The Exchanges

Q What led you to pivot from the GP side to the LP side?

A More happenstance, being lucky in terms of relationships. I was planning to stay on the GP side, but I worried about the firm where I was, great people, wonderful mentors, but was going to face these cyclical and secular declines. But I didn't believe there was a future. Our largest LP was Harvard Management Company. I went to tell the folks at HMC, who remain very good friends of mine, that I was going to leave and I'm going to stay involved with portfolio companies and sit on a couple of boards. They said, hey, would you ever think about joining us? We're going to rebuild the CoInvest platform at Harvard. The Charles Bank team had spun out already. We think you'd be a good addition to the team. That pivoted me from, I'm a GP, I'm a GP, to then thinking about being an LP. The other piece for me in that situation, Ted, I received financial aid when I went to Harvard. The mission-based aspect of that spoke to me of being able to give back in some way while doing something I really enjoyed.

AI assessment note: “They said, hey, would you ever think about joining us? We're going to rebuild”

Q At what point in time did you decide the potential didn't have the NHL path?

A I was drafted, playing the Olympics. When I graduated, I had a number of head injuries, concussions. I almost had to stop during the Olympic year and leave the team because of concussions. I almost had to stop playing hockey at Harvard my senior year. Very few people knew about what was happening and what was going on. My parents and my brother were great about, you don't need to play, but I love the game. I love my teammates. During my senior year when I was playing, it wasn't in the back of my mind. This is near the end. This could be it. When I graduated from college, I was fortunate to have the Hartford Whalers, which no longer exists, had my rights. They offered me a great contract. It was a four-year contract, signing bonus, guaranteed money, 700 grand. It's very hard to say no to 700 grand. Even if you get hurt, you still have that money. But back to the lessons about life, and there's more to life than playing hockey, it's really about your future. In particular with concussions, you're playing a very dangerous game. Between doctors, coaches, Bill Cleary at Harvard, my parents, I understood that it wasn't worth it. That was where I changed focus. It took me a couple of years and a couple of twists and turns to figure it out, because I did play for one year in Switzerland, thinking it's a less physical style of play, I could play in one more Olympics, but that was the re…

AI assessment note: “When I graduated from college... I understood that it wasn't worth it.”

Q What was that like with your dad as a professional hockey player before pro sports became the big celebrities they are today?

A Definitely different, because it was still a big deal. People treated my dad differently. When he'd go somewhere, everyone wanted to meet him, and particularly in his hometown of Nova Scotia, he was a celebrity, and even in Pittsburgh to some degree. It was at the point in time where they started to make enough money that he didn't need to do anything else. He did okay. These days would be upper middle class, but with a little bit of celebrity around it. The experiences were what I remember. One day, my brother and I were on pregame skate Saturday morning when we were allowed to go to the rink. We skated before the Penguins had their pregame skate before the other team came out, and this happened to be the Boston Bruins. We hop out, my brother and I are ripping around and having fun, and all of a sudden, one player on the other team comes out from the Boston Bruins. My dad comes out and is like, boys, get off the ice. The player on the other team comes over to where we're getting off the ice, It was Bobby Orr. And my dad says, hey, Bobby, I'm so sorry. And Bobby, as gracious and humble as he is, made a joke, which was, lol, don't worry about it. This will probably be the best competition I face all day. So you grew up in that environment, and knowing those people, you don't know any different. Once my dad retired, he went to school for 14 summers to get his undergraduate degree…

AI assessment note: “Definitely different, because it was still a big deal. People treated my dad differently.”

Q So we pull the thread on the investment side. How did you think about the building blocks of mass allocation model and how you wanted to implement it?

A This was my last chapter. I spent a lot of time on this, making sure we were like-minded, because the last thing you want to come into an organization and be like, okay, we're ripping this thing up. I wouldn't have joined if I didn't believe in it, but two examples of things that were really important that are probably the two most important building blocks. Public equities here, we are largely tax-managed passive. I worked for the Johnson family, so I know Active very well. I was lucky to lead the public markets team at HMC, too, so I've been around the sector. I have become increasingly concerned about the consistency and the opportunity to generate alpha. Fundamentally, in low dispersion asset classes, like public equity is, the beta is very attractive. I still believe there's alpha out there, but we're a 70% tax managed passive, and if you can generate a hundred to 200 basis points of tax alpha, and there are now extension strategies that build upon that, if you're thoughtful about it and don't put too much leverage on it, there's effectively some tax alpha that you get for free. The consistency of that is a foundational piece in public equities around the margin. Are there some gift to public investors? There sure are. Generally in less efficient parts of the market. It could be small mid-cap. It could be Europe. It could be Asia. That really became foundational. Where the…

AI assessment note: “Where there's dispersion, you go active. Where there's low dispersion, like public equity, you go passive.”

Q be valuable to our community. One is Oldwell Labs, or OWL. OWL is the very best software I've seen for allocators to find and track managers, and I've seen a lot of them. Trust me, it'll be worth the look. There's a link in the show notes so you can learn more. And here are those closing questions. What is your favorite hobby or activity outside of work and family?

A I love working out because I love pushing myself. If my daughter and I are going for a bike ride, which we do every Sunday in the summer in the Cape, we're going from where we live in West Falmouth to Woods Hole, and we time. All my kids are wired the same way. If I get on Peloton, I can't help but chase the leaderboard. I love to play hockey. I get to play hockey with people who are my age, and these days with people who are younger, which is quite humbling. I love the competition. I love working hard. I love pushing myself. These days, when I play with the young guys, I may only make one good play during the course of the skate, but it's fun.

AI assessment note: “I love working out because I love pushing myself... I love to play hockey.”

Q In those couple of years where your hockey career was probably ending, how did you think about what you wanted to do that ended up landing you in the investing world?

A I had no idea. You and me, liberal arts, education. My parents had done very different things, so there's no exposure going up. Finance ended up being something that I saw a lot of people in, particularly going to college, your friends, their parents. That was an eye-opening, so I started thinking about finance. I had no idea what that meant, but I had some nice mentors. People were like, if you want to get into business, investment banking is a good path. I remember getting a job at Robertson Stevens & Company. Right after I stopped playing hockey in San Francisco, I didn't even know what an income statement, a balance sheet, or cash flow statement was. I'm flying out to California. I was going to work in San Francisco office. I'm reading an accounting book, trying to figure out how all this stuff works. You jump in the deep end of the pool, and you figure it out. What I tell a lot of young professionals these days, none of this is rocket science. If you're smart, you're thoughtful, you're a good person, you work hard, there's a path. I was so intimidated. I had some great colleagues who taught me modeling. You go in with humility. You hopefully are appreciative. It's amazing how much people will give and share with you. I had some great teachers at Robert and Stephens.

AI assessment note: “Finance ended up being something that I saw a lot of people in”

Q What did you come to learn were ways that you, as an LP, could be a great partner to your GPs?

A We're all biased by our own experiences. Being a GP was helpful. It could be as simple as it's a GP who you really like. You want to be supportive. Looking at their marketing materials before they go out to raise their next fund. Being a confidant. Here's what I think you're doing well. Here's what you're not doing well. Shooting straight and being honest as opposed to telling them what they want to hear is really important. Number two is if you really want to build a mutually beneficial partnership is to be a great partner. When times are a little bit tough, you lean in and you understand things, but you also show up with a real check. You have to be a meaningful investor. If you're a five million dollar investor, it's hard to be meaningful. Fortunately, reputationally and dollar wise at Harvard, we were able to craft relationships where we were the first seat in the back of the bus, but therefore people wanted our opinion and we could share best practices. Everything that we're seeing across the entire universe to help our GPs in terms of how to think about strategy, firm transition, next generation, which I think were important.

AI assessment note: “Looking at their marketing materials before they go out to raise their next fund.”

Q What did you see as the strengths and drawbacks of investing directly across asset classes in a seat like that compared to Harvard portfolio of managers?

A It comes back to where I kind of true north in terms of domain expertise. My view is be the best or partner with the best, but have the humility to know which bucket you're in. If you're going to invest directly, you better be the best. It's so competitive out there. The flaws in many family offices, they don't hire the teams. If you're going to focus on direct investing in an area like private equity, in a sector like manufacturing, you better hire a world-class team who's got a real edge, experience, top quartile track record, have the team that can execute and deliver really outstanding returns. Otherwise you're a tourist investor or worse. And you're showing up, you're looking at things in different sectors, and you're taking risks you don't really understand. Many family offices who do direct, some do it well, some rely on less capable teams to do a direct investing. That's where you set yourself up to fail.

AI assessment note: “My view is be the best or partner with the best”

Q When you were thinking about bringing together the best of what you saw at a place like Harvard, the best of what you saw at a big family office, what were the most important principles that you encapsulated that you wanted to bring to the table at SCS?

A The opportunity to truly partner with leading investors. Playing hockey. I like to play with the best. It makes you a lot better. Oh, you partner with the best. Alignment's really important to me. I want to be aligned with everyone around me in terms of from a team standpoint, but also from a capital standpoint. I'm not trying to pitch you something that I do well, you don't do well. I also think if you're going to try to optimize a platform, you need enough scale to matter, where you can write real checks to drive terms in some cases, drive structure in some cases, lead to co-invest in some cases. It's important to me to not be so big that you can't do the small, nimble, niche-y things. We're all victims of our past or beneficiaries of our past. Being in platforms like HMC, which was 30, forty billion when I was there, 30 to a hundred is the sweet spot where you can have enough capital to matter, but if a five or ten million dollar opportunity comes up that's compelling, you still have the ability to do that. It was really around those things. The last piece, which is perhaps the most important piece, team. You need a great team. If you want to be a leading investor And you want to try to do something that you are proud of. It helps to be surrounded by a great team.

AI assessment note: “Alignment's really important to me... you need enough scale to matter... team”

Q Under the lens of partnering with the best, What are some of the things that you've found that help you identify the best compared to someone that is good or maybe even great?

A The math piece, which is statistically significant sample size. You better be doing this for a period of time and a very hard adventure. There aren't many Mike Moritz's out there. You start there with a great track record, but then you come down to the other pieces. Integrity to me is so important. These are partnerships that are going to be long-term. It's a little bit like getting married. It's a long-term relationship in private equity or hopefully within public markets. You're going to be an investor for 1520 years. The integrity of the firm, the quality of the people of the firm, the culture of the firm are all those things that are part of the mosaic that you need to build. But the end of the day comes back to domain expertise, proven ability to capture inefficiencies, Understanding investment process wise, how you get to that. One of the challenges for me had been, ok, GP has a five and one dollar fund. They do great and they're focusing on two sectors. Now they're in hot demand. Next thing you know, it's a 1,000,000,002 50. Now you're underwriting something very different. Fishing in a different sized pond, writing bigger checks. They're going to add a sector. They're going to add more people. Now what you're underwriting is something very different than when you underwrote before. With GPs who rationalize raising more money without being intellectually honest about it,…

AI assessment note: “You start there with a great track record, but then you come down to the other pieces.”

Q At three different firms, what did you learn about what it takes for a GP to be successful?

A One of the keys is domain expertise. I also learned that sector matters. The last firm where I worked was focusing on media and telecom. Media had been a great sector for many years, buying TV and radio stations, monopolies, stick value, great assets. But when an industry that is facing a cyclical and secular decline, which was happening in the late 2000, no matter how good an investor you are, it doesn't matter. I learned about You got to be picking the right sector, technology, healthcare, the importance of leaning into those sectors. I also learned that not every investor is a great investor. I certainly learned this more when I moved to the allocator side. There is a real bifurcation. It's very easy to be an investor. All you need is money. If the question is you want to be a great investor, now that's a very high bar.

AI assessment note: “One of the keys is domain expertise. I also learned that sector matters.”

Q So when you have a team that sees a lot that they like, how do you roll it up into your portfolio?

A It's an enjoyable process because it just ends up being best ideas. There are times where you do think about sizing, where you really love something, but you don't have much space, so you may size it down back to having enough capital battered and not so much that you can't do small things. It ends up being one of getting the best expression that you can in the portfolio. Those discussions are I find are some of the most enjoyable discussions. You've got good manager A and really good manager B. How do they fit? Now, sometimes there's an exposure piece because we're very conscious about how much tech do we have, how much healthcare, where are we in terms of buyout growth equity venture in our independent return bucket? How much equity loan short do we have? That ends up being foundational. The ultimate ends up being the expression of trying to find the best managers.

AI assessment note: “There are times where you do think about sizing... sometimes there's an exposure piece”

Q As you came in to be the CIO, as you said, the last chapter of your career, as part of a succession from the original founders, what have you learned about succession that you use as a lens to evaluate money managers?

A Steve Orstaglio, who's a CIO before me, extraordinary person. He did a great job, and I'm so grateful for all the things he did. Then when I joined the Johnson family, Ned Johnson had done a lot. Stepping into a platform that he built was daunting. He's one of the greatest entrepreneurs of the generation. Fidelity is one of the greatest businesses created. They're a wonderful family. So that was daunting. This was less daunting, but very enjoyable. Once you become a big machine, The big Apollos, Blackstones, Goldman's, those are machines. More in the boutique area, which I describe as, it's more important, certainly in the private equity realm, the succession of the leadership and ownership. I've seen that handled really well and really poorly. The most important thing for succession to be handled well is having founders who along the way share more than they should. Too many founders think it's them. It's ego. It's frankly hubris at times, and they think it's all about them. I have a relationship with the LPs. I'm the one who raises money. I'm the one who built the track record. Now, if you want to have an enduring business, you evolve from being an investment shop to a franchise, you better build a culture, a team, and a capability, but it starts with attracting and retaining the best talent, and that is by sharing more than you probably need to.

AI assessment note: “most important thing for succession to be handled well is having founders who along the way share”

Q When you have a platform as powerful as Harvard's, how did you think about doing something different?

A I really thought once I got to HMC, I was staying there. I was given an extraordinary opportunity. Then move from the private equity side, which included the oil and gas and energy stuff, too, in the private equity realm. But to move to public equities, Jane Mandela was the head of HMC, and she was a great mentor, gave me that opportunity. Then I had just gone back to run private equity. I love the platform. I love the access. I was learning every day. Also, finding a way to be a great partner sitting on the LP side. How do you be a great partner to the GPs? To figure out how to build relationships that are enduring, and you can do many, many things with GPs. I thought I'd be there forever, and the phone rang. The first time the phone rang, I said no. The second time, I listened. Someone said, you should just take this meeting. With some real hesitation and reservation, because I love the mission, I love the platform, I love the focus on trying to generate the best risk-adjusted returns for the endowment. I love that that's true north. Now, there are flaws in the endowment model. But I never thought I was gonna leave, and then it was just a unique and interesting opportunity.

AI assessment note: “I thought I'd be there forever, and the phone rang.”