The Exchanges

Q So as you start to get your feet in that part of investing, at some point in time, you moved from the investment side, say, to the manager selection allocation side. What led to that change?

A This was around late, 2007, early 2008. It just felt like the right time for a change. And I left Apex and was really attracted to the allocator side, I think by the increased breadth of the role. I'd been very, very narrow and deep. Apex is a sectorally focused firm. So I'd been focusing on one sector, one geography, working on buyouts at that time. It was slightly less frenzy pace than it is today. So we'd be working on one business for many months. Subsequently, of course, if you own the business, you'd work on it for many years. I really, really enjoyed that. But what appealed to me about my subsequent role at Alta was just the international breadth of being able to look at different types of strategies, different types of organizations. And I found that really fascinating.

AI assessment note: “was really attracted to the allocator side, I think by the increased breadth”

Q Let's go through each one of those. So how did you go about rebuilding the team?

A So that was a really fascinating project for me. I had quite a long notice period, so I had some time to reflect on how I was going to approach it before I actually got into the seat. And somebody recommended that I should read a book called Rebel Ideas by a British journalist called Matthew Saeed, and it was all about the power of cognitive diversity. So I became very focused on How was I going to build a team who would have a common core of values, but that would actually bring really different perspectives to the table so that we wouldn't fall into the risk of a kind of group think. And so really instrumental in that was working with very experienced HR professional that I was fortunate to meet very early on. And we, as part of our interview process, introduced psychometric Testing for all of the new recruits, which was specifically aimed at finding people who would bring very different personalities, skills, and approaches to the table.

AI assessment note: “introduced psychometric Testing for all of the new recruits”

Q What have you found that's different or unique about this organization, Cambridge University, than the places you've been exposed to in the past?

A Quite a lot of things, actually. Firstly, one thing that may be different about Cambridge relative to a US endowment is that we actually have quite a large number of discrete investors. So Cambridge is a collegiate university. There are 31 different colleges within it, and each of them has their own endowment, and they are completely independent in terms of whether they choose to invest those endowments with the central pool that we manage or to do something completely different. So as of now, we have 21 individual investors. In addition to the portfolio management aspects of what we do, there's also an investor communications element to it. We also have a complex group of stakeholders, so not just those who actually oversee those capital pools, but of course, many other constituents are also our stakeholders, students, faculty, professional staff, alums, So that has been very different for me, and I've actually found I really enjoy working on our stakeholder communications. Another thing that is maybe different is our currency situation. So we obviously, we're a British university, all of our liabilities are denominated in sterling, but our investment opportunity set is global. So we have to manage that in a sensible way. Hedging back the majority of our assets to sterling, but without hedging to the extent that if there's a disconnect in currency movements, we would have an u…

AI assessment note: “one thing that may be different about Cambridge relative to a US endowment”

Q Which two people have had the biggest impact on your professional life?

A The first would be a gentleman called Peter Englander, who was the chief investment officer at Apex. And he had a really foundational impact on me because I think he was the one who gave me my first break in investing. I had a number of interviews at Apex, but I could tell that Peter was a real decision maker. And I could also tell that he was incredibly skeptical about me during that interview. Somebody who came from Background in English, working in the corporate sector, no investment experience, and so on, but he had this unique balance of skepticism and ability to take risk that I learned from hugely. Very sadly, Peter actually passed away earlier this year, but I'd really just like to honor him as a legend within UK private equity investing. The other one would have to be Rob Wallace, who was the CEO of Alta when I joined, and again, he was the person who hired me into my first allocator job, and he's now, of course, the CEO of Stanford Management Company, and I really would say that Rob taught me more than a hundred percent of what I know about endowment investing, and I'm really fortunate to still be in contact with him today.

AI assessment note: “The first would be a gentleman called Peter Englander... The other one would have to be Rob Wallace”

Q What are some of the insights that generally come out of that course that a fund manager will learn they may not have known before?

A Probably the most important one, which we see again and again, is a realization that any asset owner can actually be a positive part of the transition. I think there's a real tendency to feel quite powerless in the face of this climate emergency. But I think one of the really central tenets of the course is don't let the great be the enemy of the good. Just because you're not a hundred percent Sure on how your portfolio company can get to net zero today. That doesn't mean that you can't take a step, for example, by, if it's a software company, make sure that its data centers are powered by renewable energy, or if it's a transportation company, replace incremental vehicles with electric vehicles, or very simple, straightforward steps that can be taken. And then I think a related insight is that in some sectors, Very often there is actually a win-win, thinking about this concept of being efficient with your emissions. If you're, for example, going to use up less energy to achieve an area of activity, it's going to cost you less, or if you are going to recycle waste materials, you may need to purchase fewer raw materials or things like that. I think increasingly we believe, and I think we're seeing many other investors, believe that the environmental and Financial aspects of sustainability are coming into alignment.

AI assessment note: “realization that any asset owner can actually be a positive part of the transition.”

Q We hear a lot about cognitive diversity, and now we're bringing in some form of testing to tease that out. What are the different aspects of analysis or assessment that you saw from the testing that would indicate that the people that you're interviewing are diverse cognitively from someone else on the team?

A You want them to be diverse, but remember, you don't want them to be so diverse that you end up all going in completely different directions and sort of being unable to actually achieve anything together, so it is a really delicate balance. There are many different personality tests available, and I hadn't the foggiest idea about any of them at the time, but I was fortunate to be advised to use one called the Hogan Personality Inventory, and it has quite a large number of different axes of which it evaluates The individual. What we did there was essentially think about what is the common core that we need everybody to have. So some of the things that actually are very common across the group are intellectual curiosity. Of course, you would expect that a real interest in commerce and business and what makes businesses successful, but also combined with a really strong interest in altruism, which actually makes so much sense if you're working for an investment management organization within A large charity. So those were some of the things that were the same, but then in terms of what was really different were other axes. Some of us are really sociable and others of us are super introverted. Some are very creative and imaginative, not me by the way, and some are very analytical and that kind of thing. So those were some of the areas where we really wanted people to diverge.

AI assessment note: “Some of us are really sociable and others of us are super introverted.”

Q You mentioned the importance of sustainability in the pool. How have you addressed sustainable investing?

A That's been hugely important part of our work over the last four years, and I think the student community has really pushed us on in our thinking there. So the core element of our sustainable investment approach is an ambition that we've expressed to achieve net zero greenhouse gas emissions from the portfolio by 20 38. That might sound like a slightly odd date, but it's basically been chosen because the university itself has an ambition to decarbonize its own operations by that date. And what does that mean? We look at sustainability across the entire portfolio. So there's not one carve out for impact investing or environmentally related investments. And our overarching thesis is that Society as a whole has to make a transition to net zero over the next several decades if life as we know it is going to continue. So essentially what that boils down to is we need to be able to produce the same unit of economic activity with fewer emissions over time. So when we think about our portfolio, it makes sense to us that a company that's a more efficient Consumer of emissions, shall we say, within its business activity over time as a long-term investor is likely to be more valuable than its peers who are less efficient. And so on that basis, we are very focused on engaging with all of our fund managers, not just a subset of them, about how they in turn can work with portfolio company ma…

AI assessment note: “the core element of our sustainable investment approach is an ambition that we've expressed”

Q If you take that down one level to how you've gone making decisions with your teams, what is that process of making the decision that optimizes the chance of making a good decision?

A Well, you have to remember that we're a pretty young organization, so I only came into this role four years ago. We are actually still iterating on that. We have an investment process that we've laid out, and we regularly come together a couple of times a year as a team and say what's worked well and what hasn't worked well. As of now, what we've found is we like to bring an opportunity to the whole investment team pretty early on. When we first started, we would have these team discussions once a The majority of the diligence had been completed, but what we then found was that everybody was already quite bought in to the idea of the investment going ahead. So as soon as we think something's potentially interesting now, we actually workshop it with the whole team. The people who are actually working on it still feeling very open to whether or not it proceeds, and then try to really flush out all the concerns that might arise at that stage so that they can then be fully baked into the Subsequent due diligence process. And then in terms of the actual decision, that would be in the small group of those who'd actually been working on it for a substantial part of their time, plus me. And then formally, we have this classic sort of sole decision maker structure here, but it would be inconceivable for me to want to do something that wasn't supported by the team that had actually worke…

AI assessment note: “as soon as we think something's potentially interesting now, we actually workshop it”

Q How do you think about the benefits and drawbacks of specialists versus generalists on the team?

A I know that this has been hotly debated and a lot of organizations have gone down the more generalist route over the last five to 10 years. Perhaps that's more difficult for me to contemplate because I do come out of such an asset class specific background. I'm not only was I a PE allocator, I also worked in PE directly for almost a decade. And so for me, I feel so much of our job is about pattern recognition. And so if I want to appoint a Let's just say a PE manager, because that's my background. It's really hard to do so if I haven't seen all the other PE managers that there are that could potentially fulfill a similar function in the portfolio. So I am a big fan of specialization, but only if it's combined with a lot of cross asset class communication. And that's why it's really important for me that every single investment team member is involved in Throughout the decision making process so that everybody's aware and everybody gets a chance to learn as well. One thing that was really a tremendous benefit of my time at Alta was that all of the entire team were encouraged to meet any fund manager whenever they were in town or whenever we went on trips. So even though my role was primarily focused on PE, I managed to pick up a lot of information about other asset classes, other strategies, other organizations, other managers during my time there.

AI assessment note: “I am a big fan of specialization, but only if it's combined with a lot”

Q So as you stepped in, you were familiar with this endowment style portfolio. You mentioned diversification away from equities. Where are the places where when you wanted to impart your views on how to manage a pool of capital like this, it was a little bit different. From maybe what you saw at Alta?

A That's an interesting question. I have to say I have brought a lot of the thinking from Alta with me. I'm not sure that the asset allocation actually is tremendously different from what we had there. I think one thing that works potentially in our favor is we're much smaller. There are benefits to being small. There are also obviously benefits to being large, but we are able to be very concentrated as a result of that. We are also Able to access fund managers that might have smaller funds or be a bit earlier in their life cycle because we don't necessarily need to allocate a tremendous sum in order for it to be really meaningful to the endowment. I think what's actually perhaps more interesting in terms of differences are some of the perspectives that my colleagues brought. So I have colleagues from very different types of Investment organizations, given that there isn't a really established endowment and foundation community here. So my colleagues come from other family offices, from outsourced chief investment offices, from pension consultancy, and also from direct security selection roles. One of my colleagues in particular is really focused on every manager having a very specific role to play in the portfolio. Another of my colleagues is very focused on Having a very disciplined investment process, and I tend to be very focused on the people and whether or not the fund mana…

AI assessment note: “I'm not sure that the asset allocation actually is tremendously different from what we had”

Q You mentioned your evolution back to this focus on people from the venture world, private equity, and now back. How do you think about assessing people?

A It's really hard. I'm not sure that I have a magic answer to that. It's really about just spending time with people in different contexts. Asking different people in the organization the same question or asking the same question in different ways, having different members of our own team meet in different contexts. I do really think it's important to understand in some detail the motivations of the key people, their investment philosophies, in particular, what's shaped their investment philosophy over time. In discussing that, of course, you can Evaluate how they have evolved in their thinking, how they've learned from what's gone well, but also critically how they've learned from their mistakes. I think we all learn a lot more from what's gone wrong than from things that go well. So I think, yes, an ability to reflect on those things is really important, and I think where possible trying to meet the individuals outside of a business context to actually get to know them as people as well is important to us.

AI assessment note: “It's really about just spending time with people in different contexts.”

Q What areas of opportunity are you most excited about today?

A It's hard to say because I don't tend to look at the portfolio from a very top-down perspective. I tend to look at it very bottom-up, so I'm pretty excited about all the fund managers, otherwise they wouldn't be in the portfolio. I think in terms of sort of areas that we're investigating or researching right now, like many other people, we're interested in diversifying some of our emerging markets exposure, so we're currently actively looking at Managers in Southeast Asian equities. I think that those markets are really growing. They're becoming deeper, much more investable from an institutional perspective. Completely different area that we're interested in is looking at nature-based solutions. So we've recently just got over the finish with a commitment to a agricultural forestry fund, which has benefits of Underlying demand for its products, but then also potentially ancillary benefits of generating carbon offsets. And I think the opportunities in nature based solutions is really fast growing. So we're going to be spending time in 2024 trying to understand that in more detail.

AI assessment note: “we're currently actively looking at Managers in Southeast Asian equities”

Q So what were some of the key lessons you learned from those operating roles at Virgin and BBC?

A Yeah. The power of brand, obviously, with Virgin. Virgin was able to really disrupt some very established industries on the basis of its brand and doing things in a very different way. I had relatively limited interactions with Richard, but I learned a lot from just seeing how he would laser focus on the one or two elements of a business proposition that were really fundamental to whether it would work or not. He had this uncanny ability to really do that. Sift through lots of information and say, this is going to work only if we can achieve X or Y. So that was absolutely fascinating and very entrepreneurial, small SWOT teams doing lots and lots of different things. Then moving into the BBC, it was a little bit the opposite in terms of a very established, large organization where there was a huge amount of process and lots of different decision-making layers. And I think from that, I learned a lot about There's just the difficulty of actually getting things done. It's interesting when I had a long subsequent career working with private equity firms, and I always ask the question when we're talking about value creation of who did what to who to actually get it done, because there's really one thing to say our value creation plan is X, but it's a huge gulf from that to achieving the value creation plan, and I think I have a very visceral appreciation of that from having Work with…

AI assessment note: “The power of brand, obviously, with Virgin... moving into the BBC, it was a little bit the opposite”

Q What did you learn sitting in that allocator seat over the dozen years you were there that was different from what you thought and believed from being inside a manager?

A When I first arrived, I remember vividly thinking very naively, as it turned out, that I had this background in security selection, and that I would just go through all the materials that the managers had, and if they had made good decisions about deals, then they should be a good manager. And that was it. It was all there was going to be to it. So little did I know there were very many other factors involved in manager selection. Obviously, the organizational design, the team dynamics, uh, Being most fundamental in my view, whether the key people who made the successful investment decisions of the past were still there, whether the investment decision making functioned well. And then of course, on top of that, how did that manager sort of fit into the broader portfolio? What were the prospects for their particular investment style going forwards and so on? So the role was much more qualitative than I had before. Anticipated. But then, fortunately, I found that I really enjoyed that in a way.

AI assessment note: “So little did I know there were very many other factors involved in manager selection.”

Q firms moving to Ridgeline gain a decided advantage. That's why customers call it miraculous, game-changing, and an awakening. If that's not how you would describe your investment management tech, request a demo at ridgeline.ai. And now, back to the show. How do you think about the discipline and rigor to stick to a process compared to the need to evolve and improve what you're doing and change as conditions change?

A That is so important because it absolutely has to evolve. I think, again, a big red flag is somebody who almost religiously sticks to the process over time, even when market conditions have changed. So I think that was actually something that we saw a lot during COVID. A number of our managers really retooled their processes to Be able to take advantage of the volatility in prices. Perhaps people who had invested previously in more traditional industries suddenly really realized that the virtual world was upon us in an accelerated way and started thinking much more about the implications of technology on their underlying positions. I think the portfolio actually really bifurcated quite a bit at that time into people who were really racing to adapt Their process to these different types of criteria. Also, of course, to the fact that we were all working remotely by comparison to some others who were doing exactly the same thing that they had done before. But I think what's really important is that evolution has to be done in a considered way, right? Rather than just randomly experimenting with different things. Of course, we need to experiment with things. That's the only way we can change, but it needs to be done in a considered way. Way and probably for the most part in a more incremental way when you're talking about investing large sums of capital.

AI assessment note: “That is so important because it absolutely has to evolve.”

Q The venture capital side, And later stage private equity, often you think of as very different skill sets, very different risk reward frameworks. What parts of each most resonated with you as an investor?

A That's such an interesting question. And I think often the extent of difference between different stages within peers can be underestimated from the outside. I think for me, the thread of continuity was because I had come from the business world and my interest in investing started out with launching new products, for example, at Virgin. So for me, it was always about will the product succeed? It was a consulting based approach. How big is the market? Is there demand for this? Why is this product going to do better than all the other opportunities that are out there for consumers, et cetera, or for the customers? And I think that thread actually is consistently relevant for any business, for venture, for buyout. And then the different, should we say more technical aspects of the different investment types were more of a bolt on. Business fundamentals has really, for me, always been at the heart of everything that I've done. Professionally, obviously, since I left the academic world.

AI assessment note: “thread actually is consistently relevant for any business, for venture, for buyout.”