The Exchanges

Q Great. Well, Margaret, let's turn to a few fun closing questions. What was your favorite sports moment? Either as a participant, which might be intramural ping pong, I'm not sure, or as a fan.

A That is, that is exactly what it was. Um, that was my favorite sports moment was the, was my own personal sports moment was intramural ping pong at college. We won the, we won the tin cup for it, but actually, I will tell you actually what was the most, for, for me athletically was because I was an immigrant, we loved baseball. I mean, I loved the Yankees growing up, but I knew nothing about football. And so, freshman year, like, second week of school, I must have been in shorts and sneakers, and some guy comes up to me and says, you know, we are so desperate for a woman to come out because it was Koei Touch football, and we're going to forfeit the game if we don't have another woman come out. And so, you know, I was in shorts and sneakers, so I must look like I could run or something, and so I was like, ah, and I didn't have the heart to tell him I knew nothing about football. Like, literally nothing. I didn't even know where the end zone was. So we get out there, I said, okay, fine. So I get out there, and he says, Just go to your right, and just run straight, and then just turn around, and I'm gonna throw you the ball. Because after watching me a couple plays, you could see that I could run. So I did that, I caught the ball, and then I knew enough to be like, I have to run to the end zone. But I just started running the other way, and then everyone's yelling, and it was beca…

AI assessment note: “my favorite sports moment was the, was my own personal sports moment was intramural ping pong”

Q That you've known as an organization because they came out of a place you'd supported for you, you know, the person you want to get behind them, but there's limited capacity and you have CA capital management, the OCIO business. You have lots of consulting clients. Is there a conflict or is there a mechanism and what's the mechanism to decide who gets access to something that has limited capacity?

A So the mechanism is pretty straightforward, and that has to do with, you know, we ensure we're compliant too, but the manager decides. So that fund, the GP, decides who ultimately, as the manager does for any client outside of Cambridge or, you know, within Cambridge, who gets access, which institution gets access. It would be a complete conflict of interest if we had to pick and choose amongst our clients. It's like saying, which one, who's your favorite child? You can't do that. But what you can do is saying your child's applying to school and you say, okay, you know, the school has to decide how to make that composition amongst their LPs. What is that right composition? Having said that, I will say that I think we have really good access because people want to be with our clients. And because we are not a one size fits all kind of OCIO shop, or then basically, you know, we are not looked at as one entity. You're looking at it and you say, well, do I, what about this endowment? What can this endowment bring? Or this institution. So, that's what, you know, we've worked very long with many, many managers, and the, the process works because it's fair, because it's transparent, and because, you know, Cambridge is not one large entity in that sense as a name, but aside from having that, the infrastructure, um, it has, you know, many underlying different children.

AI assessment note: “the manager decides. So that fund, the GP, decides who ultimately”

Q At some point in time, as you go through this broad And deep learning process, the business starts to grow, and people get siloed. Where did you end up plugging in after you went through your four, six, eight years, whatever it was, of education?

A Very early on, I was lucky enough to find a set of clients that really appealed to me, and it was a business that I built. So it was just, you know, serendipitous, but it actually suited my skill set. So I ended up with a client that was a liquidating pool. So instead of, you know, here's a pot of money, and as an endowment you want to grow into perpetuity, I, um, had these set of clients where, for whatever reason, either for environmental reasons, settlement reasons, spend-down reasons, you know, these are, and this is sort of ahead of their time, we were talking 15 years ago, that they had a large pool of money, and 35, 40 years from now, they're gonna go down to zero. And how do you get them to zero when there's uncertain spending, Some of these are very highly taxable. Some of these have, um, significant constraints on what they can invest in, and they're capital preservation oriented. So there's some aspect of endowment oriented because they're long-term horizon. There's some aspect of pensions because they're, they're some asset liability, but in a very loose way. And some of them are highly taxable, like private clients. So I had a little bit of this, little bit of that, and that was very important because it was allowed me to be very innovative and think about how to deal with these kinds of pools. So that, you know, I was basically the CIO, and it was for these set of…

AI assessment note: “I was basically the CIO, and it was for these set of clients”

Q Who were those three people? Do you remember?

A Well, I remember two of them, and one whose name I, I no longer remember. One was Troy Murray, who was a very, very long time employee at Cambridge Associates, and a wonderful person, and also a Yale grad. And so, I had been president of Yale Club of Boston, and I had known him for eight years, and I had no idea what he did. This is like a young person saying, like, yeah, he's my friend, I have no idea what he did. Another person was, um, Heidi Pearlson from Adamus Partners, and who worked at Cambridge, but she had interned at Cooper's and Labyrinth Consulting, which is where I was working. And so, through that, she had said, you know, what about Cambridge Associates? And so, you know, in that, in that one day, and I was like, what is this firm? So I called them up, and they basically were kind enough to interview me. They put me through 14 interviews, then told me, Troy called me from London and said, You know, everyone really enjoyed you, but, you know, you'd be a high risk hire. Which is very nice of me to say, and I said, I basically made a case for why you should give me a, give me a chance, and it's been a fabulous fit, and actually, it was in 1997, and so, in three days, it's gonna be my 20th anniversary.

AI assessment note: “Well, I remember two of them, and one whose name I, I no longer remember.”

Q And what does the manager see then from the other side of the table?

A So they've seen a research team come in, they have this CIO come in, that CIO come in. But what they tell us is this. What they tell us is, look, they really appreciate, it can be a lot of work relative to other competitors out there, but it's worth it because they, they know That we appreciate and understand what it is they do, and we have long-term investors, and they have clients that have, you know, basically bought into what Cambridge offers, um, and are there for the long-term. I mean, we have a 97% retention rate for the last five, you know, for the last five years, and I think the average tenure is something like 12 years. So these are, these are institutions that are not going anywhere. They, they believe in long-term investing. They believe in diversification. They believe in You know, the structure and infrastructure that we provide them, and the managers appreciate that. So we might put them through their paces, but, you know, it's, it's, uh, managers tell us that they, they, they appreciate it in the long run. It's like, it was worth it.

AI assessment note: “they've seen a research team come in, they have this CIO come in”

Q And then does that translate to the tendency to hang around for a long time with managers, or can individual CIOs on the team decide, I, I no longer like that particular manager in my portfolio?

A Yeah, so there are two levels in that, too. So, The research team will ultimately make a research decision on a manager. So there's, you know, they go through under regular due diligence. Um, on a second level, the investment team could also decide for investment for that specific client need that the manager is not no longer appropriate for the portfolio. It could be for a variety of reasons. It could be your cutting real assets. And so, you know, that you have to figure out which manager to trim. It could be that you find a better fit for a risk return profile. You know, it could be You know, there are lots of legitimate reasons why that could be the case, but then, and we do allow the teams to make individual decisions, um, on managers, and the reason is because I don't think in investing there is a standard A to B. Like, you know, managers, that is a, again, you're hiring an investment team, and you can get the same return and, you know, get there differently, so I think, um, in that sense, this is where the Sameness and different being different is there's always a tension there, and we're comfortable living with that because I think that every institution is different. And so if you're different, you have to be able, you have to allow the investment teams to have that difference. And again, if you have the proper monitoring oversight, you know, that's fine. We, we see all…

AI assessment note: “we do allow the teams to make individual decisions, um, on managers”

Q Yeah. So does that mean that each client kind of has their own portfolio?

A Yes. Every client has its own portfolio. It's customized to that client's needs. And we spend a lot, a lot of time, you know, working with clients to understand what is going on at that institution. So the whole enterprise, because oftentimes if you, you know, if there's debt covenants out there and you don't know about that, you'd invest differently, you know, or if there's, you know, if we're universities, you know, Fossil fuel issues out there, you know, if you're not aware of what's going on out there, you, you know, you might need, you know, so those are the kinds of things that, that when we started investing, like, that, that wasn't, that wasn't, no one really talked about that.

AI assessment note: “Yes. Every client has its own portfolio. It's customized to that client's needs.”

Q What are the trends in the OCIO business? So if you were to look out five or 10 years from now, What do you think your business looks like, and what does this sort of industry of OCIOs look like?

A If we looked up five, 10 years, I'd say we're in the early innings in the sense of, um, there will be consolidation in the industry. And there also, there will be a consolidation of models, you know, in terms of, you know, what clients want in terms of their OCIO provider. You know, there's just, there's so many providers now that the, the, the barriers to entry in some ways, um, are still relatively low and they're getting higher. And they're getting higher because you need the infrastructure, you need the resources, You, you know, you need to invest in those. So, uh, you know, but in the early days, you know, anyone can hang on a shingle, and, and, you know, you can outsource a lot of the, the back office, but more and more clients, I think, are realizing the reason they want to hire an outsourced investment office, um, and the concept and the model, sort of the way that, um, we provide our clients a full investment office. It's not just the investment team. It's everything around it that's really complex, and it Some of it's so manual, you know, even today, and, and to, to, that is actually very different, and a lot of folks don't appreciate that because they don't see it. Like, if you keep the trains running, that's not, you know, everyone's like, of course you've got the trains running, but the minute it doesn't, you know, work, like, you know, in 2008, a lot of it went of…

AI assessment note: “there will be consolidation in the industry. And there also, there will be a consolidation”

Q What are the core investment beliefs that come across all of these portfolios?

A Uh, well, we have an equity bias. We, you know, there's, there's no question about that. We also, you know, the core beliefs are, you know, we are diversified. We do believe in diversification, and, you know, it's been a very challenging environment to invest in the last, you know, eight years or so, um, but we've lived through it before, before the tech crisis. It was the same thing as one sector, but, you know, so in our lifetimes, um, it's been challenging to be a diversified investor, but there's no question that, you know, being protective of Um, the whole institution and the endowment requires some diversification. So we can argue about how much diversification, but as a concept, it is something that we truly believe.

AI assessment note: “we have an equity bias... the core beliefs are, you know, we are diversified.”

Q What are the biggest challenges you see going forward?

A I think there are two challenges. One is making sure folks have enough experience to be really strong investors, but be open-minded enough to continue learning. Because I think that since we have graduated from college, wealth creation has been incredible. Almost seems too easy out there for institutions as well as individuals. And in some ways I worry that that Leads to sort of a yes culture, you know, so, you know, if I have the means, and I'm giving, and being philanthropic, which is a wonderful aspect, you know, of one's life, you also have the power. And, you know, we're talking about power all over today, you know, and, you know, in workforce. And I think that if you always feel that and know and have that, um, and people treat you that you're like, you're always right, it's actually very dangerous for investing. And so it's, it's a, it's a variable of the dominant voice, In the room, um, problem, but when you have five dominant voices in the room, sometimes they can't get along. So, you know, one of the challenges is, you know, those kinds of individuals, and the second is, I think that since in the 25 years, you know, in the business, I would say civility and gratitude are things that I worry about, because I don't think people are very civil, and I think that people, if they don't like it, they'll leave. You know, instead of sort of Working out and saying, well, Ted, w…

AI assessment note: “I think there are two challenges. One is making sure folks have enough experience”

Q So, 20 years at Cambridge, and a lot's changed, and you're learning for the business of consulting, the OCIO business, which we'll talk about. Why don't you, Touch a little bit on your path within Cambridge. So how did you start? And let's evolve that to where we are today.

A Yeah, I mean, it's very different. It was very different in the, in the late nineties. The investing world was very different. When I started at Cambridge, the, I, the path was you worked with, let's say, 10 colleagues who were more senior than you, and it really was an apprentice model. I mean, this doesn't happen anymore because there's a, the world has changed so differently. Technology has changed things and investments have changed. But back then you could work with 10 people and you work with a multitude of different kinds of clients. So the learning curve, it was like entering college again. It was so steep, you know, and you, you could learn one day you can be dealing with currency. The next day you could be dealing with this very large multinational endowment. The next day you could be, you know, working on specifically writing something about doing due diligence for a manager. I mean, it was, it was just like being bombarded. And so it was incredibly exciting. And really just learning from other people, learning from our clients. So that was for several years what I did, and I was very happy doing that. You know, that's a, um, they're paying me to really, and I mean, of course I came in with skills that were very helpful for the, the clients in the sense of, you know, the consultant, management consulting is actually excellent for process and being able to take a inst…

AI assessment note: “When I started at Cambridge, the, I, the path was you worked with”

Q Yeah. On the, The OCIO business that you run today, there are a lot of different structures that people can use, right? You can have one pool, everyone invests in the same pool, you can have asset class pools, you can have customized portfolios for each client, and you can have some combination of all of those. How did you guys approach it, and how has that evolved?

A It was very simple. The way I thought about it was, if I were starting an investment office, what would I want? Right. And so there's sort of, I would call three flavors. So if you think of yourself as a builder, let's say you're building a house, right? There's, there's the, everyone has the same house. You're building the exact same house. There's no difference. Everyone's got the white picket fence. And so that to me is more of a product kind of thing, right? There are those that you're in the same neighborhood, but you might have different kinds of houses. So you say you'll have your colonial or split level. And so that might be the asset class sleeves. Combination, right? So you're, you're creating a portfolio, you know, like that. The way I thought was most important and most appropriate for an institution was that I'd want to know, you know, what does that institution need? What is it that I, as an institution, um, need from my portfolio? That's unique to me. And so we are able to provide them with a full investment office, not just an investment team, because in some ways that's the easiest part, but you have to have, um, what I call the institution. And you have to have the infrastructure. You want to know that who you hire is going to be around, and that it's not, that you're not going to have to deal with transition, succession, you know. And you also want to have th…

AI assessment note: “What is it that I, as an institution, need from my portfolio? That's unique”

Q And let's talk a little bit about the consulting business. What is it? Cambridge, when I, in my early years, was, was the place that everybody went in the Endowment Foundation world, and still is a great brand in the business. How does the consulting model work?

A Well, consulting in some fields today feels like a dirty word, like derivatives, but consulting is really important, I think, as a For, for the right kind of client consulting is, having a consultant is really important. And that, and that client is the client that has a strong core in terms of an investment committee, or, and a staff, and needs resources. And whether it's manager information, whether it's ideas, whether it's best practices, whether it's benchmarking, I mean, those, you have to get those someplace. Because in itself, you know, if you were just, if you just had, say, an investment staff and, Investment Committee. I mean, you have a volunteer group, and you have a staff that could be very high quality, but they're going to turn over. I mean, just by definition. And that's, you know, because the people, that's the, the, you know, the, the career path. And so, there's not, they're not the resources, and there's not the institutional history. And so, there's a real place for that, and that's how Cambridge got started, you know. And so, um, you know, Jim Bailey and Hunter Lewis had the foresight to first hire Very good people, and you know, Jim will tell you he was one of the early ones to hire all the women that no one, no one was hiring in the seventies, but, but that, that skill set is very important. Now the world has changed significantly, and we as a firm have …

AI assessment note: “whether it's manager information, whether it's ideas, whether it's best practices, whether it's benchmarking”

Q And are there, are there a few simple tools that you could think about of how you walk someone through a decision?

A Yeah, I mean, the way, the way I think our, what is most important is if you, you have to understand and you have to appreciate who your audience is. I mean, that's like, it's so basic, but oftentimes folks know what works for them, and they extrapolate that to everything else. You know, that's like, that's the only way to do it. But really, if you turn it around and just say, knowing Ted, you know, what is it that would appeal to Ted in terms of how I communicated this information? So, you know, some people are very visual, Some people are very literal, some people are a combination, some people are very analytical, and some people, you know, just want to have you talk about it, and here you have the conviction, and so you have to be able to really think through those kinds of things, and that seems very simple, but people have hired us to be independent thinkers, and to provide them information with what we think should be best for the portfolio. You know, half the battle is being able to get yourself heard.

AI assessment note: “what is most important is if you, you have to understand... who your audience is”

Q And that particular challenge is very different from how a perpetual pool, or an endowment foundation pool, a pension pool that's not perpetual, but very long dated, You know, you have a pool that's winding down in 10 years, 20 years, 30 years. What are the differences in how you'd think about an asset allocation structure or yield versus total return in that type of a challenge?

A Well, that's a great question. So the, the most important concept that I always wanted to, you know, make sure we protected against was the first phase, whatever that is, one, two, three, five, whatever that first phase is, is the absolute most important critical phase. Because if you don't get that right, then you don't get the other two thirds or three quarters of the, you know, of the decision right. It depends on the, the spending that's going to go out and depends on what, what you think the expected needs are on the draw on the pool. So Talk about, like, thinking about 2008 or even an endowment. I mean, the liquidity and the credit quality is really, really important. I mean, that's the, the, you know, you, you have to constantly be vigilant about that because it's so easy to be like, well, the S and P is a 33. Why don't we have 80% of the S and P? But you also have to have to invest for growth, right? And so there is a balance there that you have to think about. And it's not unlike an endowment where you're, you know, you have to think about long term pool, but you have to think about liquidity, You know, spending, what your expected return needs to be, and how do you actually put those puzzle pieces together? And that's what it is. It's a puzzle, because everyone's different.

AI assessment note: “the most important concept that I always wanted to, you know, make sure we protected”

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A Well, we do it differently than others, so we have investment teams that are focused by types of clients they work with, and it's focused on geography, and then just, you know, capacity. So we have, we have multiple, and there's a matchmaking that goes on, because we're talking about investments, you know, we're talking about matching skill sets and expertise to an institution, and that's my job. So I always tell prospective clients, you have to buy the institution first. Like you have to be able to say, you know, say capital as my OCIO provider is the right fit for me. It's a criteria that we've just talked about. You want, you know, um, resources, stability, experience, um, investment team. You need a whole investment office. You know, if those are all your criteria, then you're in the right place and you can say, okay, who would be the right fit for me? And it's so interesting because I deal with this concept of sameness versus being different at, in, Every aspect, and this is one of those where I think institutions want to be different, and yet it's very hard to be different. You know, so you look at the numbers that come out every fiscal year as to how everyone's performed, and it's, you know, you're comparing yourself against your peers, but that's not how you're investing. You're investing against your own benchmark for a reason, and we tell our children that. You know, …

AI assessment note: “we have investment teams that are focused by types of clients they work with”