The Ledger
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Long/short equity managers are generally poor at shorting stocks
“Pretty good data out there that long, short managers, and I'm sure you know this, are good at picking stocks. Not as good at shorting stocks on average. Some are good, but not as good on average.”
Investment committee governance decisions destroy massive value while chasing marginal alpha
“Everybody's had lots of decades of concentrating on why the small cap manager ought to beat the benchmark by 50 basis points. And yet, a lot of times, the governance decisions that are coming out of the committees are destroying massive amounts of value, and n…”
Applying ERISA-style pension rules to family and endowment management destroys value
“What I'm criticizing is misapplying it
Into family and endowment management, where we should like tracking error.
We should think about what you need to do to outperform, not shy away from it.
I guess that's my biggest pet peeve, is best practices that are act…”
Dynamic asset allocation only works for avoiding once-a-decade market bubbles
“Where I am on that is that you can, if you are careful when you do it, and you respond to very strong signals. So it may happen once every 10 years, but if you can avoid a bubble by doing that dynamic asset allocation, it's hugely impactful”
The size factor is questionable compared to valuation, momentum, and quality
“We think there are some sustainable factors that add value, like valuation and momentum and quality. Size is a little more questionable, in our opinion, but we're still looking at factors all the time.”
Wall Street firms underappreciate OCIO by treating it as product distribution
“We think the whole OCIO concept has been underappreciated by Wall Street, because the big firms who are getting into the space see it as a distribution arm. You know, it's a label. They want to
Get more assets. Good. But we see it as actually this sea change …”
Goldman Sachs shifted to trading after the J. Aron takeover
“When the Jay Aaron people took over, it became more trading focused. And so when I was there, it was still very much relationship driven.”
R.K. Mellon's family office consistently outperformed Goldman Sachs in the 1980s
“The chief investment officer was a guy named Arthur Miltonberger, and I covered him as a broker, and what was interesting was that they were consistently outperforming us, so Arthur Who was based in leafy Ligonier, Pennsylvania, which is really a bucolic setti…”
Factor strategies are less effective for taxable families due to trading friction
“Families, it's a little different than institutions, because a lot of these factor weights like momentum and valuation and quality are pretty heavily traded. So they're not as effective for families as they are for institutions.”
Long-lockup illiquid assets offer rich and repeatable alpha
“So when we think at the very top, we're thinking about illiquid assets, 10 to 12 year lockups, and that's a big, thick icing on the top. There's lots of alpha there. Lots of manager value added because it's an illiquid market. It's idiosyncratic. It takes spec…”
Private equity target is 400 basis points over public markets net
“Our expected return for private equity is about 400 basis points over the long-term expected return of the public markets. So 10 real.”
Hirtle Callaghan avoids public credit in favor of private credit
“So we're not very high on credit right now. And, you know, fixed income-wise in general, we're pretty conservative. We are finding interesting things in private credit, and that's where we would prefer to go. Rather than taking a higher risk in public markets,…”
Employing portfolio leverage effectively is a distinct investment skill
“Using leverage is its own skill. I mean, I don't want to act like that's easy. You just put five percent on and leave it. That's not my point at all. People would poo-poo hedge fund guys say, well, they're just long short with leverage. And I'm like, well, yea…”
The 1980s era under Weinberg and Whitehead was Goldman's golden era
“I personally think, and I know they're more profitable today and so forth, but that that was a golden era for Goldman Sachs. It was run by John Weinberg and John Whitehead, but other leaders like Bill Gruber and Roy Zuckerberg and Richard Menchel and so forth.”