The Ledger
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Delta's 2014 Pension Strategy: 40% Hedge Funds and 50% Leverage
“We go back to July of 2014, and that's the portfolio. 30% privates, 40% hedge funds, 10% cash, borrow 50%. You've got this other 20% funded stuff in case you've got a liquidity event if you really need it. That's what the portfolio looked like back in 2014.”
Glidden: Unconstrained Hedge Funds Surpass Benchmarks Easier Than Long-Only
“The idea here is that unconstrained talented hedge fund managers have a better chance of beating a risk-free rate than highly constrained long only managers have the probability of beating a benchmark.”
Increasing Manager Count Is Key to Mitigating Hedge Fund Skew Risk
“The only way to get around some of that skew risk, some of that kurtosis risk, is to just increase the number of managers that you work with.”
Glidden: Paying 20% Fees on 0.4 Beta Demands Unrealistic Selection Skill
“If you're paying 20% incentive on 40 beta, you got to be damn good at manager selection. Some people can do it. I can't. That eliminates a lot of the universe.”
Glidden: Delta pledged 5% contributions and a 9% return backstop
“When might Delta not be able to stand up to that pledge that they made in those early days, which is we're going to pay the five percent mandatory. And if you don't hit a nine percent expected return, we're going to stand up and make it like you did make a nin…”
Glidden: Prime Directive of Portable Alpha Is Never Getting Forced Out
“You've got the one prime directive of portable alpha. Do not let the markets push you out of your beta position. Do not let the markets push you out of your alpha positions.”
Delta's Portable Alpha Strategy Generated $2.25B in Net Value Over Decade
“That portable alpha, that's over two hundred million dollars of net value per year for over a decade. 2.25 billion since the inception of the program. Private markets, it's over a billion excess relative to the respective public markets since then.”
Glidden calls for hedge fund cash hurdles despite supply-demand obstacles
“I would love to see cash hurdles for hedge fund managers. I would love to see that. I don't know that I'm going to get my wish, especially we've got a pretty impressive roster of managers. There's a supply-demand mismatch.”
Glidden: Derivatives enable borrowing near risk-free rates to lever portfolios
“If you can borrow at the risk-free rate, you can just lever your tangent portfolio. You can make more money per unit of risk. Well, can you do that? Can you borrow at the risk-free rate? Some people can. You can do it through the use of derivatives.”
Delta's Pension Was America's Worst-Funded in 2011 With $14B Shortfall
“The pension today is sixteen billion. Back in those days, the pension was more like seven billion, and it was fourteen billion underfunded on a company with a market cap of seven billion dollars. Funded status was hovering in the upper thirties, low forties, s…”
Delta Backs Every Notional Beta Dollar With Cash or Hedge Funds
“We created something that we call the golden rule. So we've got a notional value of our beta overlay. Every notional dollar needs to be backed by either cash or hedge funds. That's the golden rule.”
Glidden: Treasury Cash and Carry Strategy Yields More Than Warranted
“So treasury cash and carry, it's been a good strategy. To this day, it's a better strategy than it probably should be. It probably pays you more than you should.”
Glidden: Delta capped venture capital at 5% to 10% of private equity
“Want to be very cautious with venture because it is the longest duration asset class, but we targeted in that five to 10% range of the private equity exposure is about what we wanted venture capital to be.”
Delta Pension Faced $3B in Margin Calls During March 2020
“We had three billion in net margin calls around the worst of the COVID timeframe. So we went into COVID reserving about three billion in cash behind our derivative portfolio.”
Delta Pension Compounded at Over 10% With ~185 Bps Alpha (2011-2021)
“The plan largely worked. So we compounded at over 10% from 20 11 to 20 21. We didn't quite get our 200 basis points of alpha, but we were really close. 180, 190 basis points of alpha.”
Glidden: PIMCO beat equity benchmarks via derivatives and bond portfolios
“It's really hard to beat equity indices by picking stocks in a constrained manner. But what PIMCO did, they pair an S and P 500 derivative on top of a bond portfolio. So then they get some alpha, some duration, some credit, and they beat the index that way and…”
Glidden: Emory Endowment Sold $3B in Coca-Cola Stock to Diversify
“Emory, even back in those days with six billion, we sold three billion dollars worth of Coca-Cola stock in the pretty early days.”
Glidden: Emory's Portable Alpha Portfolio Beat Benchmarks by 200 bps
“It worked. We beat benchmarks by 200 basis points on this portable alpha portfolio we had.”