Capital Allocators Monthly - June 2020

July 2, 2020 by Ted Seides

Hello Fellow Listeners,

I can’t remember a month with more powerful narratives.  I just couldn’t find a way to keep the reading list to five.

Announcements and Gratitudes

Behind the Episode – new addition to Premium content
Premium subscribers receive a weekly email describing the backstory, takeaways, and top quotes of each episode, along with coming attractions on the show. Click here to subscribe. Thank you for the support – I am very grateful for it.

Daylian Cain’s online training program
Daylian’s new online training in negotiations releases on July 20th. He’s currently offering a 50% pre-roll discount (plus another 20% for listeners of the show). Use the coupon code ALLOCATORS.

Academic research for allocators
Prior guest Paul Sonkin is studying the importance of personal attributes allocators might take into account when selecting managers. Please give him a hand and take a few minutes to fill out this survey. We’ll share the results when published.

Reading (Ordered by reading time: tweets first, books last, and blog posts and articles in between) 

Quote from Phil Duffy, President and Executive Director of Woods Hole Research Center, that sums up my take on the mini-series:
“I could give 100 more speeches and nothing will change, but if we get 100 security prices to move, something may change.”

1. Breaking the Silence, Shundrawn Thomas, President of Northern Trust Asset Management, shared his personal story and call to action on racial injustice.

2. Capitalism After the Coronavirus, Al Gore and David Blood. In a WSJ op-ed, two leaders at Generation IM discuss the opportunity to build a better economy focused on sustainable principles coming out of the pandemic.

3. After the Great Lockdown, David Hunt and Taimur Hyat, PGIM.  A thoughtful look at megatrends coming out of the pandemic.

4. Stretching for Returns 1: Leverage at CalPERS. Leverage is the great magnifier. Modest balance sheet gearing makes sense for the long-term, but this outcome will be end point sensitive. A dozen years ago it would have been politically unpalatable to leverage post GFC, when expected returns were high. Now, this feels like a pro cyclical timing mistake.

5. Stretching for Returns 2: Private Equity in 401Ks. The regulations tied to 401K inclusion of private equity are sensible, and the potential wave of incremental capital from 401Ks may preserve the private equity bid for a while longer. Still hard not to question the timing at current valuations.

6. Dislocation investing at Apollo. It’s hard putting lots of money to work, and it’s really hard putting any money to work in a scary meltdown. Kudos to Apollo for doing both and rapidly seizing the opportunity in March.


Capital Allocators
First Meeting Episode 20: Clarke Futch – Healthcare Royalty Partners. Clarke dives into a niche investment strategy

Sustainable Investing: The Next Frontier, with thanks to:

Episode 139:  Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity. Wendy defines the terms of sustainable investing, discusses the different approaches managers take, and describes how each is applied at Wellington.

Episode 140:  Sustainable Investing 2: Liqian Ma – Allocator Perspective. Liqian shares his perspective from his work with 150 families focused on ESG at Cambridge Associates.

Episode 141:  Sustainable Investing 3: Bob Litterman – Pricing Climate Risk. Bob applies his sharp risk management mind to pricing carbon risk.

Episode 142:  Sustainable Investing 4: Emanuel Citron – Sourcing Sustainable Managers. Manny founded Volery Capital to back investment firms focused on environmental and social impact investing.

Episode 143:  Sustainable Investing 5: David Blood – Pioneering a Generation. David created Generation IM with Al Gore and a group of partners in 2004. Generation is perhaps the biggest brand name in the space.

Episode 144:  Sustainable Investing 6: Richard Lawrence – ESG Integration at Overlook. Richard rejoins the show to describe how he integrated ESG principles in his value-oriented investment shop investing in Asia over the last 30, 20, and 10 years.

Episode 145:  Sustainable Investing 7: Tony Davis – Hedge Fund Perspective. Tony left the multi-billion dollar hedge fund he co-founded to do good, and soon found himself creating hedge fund Inherent Capital with a sustainable lens.

Best of the Rest

Jeremy Grantham on Invest Like The Best Jeremy at his best, waxing poetic about crisis investing in general and this one in particular.

Have a good one,