Insight
Monk: Allocators should target specific cash flows over generic 7.2% returns
“Right now, when you say, oh, I need 7.2%, which is a very generic destination, everybody's like, well, I need this amount of private equity, and I need that amount of hedge fund. But when you say, no, no, here's your confidence interval for the amount of cash …”
Assertion Not checkable as stated
Monk: Major pension funds spend $30M to $100M annually on tech
“We're talking 30 to a hundred million bucks a year going into technology. By the way, the problem I have with the fact that not everybody knows this is all these technologists at places like Stanford or Princeton or Harvard, they don't even know that these pen…”
Insight
Monk: Big pension funds rely on established tech vendors over startups
“So when these big pension funds need technology, it's not like there's an army of startups out there that are trying to solve their problems. It's actually just the established players that are invited to participate in RFPs.”
Prediction Not checkable as stated
Monk: Tech allows endowments to execute the Yale Model more effectively
“Part of me thinks the technologized model is going to empower them to be even better at the Yale model. Why? Because you're just going to have much more confidence in how your GPs draw and return capital.”
Insight
Monk: Conservative asset owners only innovate when forced by crises
“So the punchline to answer your question is we often need crises to drive change because these organizations are fairly conservative and slow moving and they are monopolistic. But interestingly, technology is going to reveal little mini crises inside these fun…”
Opinion
Monk: Australian superannuation fund mergers act as natural innovation drivers
“I think the mergers that you're seeing in Australia are a natural driver of innovation. You're bringing these big teams together, smushing them and seeing what are the best practices that emerged.”
Insight
Monk: Allocator collaboration succeeds best in middle and back-office functions
“Collaboration is often incredibly effective where organizations don't feel like they're really competing to deliver out performance is like these middle back office functions or thinking through like, how do we design a legal function? Those are parts that I'v…”
Insight
Monk: The investment industry lacks tools to evaluate market recovery shapes
“And so weirdly, we don't have great tools in the investment industry to think about the shape of recoveries. And so we have a lot of work through MPT on drawdowns, on value at risk, We do a lot of work on volatility and variance, but we don't think as much abo…”
Insight
Monk: Portfolios can diversify by drawdown duration, not just volatility
“You can diversify your portfolio according to submergence. You don't just have to diversify according to risk factors and volatility and things like that. You can say, well, this type of asset has this submergence profile, and that asset has this submergence p…”
Assertion Supported
Monk: Most public pensions and endowments lack aligned definitions of success
“I've done this in a research project in the last four years, and I have to tell you, I was blown away that most of these organizations actually have different definitions of success.”
Insight
Monk: Granular cash flow modeling allows pension funds to hold less cash
“We found that if you can really kind of model out those cash flows that we were talking about, cash flows, liquidity, unfunded pacing commitments and all of that you can drive. In fact, there's a UK based pension fund that did this. You can drive these organiz…”
Assertion Partly supported
Monk: Measuring diversity prompted London Pension Protection Fund to alter strategy
“And then most recently, the neat one that I saw was PPF in London recently, Pension Protection Fund. They measured the diversity and inclusion in their organization and portfolio, and realized the moment they started measuring it that there was like fundamenta…”
Insight
Monk: Asset owners innovate by pooling career risk with peer institutions
“How is like we've seen, and I've written about this like collaborative model of investment where Pension funds and endowments and sovereign funds will come together and collaborate. They'll pool resources. They will pool career risk. If I'm working with Ontari…”
Prediction Not checkable as stated
Monk: COVID-19 pandemic will be remembered for triggering digital transformation
“The crisis that we're living through now will go down as the crisis that like triggered the digital transformation and frankly, the integration of ESG, but that'll be kind of a secondary part of that digital transformation.”
Assertion Not checkable as stated
Monk: Unifying institutional portfolio data across custodians and GPs takes months
“What was really hard to do was to get all the data unified, to get it into the system. It could take six months. It's like when you said at Yale we had all this data. It's a huge lift to get this stuff out of
The custodians, out of the general partners, out of…”
Assertion Not checkable as stated
Monk: Pennsylvania pension staff interviews required speaking before 40 colleagues
“My interview at one of those organizations was me sitting in a room with 40 people, and every single person had to say what they were going to say to me in front of the other 40 people.”
Insight
Monk: Pension boards need technical expertise on derivatives to enforce accountability
“All these organizations need boards of directors that can like hold the staff accountable, that understand derivatives contracts and how they're priced and what the tail risks are for certain different assets.”
Insight
Monk: Gamification and variable rewards are behavioral finance's next phase
“Our thinking and our thinking remains that this is the next phase of behavioral finance. And what we think of as like the nudges of personal finance, we're going the next step. Which is to bring a bunch of extrinsic motivators, gains, variable rewards, into th…”
Assertion Not checkable as stated
Monk: UC secures aligned manager terms using its research ecosystem
“And over the last three years of watching Jagdeep Bashir and his team implement on that, I can tell you that works. Like, they're getting into managers on terms that I would describe as aligned, and I never would have imagined we could actually do it.”
Disclosure
UC CIO partnered with Vivek Ranadivé's Bow Capital for deal flow
“We partnered with Bo Capital, which is in effect the entity that is UC Ventures. And that's a guy named Vivek Ranadive that's running that. We partnered with them, and we brought the deal flow that is privileged to the University of California to the partnersh…”
Insight
Monk: Showing external fees beside internal budgets forces governance changes
“If you could take the fees that were being paid to external managers and present them back to the board alongside the internal budgets that were being paid to staff, the inevitable question time and time again that came out of the mouths of the board members w…”
Assertion Supported
Monk: UC Investments cut manager relationships from 340 to 120
“Like, at UC, when we got there three years ago, I think this is all public, but it's, we had about 340 fund relationships, and now Jeg Deep and the team has whittled that down to something like a 120.”
Assertion Supported
Monk: Dutch pension APG acquired a Deloitte data analytics team
“APG, they went out and actually bought like a data team from Deloitte, a pension fund doing M&A to get data inside their organization.”
Assertion Supported
Monk: Institutional allocators deploy $120 trillion into global investment funds
“With a 120 trillion dollars, their capital flows out into the hedge funds, the mutual funds, the private equity funds, the venture funds.”
