The Ledger
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Van Vleet: Institutional Allocators Cannot Afford to Avoid China
“I think you can't afford not to be in China.”
Full-Fee LPs Subsidize Large Institutional Investors Taking Free Co-Investments
“Because of that, I'm not real thrilled when our GPs will raise five hundred million and then raise five hundred million worth of opportunity for direct co-invest. And my pushback on that is, well, so I'm really just subsidizing the other guy who's taking the c…”
Wall Street Repackaged Basic Governance As ESG To Charge 40 Basis Points
“I'll tell you how it happens because we have a lot of Wall Street firms who have a conflict of interest. They can wrap it into this new bottle and slap on another 40 base points of fees for it.”
UK Pension Rules Mandating Consultants And Beneficiaries Fueled The LDI Meltdown
“The UK were required to have a consultant, and were required to have participant beneficiaries on the committee, which are two problems that also led to this little fiasco in the UK around their LBI programs. You have too many amateurs in the room, and so you …”
Leveraged Derivatives Used For Growth Targets Caused The UK Pension Crisis
“The other common way, as we've experienced in the UK, where the UK, of course, has gone through a meltdown because they were using derivatives. They were leveraging. So they were only using 50% of their assets levered To be hedged, and the other 50% still rema…”
Overfunded Textron Pension Ignores LDI Strategies To Maintain Growth Focus
“So we're about a 116% funded and we still remain growth focused. We do not have an LDI focused plan.”
Top Silicon Valley VCs Reject Corporate Pensions Due To Finite Fund Lifespans
“We have some growth in buyout mid-cap, and we just never went deep into venture, you know, seed or A round, partially because we just, you know, we're not interesting money to Sequoia and to Sand Hill Row, because Sand Hill Row says, you're not going to be her…”
Van Vleet: Infrastructure investing is fundamentally just real estate
“It's real estate with some unique patterns, but it's really just, you got this asset. If you don't have a tenant for it, it's worth nothing, and so you get a cash flow off that, and you might get to increase your rent with inflation if it's a bridge, but we ju…”
Van Vleet: There Are Fundamentally Only Two Asset Classes: Rates And Equity
“I really only think there's two asset classes. There's rates, as in government rates, And there's equity. Then there's equity proxies called spreads.”
Van Vleet: Real estate is just a fixed income portfolio of tenant credits
“And I'd even go so far to say real estate really is just a spread product. It's a bond. It's a fixed income. The building itself is worth nothing if it doesn't have tenants. Real estate's really just a fixed income portfolio of credits and the credits are The …”
Van Vleet: Public REITs and convertibles act as equity, not real estate or bonds
“Public REITs are not real estate. On any given day, it's equity. And convertible bonds, surprise, surprise, are not bonds. It's equity. And it's fine. You know, convert, convertible bond is a .8 S&P and a REIT is a .9 S&P and high yield is, we call it a .4 S&P…”
Van Vleet: Textron pension uses no investment consultants
“We don't have any consultants. I'm not a big believer in consultants.”
US Venture Capital Brain Drain Keeps European Public Markets Heavy In Banks
“Europe tends to be very, very heavy into banks, insurance companies, there's a couple of great pharmas. Now, part of the problem isn't they're making, part of the problem is that any technology upstart, it starts in Germany, or starts in Berlin, or starts in t…”
Van Vleet: Large co-invest capacity drags mid-market GPs into unnatural deals
“So they're kind of forced into what is perhaps an unnatural part of their cap space because they, they'd love to spend the 500 in coinvest. And that coinvest that I'm subsidizing and is being a distraction to, and perhaps dragging that Five hundred million GP …”
Asset Managers Will Soon Need Separate Pitch Books For Pro- And Anti-ESG
“I said, I think someday, just like back in the eighties, you used to have to carry two business cards, one with a bug on it, union bug, and one without, and never get them mixed up. You're going to have two pitch books. You better not bring this pitch book to …”
Van Vleet: Long US dollar positions provide cheaper downside protection than hedge funds
“I just think it's an expensive downside. We talked about my best downside is, is structured long US dollar. That's actually a positive carry. It's not costing me one in 10 to get that downside capture. So I just, I can't get past the fees.”
Van Vleet: Climate change makes property-casualty insurance underwriting impossible
“It just, I, I've come to recognize that, well, I think the insurance business, property casualty in particular, is just going to be impossible to judge how much premium you should charge, given the climate change issues.”
Pre-Fund Niche Strategies With Nickels To Deploy Dollars Rapidly During Dislocations
“I just will have a lot of niche strategies that I leave a nickel in so I can push in a dollar later. So for example, I keep a nickel in Fallen Angels. I keep a nickel in these closed-in funds. I keep a nickel in BDCs because when you get a banana peel moment, …”
Van Vleet: $8B to $10B is the optimal pension fund size
“It's, a lot of it is because we're at a size of ten billion. I can do that. Again, I really feel for the people at CalPERS who you just can't move the needle, and I feel badly for the firms that are, you know, five hundred million to a billion, you're not goin…”
Van Vleet: Textron avoids multi-asset and macro funds to maintain style purity
“It's very, very important to me that managers stay in their box. And for that reason, we don't hire any multi-asset managers. We don't have any macro hedge funds.”
Van Vleet: Textron will not seed small boutiques for derivative strategies
“I'm not going to go to four guys in a shoe box and give them a mandate where they're using derivatives and prime broker. And no, I, you go to large firms, you give them a sharp knife and you trust them to use it.”
Yield To Maturity Is Horrible Math Due To Unrealistic Reinvestment Assumptions
“For investing, my biggest pet peeve is the word yield. I think anybody should spend half a minute looking at the math of how you calculate yield to maturity. It's bad math. It's horrible math. This idea that you're going to reinvest at the same rate. So of cou…”
Van Vleet: Rising Real Rates Break Crypto As T-Bills Yield 4%
“When you lift rates from a negative one and a half real to a positive one and a half real stuff just breaks because you would spend so many years with no volatility in rates that almost has broken the country of the UK. And now it's breaking the whole crypto b…”
Van Vleet: Japan Funded $45B Currency Intervention by Selling Treasuries
“Forty-five billion dollars in currency intervention. That money had to come from somewhere. It came from U.S. Treasuries.”
Van Vleet: Textron assigns an equity beta to every portfolio holding
“Everything we have in our portfolio, we assign an equity beta to it.”
Textron Pension Holds 5% Levered Long US Dollar Position
“A really easy place to fall back that we have consistently is we just remain overweight U.S. Dollar. We have a standing long dollar with a short versus yen, Aussie, and Euro, and it's a positive carry. We do it unfunded, so it's levered. It's a five percent po…”
Textron Pension Maintains Dedicated Equity Allocation To Chocolate, Alcohol, And Tobacco
“For example, we've always had a dedicated allocation to my team's going to hate me when I hate to say this. I call it our cat stocks, chocolate, alcohol, tobacco.”
Van Vleet: Textron Maximally Underweights International Equities
“And then I have been as maximum underweight international as I could be as much as I felt comfortable.”
Van Vleet: Textron Invests in China Strictly via Domestic A-Shares
“All in A shares. So we didn't want any H shares. We didn't want any red chips. We want as much as possible somebody who's reflecting the local economy. And so that's a lot of healthcare and fintech.”
Van Vleet: US household formation outpaces housing production by 150,000 units annually
“The household formation running at a million units a year, we're only making 850,000 a year. So the shortage is there for a while.”
Van Vleet: Textron is buying single-B rated CLO equity slices
“The other place, Ted, I think is great. It's where you have such incredible diversity, and that's in, you know, single B rated CLO equity. So CLO equity, you know, where you gather 200 single B rated names and throw them in, and I buy the bottom slice, the equ…”
Textron pension replaces physical Treasuries with futures for liquidity
“So we have been actually just taking treasuries out of the market and replacing them with futures. Futures being more liquid than treasuries in one of these taper tantrums.”
Van Vleet: Textron allocates 30% alts, 30% fixed income, 40% public equity
“We're in 30% alternatives, which is private equity, real estate, primarily. A couple of hedge funds, but mostly real estate, private equity. 30% fixed income and the balance in public equity, and that public equity is U.S. And international.”