Opinion
Chhabra: The institutionalized David Swensen endowment model no longer works
“I'm not clear that the entire ecosystem of the Swenson model that had become so super institutionalized really works any longer. The fees are high, the fees are asymmetric, the LPGP risks are different, and I think we should explore different models, and I thi…”
Insight
Chhabra: Substantial wealth comes from concentrated business ownership, not diversification
“That is the engine of wealth creation. That is where all of wealth gets created, and so I analyzed the Forbes 400. I tried to figure out how wealth gets created, and it was really what I had learned in my interaction with these internet millionaires in 99, 200…”
Opinion
Chhabra: Fischer Black's options math was trivial to a physicist
“Fisher Black had done some interesting work. He had solved the heat diffusion equation. It was sort of a trivial piece of math almost from a physics point of view. And so I think every physicist thought they could make a fundamental contribution in finance the…”
Insight
Chhabra: Prop trading desks give traders an asymmetric free option
“Because the traders have a free option, and On the firm capital, and so you're just going to induce me to take a lot of risk, and if it works out well, I'll make a lot of money if it blows up. There was something wrong with that whole structure”
Insight
Chhabra: Modern portfolio theory fails by ignoring markets' extreme social instability
“It completely misses the point that markets are this crazy beast that are totally uncertain because they're really a product of social activity, and over long periods of time, any social activity has huge variations.”
Assertion Supported
Chhabra: Harry Markowitz does not invest using pure mean-variance optimization
“Even Markowitz doesn't invest as per Markowitz, and nobody really does mean variance optimization. Otherwise, you put all your money in emerging markets.”
Opinion
Chhabra: Elite universities could double tuition and still fill every seat
“While on the other hand, for Yale or Princeton, they could just double their tuition. They still fill every seat.”
Insight
Chhabra: Private equity and venture are merely variations of market risk
“And I include private equity and venture as part of just variations of the market.”
Insight
Chhabra: Private equity and hedge funds are aspirational for GPs, not LPs
“A hedge fund is not an aspirational investment for the LP. It is definitely an aspirational investment for a GP. Similarly, private equity, it's definitely aspirational for the people who own the firm. That's a mathematically correct statement.”
Insight
Chhabra: Non-elite universities cannot safely copy David Swensen's endowment model
“Is it appropriate, therefore, for another institution to copy Yale's endowment model? The answer is, if you're Princeton, yes. If you're some very small university in the middle of the country that's already having trouble getting students each year, no, becau…”
Insight
Chhabra: University endowment retrenchments disproportionately impact lowest-rung employees
“I do think from the diversity, equity, inclusion point of view, even for Places like Princeton and Yale, when they're retrenched, it's really the lower end, the lowest rung of employees that end up getting retrenched. The tenured professors do not.”
Insight
Chhabra: A viable reserve currency requires a strong military
“In order to have a currency, you need a military. Otherwise, everybody's going to counterfeit your currency, and you need to enforce it in a court of law, and you need to have a transparent court of law, and therefore, the U.S. Is sort of the right country wit…”
Opinion
Chhabra: The asymmetry of terms between LPs and GPs is fundamentally wrong
“Oh, the asymmetry of terms between LPs and GPs. That's an easy one. That's just wrong. We should find a way to fix it.”
Insight
Chhabra: The three-bucket wealth framework functions like an options structure
“I will say in the simplest sense, you can think of it, the three buckets, as a put, an index, and a call. The put protects you against a variety of risks. The index exposes you to the market. The calls is a call option on your skill set or what you want to do …”
Assertion Not checkable as stated
Chhabra: Harry Markowitz supported the goals-based wealth allocation framework early
“And I think one of the very early supporters of this was Markowitz himself, and he mentioned to me, he said, I've been trying to solve this problem for decades. These utility functions are very hard to solve based on large deviations. You just wrote down some …”
Opinion
Chhabra: Leon Levy took endowment risks that are unthinkable today
“Prior to Jim was a man called Leon Levy, who was the chair of the investment committee. Brilliant investor. Ran the portfolio himself pretty much. Probably took risks that today under an institutional setting you could not take.”
Assertion Not checkable as stated
Jim Simons hired Chhabra as CIO based purely on smarts
“At the end of the hour, Jim looks at me, and he says, clearly, you know nothing about this job. I was sort of like in a state of shock. And then he says, but I like you. You're really smart. I'll give you the job.”
Insight
Chhabra: Low-beta portfolios protect institutions from painful organizational cuts
“I think people often forget liquidity, the fact that this institution must be able to survive the ups and downs. And I think this is where the low beta framework that Jim has always been a proponent of is very useful, in that when you have a high beta framewor…”
Opinion
Chhabra: Cryptocurrency has staying power because it appeals to anti-centralization
“There appears to be an ability for two different systems to coexist, because there are countries outside the US, there are the deep state, and those who fear the deep, you know, there's a duality in the society, and so crypto appeals to a certain section of so…”
Assertion Supported
Chhabra: Charles Schwab's market value exceeded JP Morgan's around 1999
“I believe, if I have my facts right, that the market value of Schwab exceeded The market value of JP Morgan, and Morgan, in some sense, was in an existential crisis, especially the private bank”
Insight
Chhabra: Allocators overlook red flags when chasing outperforming fund managers
“What is hard is that you're always looking at managers who have done well recently. That's why they're raising capital. So you have that behavioral bias, you want to get in, And you're willing to overlook things that in retrospect were always there.”
Insight
Chhabra: A non-human perspective provides a useful framework for investing
“There are two points of view in life. One, the way you see it, and one, if you're not a human, how would you see it? And in that sense, that duality has actually stuck to me, and you'd be amazed how useful it is in investing.”
