is, because, uh, 75% of this is cultural fit. Spending as, as much time with the existing team as appropriate, but probably as importantly, the administration of the university or the foundation, or, and then, as most importantly, the board. So the search committee and the investment committee Members of the board who are going to really have an impact on this hire and really get a feel for what's important to them and, uh, what are their key drivers and what must haves and nice to haves in terms of the, of terms of the spec and the culture and, and just how the organization works. So once you've done that sort of due diligence up front.

AI assessment note: “Well, I think the first thing is, because, uh, 75% of this is cultural fit.”

Q And so let's turn to the art side. And so what are those key components of the art in vetting candidates?

A I think you have to look at just style and cultural fit, and then, and then career motivation. Where is someone in his or her career? Why would this make sense? And then the cultural fit, you know, their team, their people management skills, their team building skills, their Ability to manage committees, and then comparing that to what the, what the needs of the, of the client are. And also, when we're in that third bucket, best athletes, you know, really thinking creatively around where could, where could people be that might fit this, this mandate, and, and that's, because it's, I mean, candidly, you know, anybody who's reasonably competent in search will know who the, you know, top 100 CIOs are across endowments and foundations and those CIOs, and, and, They may not be as well-versed as we are at the second level in terms of the up-and-comers, because we do a lot of asset class stuff, but that's, you know, I think where you can be really adding value is in terms of your knowledge of the market, and whether it's the, the alternative space, you know, hedge funds, or private equity, or solutions businesses within third-party managers, or, you know, the, the family office world is a lot, a lot more fragmented and hard to get your hands around. Being, being able to add value in terms of finding people in those areas, you know, that's, that's important.

AI assessment note: “I think you have to look at just style and cultural fit, and then, and then career motivation.”

Q in a totally different context could be the same process for hiring an investment manager. You go through the process, you, you think you have the right person. In this case, you wire money, you have them, you know, there's a contract. And then they perform or they don't perform. And how, how do you, do you evaluate over time the success of the people you've had in the roles?

A We should do a better job of tracking the success of our placements You know, on the flip side, but it, you know, it's when we're looking at candidates, or when we're measuring the success of the people we've placed, you can certainly get a sense for how they're doing in terms of the shaping of their team, if that was required, and how they're dealing, doing with communicating with the board, and building confidence with the board. But assuming those things are going well, which are things you can measure, You know, as you know better than I do, you know, the, you're turning around, you're, you're reshaping, repositioning, or turning around, you know, Aircraft carriers. So, I think you take your, really your first breath on the, and the calibration point, maybe at three years, but it's, I think, five years for me is the proof of the pudding. And it's interesting, uh, you know, if you say, what is, how do you measure success in the ENF world? It really is continuity and stability. When we were doing the Stanford CEO search, Seven or eight institutions that they compared themselves to that were ahead of them on a ten-year basis, on their, in terms of their ten-year number, all those CIOs had been in place for 10 years.

AI assessment note: “calibration point, maybe at three years, but it's, I think, five years”

Q And do you think about your business in terms of trends in asset management? So today, People are talking a lot about quantitative investing and quantitative placements. Do you think about, well, that might be an area of growth and change. Therefore, we should be thinking about those types of searches.

A I think about it all the time, and especially in the context of we're very lucky because we have a large, I call it my, I call it the captive capital clients. So because the asset owner business will always be there because those people always have to put money to work. So whether it's our sovereign wealth Clients in the Middle East, whether it's the growing family office businesses, whether it's the ENF world, whether it's planned sponsor community, that's a great stable base of business, which a lot of search firms don't have. But at the same time, you know, you want to make sure you're well positioned with some, you know, firms like Vanguard. You want to be making sure you have a nice blend between active, fundamental, and quantitative companies. All that stuff has to be taken into consideration.

AI assessment note: “I think about it all the time, and especially in the context of”

Q What are the biggest trends you're seeing in kind of the CIO space? Maybe it's the, among the candidates that you see today.

A I think the, the biggest challenge today is the scarcity of talent. I think the reason you've seen so much So many changing seats over the last several years is that because of the increased transparency around performance, and then the, so then they get the relative comparisons where, you know, through, you know, the press has turned this into an arms race, which is unfortunate in my view because it doesn't have to be an arms race. I mean, this is not a, um, zero-sum game. Everyone can be successful, so you don't have to Turn it into that type of thing so people become more introverted and less sharing and, you know, and it's a problem. But as a result of that, coming out of the crisis, investment committees and boards have been forced to take a much More fiduciary-minded view of their roles, and so performance on an absolute relative basis for, you know, from 10 to 15 was suddenly looked at much more carefully, because they're hearing from all their alumni networks, well how come we're, you know, not doing, ah, why are we underperforming Yale, or whatever it is, right? So as a result, where, you know, 2005, 2006, you know, Boards were, I don't want to say they were mailing it in, but there was just a lot less scrutiny on performance. So these boards have been forced to take action. So that's led to, you know, we're doing a large CIO search right now, and they're concerned tha…

AI assessment note: “the biggest challenge today is the scarcity of talent.”

Q Protect the innocence. What was the single easiest search you ever did?

A No search is easy. Of course I'm going to say that. No search is easy. I will say the, the most enjoyable searches are, are where you have a really focused, engaged search committee. And especially the head of the search committee. Because that's really, Your day-to-day contact. And if they're engaged and focused, it keeps you motivated and, you know, it leads to, you know, the highest probability for success. And, and none of these searches are easy. If you wanted to quantify it, I mean, the larger, the more visible the position, you know, there's fewer people that you have to target. So, You know, over the last three years, Stanford, Harvard, UTIMCO, that universe of candidates is going to look a lot different, and Canada's going to be a lot smaller subset than doing something for a, you know, a three to four billion dollar.

AI assessment note: “No search is easy. I will say the, the most enjoyable searches are”