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Franklin: Allocator pattern recognition requires asset-class specialization
“I feel so much of our job is about pattern recognition. And so if I want to appoint a Let's just say a PE manager, because that's my background. It's really hard to do so if I haven't seen all the other PE managers that there are that could potentially fulfill…”
Franklin: Donors give more when institutions appear financially inaccessible
“But actually, I think in terms of philanthropy, People tend to want to give when something's actually very inaccessible from a cost perspective.”
Franklin: Rigidly adhering to processes in changed markets is a red flag
“I think, again, a big red flag is somebody who almost religiously sticks to the process over time, even when market conditions have changed.”
Franklin: Spend illiquidity budgets on uncapped returns, not private credit
“If we're going to use up what we think of as a sort of illiquidity budget, I'd rather be in an asset that offered the potential for Uncapped returns over time, of course, not all of them are going to achieve an extraordinarily high returns, but I didn't want t…”
Franklin: Emission-efficient companies will likely be more valuable than peers
“So when we think about our portfolio, it makes sense to us that a company that's a more efficient Consumer of emissions, shall we say, within its business activity over time as a long-term investor is likely to be more valuable than its peers who are less effi…”
Franklin: China's Energy Transition and Healthcare Sectors Are Booming
“There are quite a number of industries where China is really booming, particularly in the whole energy transition supply chain, which is an area that we Think about a lot, partly as a business opportunity also in relation to our sustainable investment agenda. …”
Franklin: Delay decisions until the last possible moment to capture new information
“To never make a decision until the last possible moment, because you never know what further information is going to come to light”
Franklin: Stating a PE value creation plan is far from achieving it
“I always ask the question when we're talking about value creation of who did what to who to actually get it done, because there's really one thing to say our value creation plan is X, but it's a huge gulf from that to achieving the value creation plan”
Franklin: Manager selection fundamentally depends on team continuity and decision process
“Being most fundamental in my view, whether the key people who made the successful investment decisions of the past were still there, whether the investment decision making functioned well.”
Franklin: High-quality investment decision-making does not scale to large groups
“Having people feel bought in, but actually keeping decision making to a relatively Narrow group, because I think one of my learnings is that really good decision-making doesn't actually scale very well.”
Cambridge endowment uses psychometric testing to ensure cognitive diversity among recruits
“And we, as part of our interview process, introduced psychometric testing for all of the new recruits, which was specifically aimed at finding people who would bring very different personalities, skills, and approaches to the table.”
Franklin: Smaller endowments benefit by concentrating capital in early-stage managers
“There are benefits to being small. There are also obviously benefits to being large, but we are able to be very concentrated as a result of that. We are also Able to access fund managers that might have smaller funds or be a bit earlier in their life cycle bec…”
Franklin: Cambridge buyout portfolio has lower leverage than the Russell 2000
“So we actually looked at the leverage level of our underlying buyout portfolio. And that analysis showed that the leverage in our buyout portfolio was actually lower than the leverage in the Russell 2000.”
Franklin: Cambridge buyout portfolio valuation marks are lower than Russell 2000
“So I can't speak for the industry as a whole, but within our buyout portfolio, the valuation marks are lower than the Russell 2000.”
Franklin: Stop pretending private equity funds actually have ten-year lives
“Frankly, very few private equity funds actually have a tenure life, as we all know, so let's stop pretending that's the case”
Cambridge Endowment aims to achieve net zero portfolio emissions by 2038
“So the core element of our sustainable investment approach is an ambition that we've expressed to achieve net zero greenhouse gas emissions from the portfolio by 20 38.”
Franklin: Cambridge does not require prospective managers to prioritize emissions initially
“We definitely don't expect a new manager to necessarily be focused on these issues, the point of investment. I think many of our managers are quite small boutique type fund managers. I think what's really important to us is that the manager is receptive to the…”
Franklin: PE firms must be thematic to generate proprietary ideas
“A lot of private equity investing is, by necessity, had to become much more thematic, because unless you have proactive investment theme and a thesis, it's really, really difficult to actually generate a proprietary idea.”
Franklin: Branson focused on the one or two critical business variables
“I learned a lot from just seeing how he would laser focus on the one or two elements of a business proposition that were really fundamental to whether it would work or not. He had this uncanny ability to really do that. Sift through lots of information and say…”
Franklin: Focuses on people over analytics in current investment approach
“Actually, funnily enough, now I've come much further sort of back around to focusing intensively on people. And a bit less on the analytical side of things.”
Cambridge workshops deals early to prevent diligence momentum and confirmation bias
“When we first started, we would have these team discussions once a The majority of the diligence had been completed, but what we then found was that everybody was already quite bought in to the idea of the investment going ahead. So as soon as we think somethi…”
Franklin: Inherited a Cambridge portfolio unusually overweight in public equities
“The previous investment team had left. There was a need to substantially rebuild the investment management function. The portfolio was also, it actually done very well. But was much more heavily invested in public equities than what I was used to, or what I wo…”
Cambridge endowment allocates 40% to equities, 25% PE, 20% absolute return
“We have about 40% in equities, about 25% in private equity, 20% in what we call absolute return, which is a sort of more market-neutral subset of the hedge fund universe, and then about 10% in real assets, and the rest is cash and fixed income.”
Franklin: Cambridge Evaluates Managers Across Role and Conviction Axes
“So when we actually evaluate managers, we have two different axes, role and conviction.”
Franklin: 21 of Cambridge's 31 colleges invest in central endowment
“There are 31 different colleges within it, and each of them has their own endowment, and they are completely independent in terms of whether they choose to invest those endowments with the central pool that we manage or to do something completely different. So…”
Franklin: Cambridge hedges portfolio back to 60% sterling exposure
“We approximately have, this isn't exact at all, but approximately a third of the portfolio is in sterling related stocks. Opportunities are just over a third in dollar denominated investments, and then the other just under a third is other. And we have a polic…”
Franklin: Cambridge uses open-ended fund-of-one structures for real estate
“What we've set up in a number of areas are a fund of one structure where we're still working with an expert third-party manager who But we're just the only investor in that vehicle, and the rationale for that has really just been that we're very long-term, and…”
Franklin: Cambridge PE managers measuring emissions jumped from one to seven
“So in 20, 22, only one of our PE managers actually measured and reported emissions, whereas in 20, 23, there's going to be seven.”