E292: How the Former CalPERS CIO Built a High-Performance Investment Culture

How does one of the world’s largest pension funds shift its culture, governance, and investment process at scale? David Weisburd speaks with Nicole about her transition from Ontario Teachers’ Pension Plan to serving as CIO of CalPERS, implementing a total portfolio approach, and leading organizational change during a period of market and operational disruption. Nicole shares lessons on governance, board alignment, co-investing, and building long-term investment institutions.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Weisburd?

  Nicole, I know this term gets used a lot, but you truly have one of the most prolific investment careers in the industry. And you went from Ontario Teachers Pension Plan to becoming the Chief Investment Officer of Calpers. What made you want to take that jump?

• 0:15Speaker 01

  I had a slot in between as well as a GP. So I think, you know, the best way I'd articulate is I really have always just been very mission-driven. I'm very inspired by the notion of being able to invest and then knowing that it's bettering or giving, you know, folks a retirement with dignity, if you will. And I think that's just because I spent almost 17 years at Ontario Teachers. And so when this opportunity came along to join really the largest pension in the US, but also one that's been quite storied and extremely complex, I really got excited just about the idea of being able to bring that toolkit of experience that I had sitting in what I think is still one of the most innovative, certainly for its time.

• 0:58Speaker 01

  And I can touch on that a little bit later, what made it so innovative. But coming from the learning I had from the very earliest days of my career from at Ontario Teachers and being able to bring some of that Canadian style of governance and total portfolio approach, if you will, I thought, you know, what a great time in my career to do that. So I went, I jumped in, you know, fee first, super excited to take that on.

• 1:19David Weisburd?

  And you brought this total portfolio approach, TPA, from the Canadian style to the largest pension fund in the United States. How were you able to get an organization to change that was just so vastly large, like Calpers? And double click on exactly how you went about implementing.

• 1:40Speaker 01

  To step back, the current CIO, Stephen Gilmore, is formally and officially moving the board to a TPA approach. I would say I tackled it a little bit differently. You know, again, I arrived in the middle of COVID. There was really no one in the halls just yet. California was still allowing state workers to work from home for the most part. And so I really started with a big listening tour. I know that phrase gets used a lot, but I genuinely just walked the halls for the first, you know, 90 days, not 100 days. My very first board meeting was minutes after I arrived. And so I said, you know, at my June board meeting, let me walk you through my observations. And so I think- Trying to take this, you know, classic listening tour approach really helped me to

• 2:25Speaker 01

  kind of identify and it was almost easier because there weren't folks in the hall. You could really see where the silos were. You could really feel where the organization just really needed to have clearer accountability and maybe a more collaborative approach to governance, more connective tissue between teams. And so from a total portfolio perspective, I really started with culture, which I think TPA is, you know, is actually about governance and culture and making sure you can approach the problem as a total fund as opposed to being siloed. And so I think gearing, you know, starting off with the culture pieces that make for better governance, make for better decision making, make for better accountability is what I tackled first.

• 3:10David Weisburd?

  And the traditional approach versus the TPA approach, the traditional approach is very much focused on buckets. This is how much is private equity. This is how much is venture. This is how much is credit. And the total portfolio approach, everything is competing against each other. And what that practically means is that teams are essentially competing for the same allocation. So how did you create the culture in such a way to make it collaborative, given that it's essentially encourages this kind of competition?

• 3:39Speaker 01

  Yeah, so as you put it, you know, strategic asset allocation is allocated with a bunch of inputs that are based on where you think the market, where the markets have been or being used to make assumptions around where the markets are going. There's a policy portfolio you're trying to be, et cetera. TPA is really more about total fund. It's really thinking more about are you getting paid for the risk that you're taking in a manner that moves the needle at the total fund approach? And so often you'll have an absolute or a total fund benchmark as opposed to a policy benchmark. You absolutely are competing for capital or at least the, the culture of it is to compete for capital for the next, for the next best place to deploy the capital as opposed to thinking just for your silo or just for your asset class.

• 4:24Speaker 01

  So really what that boils down to, I go back to the cultural point, which is you need to set up, you need to set the organization up so that you are able to break down those silos. And, you know, so how do you do that practically? One of the first things we did as a team is we decided that we really should have all the asset classes in the room for, you know, in an investment committee. Type approach as opposed to having the private equity investment committee, the real estate investment committee, public markets, et cetera, all split up and all different. We had the heads of asset class come together to really make sure we were better understanding which each individual silo, which we still were, we were still definitely under an SAA

• 5:08Speaker 01

  approach. But what is, what are the goals of each of the different asset classes? Where are we trying to get? Does that make sense from a total fund perspective? Do we have the right decision making? Do we have the right delegated authorities? Are we communicating and educating the board in real time to make sure we're getting their buy-in from day one? There was really just a set of questions we posed to one another to say, are we as agile? Are we as transparent? Are we as, are we holding ourselves accountable for what the individual decisions that are being made in asset classes? Are we being held accountable through the lens of total portfolio to move the needle at the total portfolio approach? We didn't call it TPA. I didn't try to introduce that

• 5:50Speaker 01

  as a formal shift at the time. I really just wanted to get the teams talking. I wanted to try to break down any structural impediments. I think one of my deputies, Dan Bienvenu, used the term sand in the gears, which I thought was a perfect way to articulate. Sometimes we would just stand in our own way. We had policies in place that didn't make sense. Maybe they are from time past, but they still existed. We had committees or meetings in place that you really didn't need. And so we really, we went through a whole exercise to make sure that we were setting up the decision making, we were setting up appropriate governance, that we were always asking ourselves, is this as agile as we can be? Are we learning from one another? Are we sharing and being transparent with not only ourselves, but with the board?

• 6:33Speaker 01

  And again, a lot of that was just cultural, you know, really starting to think as a team. Really, I used to use the phrase like, let's think like asset owners, not asset allocators. The word allocator really wasn't a term we used in the Canadian pension kind of space, if you will. We thought of ourselves as asset owners. We thought of ourselves as, you know, investors, not allocators. Allocators feels very passive. And so it was really about positioning ourselves as a senior team and, and moving that culture through the organizations that we all felt like owners at the end of the day and be held accountable for those decisions through the lens of the total fund, not just our own individual asset classes.

• 7:10David Weisburd?

  It feels to me that culture is downstream of other things like incentive.

• 7:17David Weisburd?

  Hiring, what were those upstream things that changed the culture for CalPERS?

• 7:23Speaker 01

  First of all, finding a few initiatives that everyone could really rally around, taking the pulse of the organization to see like what gets folks excited. Again, if you think back, you know, first and foremost, I was just excited and hoping to get bums in seats on the same days. You know, years out doesn't sound like a big ask, but I think in the midst of it, it was a very difficult, it was difficult on the organization to have everyone aligned and agreeing. Or at least, you know, if they didn't agree, buying into this idea that let's pick three days where we're all here and we'll work remotely on the other two. Why was that important? I think for an organization, an investment organization to be healthy,

• 8:07Speaker 01

  it has to be almost like a teaching hospital. You know, I use that analogy a lot, like we got to be around, senior people have to be, you know, mentoring and training junior people. Peers need to be open minded to the notion that you're not the smartest person in the room. You're learning from people around you all the time. And so getting more of a teaching hospital mentality of being in the building on same days was important. I think having the tough conversation and getting the board's support and buy in around, let's align compensation with performance. Let's really think about what that compensation structure looks like.

• 8:49Speaker 01

  Are we incentivizing people to do the right thing versus incentivizing folks to, doesn't really matter, you know, if I work super hard or I don't work super hard, I'm getting paid the same. Like, let's make sure we were really instilling the right behaviors in individuals so that folks were motivated to do the right thing and get, you know, compensated accordingly. That exercise alone.

• 9:15Speaker 01

  Is not easy to do in any organization. I think that exercise alone in a large state pension really requires the education and help and support and buy-in from the board, which we had thankfully at CalPERS at that point in time, to really be more thoughtful in the compensation structure. So I think that went a long way. I think it went a long way across the organization and it certainly went a long way within the investments department. The decision-making structure upstream. So having, you know, the heads of the asset classes not only gather for investment decision-making, but also gather around the table for the portfolio construction and risk management of the program,

• 10:00Speaker 01

  and also gathering around the table for the administrative bits, so that everyone was owning each other's problems in those respective categories. When those types of decisions on the admin side are being made in a silo or in the investing side or on the risk or portfolio construction side, you're never going to get to a place where you see true collaboration and you're certainly not going to build a culture that is ready for such a big shift from SAA strategic asset allocation to more of a total portfolio approach. And so we were just planting the seeds in those, you know, in those early months and into the extent of my tenure to make sure that we would be well positioned to speak the speak of a less siloed, more total portfolio approach.

• 10:43David Weisburd?

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• 12:08David Weisburd?

  I think two of the frictions for why these policies come into play is, obviously, the team wants total flexibility and the board wants oversight and control. And a lot of that has to do, I think, being on the same page and having that trust. How did you build that trust with the board? And were there certain people on the board that were for it, were against it? Talk to me about how you garnered support for this approach.

• 12:37Speaker 01

  I think, like, the first simple, but not so easy task, I guess. Everyone has to buy in that the board is there for the sole person, the sole purpose of making sure that their stakeholders, their constituents can retire with dignity. Full stop. I mean, if you can't start from that place and give them the benefit of the doubt that they're really just, they're not there to be in control, they're not there to feel important, they're not there, you know, for their own purposes. If everyone can start from the place that we all have the same North Star that we're going for here, that we need to deliver a certain outcome so that we can pay pensions in the future, that's what, you have to start there.

• 13:21Speaker 01

  You have to join arms and start there. Once you buy in that you're all, you know, gunning for the same place, then you ask yourself, okay, well, how do I make that job easier for the board to give us the delegated authority, give us the autonomy that we need to be agile, to be good investment partners, to our GP friends, to make the right investment decisions? And so, a lot of that, I think, came from our...

• 13:46Speaker 01

  You know, a real push, if you will, into making sure we are being as transparent as we possibly could be. Always start with the assumption of if we educate the board and bring them along for the journey, as opposed to surprising them with this is what we need and this is when we need it and this is how much we need, we'd be in a much better place. And I do think that, for many reasons, I understand, and I certainly learned, I certainly picked on it pretty quickly. Maybe historically, that isn't how investment teams and boards in general work in many of the state pensions, this idea of being a partnership and being super transparent. But I can tell you, for a plan the size of PERS and the complexity

• 14:29Speaker 01

  of that plan, there's really no other way to have success, other than be a partnership, be in a partnership with the board and make sure that you're not surprising them, making sure that they're buying in and they're only going to buy in if they understand the why and the how, and feel comfortable that the team is resourced appropriately, that the strategy makes sense, that the outcomes and the risk that we're taking are not going to put them in a precarious position with their stakeholders, with their respective contribution levels, etc. And so, that whole handholding and learning from and exchanging of views was a super important piece that we really worked hard at as an investment

• 15:14Speaker 01

  team, and working with the rest of the senior leadership on the enterprise side of CalPERS, to make sure we were building stronger bonds with the board. And I definitely felt supported by that board. I know the board changes, board changes all the time, but during my tenure there, I always felt very supported by that board. And I really always felt that they showed up at every meeting, wearing one hat, which was, let's make sure that our constituents can retire with dignity and retire with a pension.

• 15:44David Weisburd?

  You mentioned you like to be a good partner for GPs. For such a large plan, what does that mean?

• 15:54David Weisburd?

  What's been some good use cases of how calipers could partner with GPs and be a true capital partner to them?

• 16:01Speaker 01

  We had to step back and say, you know, where are we trying to get to? And are the tools or the levers that we're pulling on going to get us there? And I think the first exercise we did during that last listening tour was what have we missed? And it was pretty evident from the data, from the history, what was in front of us, that we'd missed a really big chunk of participating in the private equity markets for like almost a decade. It was like a lost decade. We were in, we are out. We were not, you know, really leaning into the opportunities that were in front of us with respect to building a co-investment platform, with respect to making sure we weren't over diversified, with respect to making sure we are right sizing our checks, with respect

• 16:46Speaker 01

  to are we in all parts of the, you know, the menu, if you will, of options across alts? So we did a real deep dive, in particular, onto the illiquid side of the business, which was, you know, a safe place for me to lean into initially because of my private markets background. And we came to some conclusions that were, look, we need to do better. We need to do more. We need to do better on the private equity side. And we need to really lean into the partners, the GPs, where we have high conviction, high conviction being, you know, really being decided based on track record, their track record of being, you know, good partners, whether that meant because they performed

• 17:30Speaker 01

  well, whether that meant because they showed up and, you know, with that teaching hospital mentality, showed us deals, helped us get there, et cetera, et cetera. We had a real hard look at who we thought in that stable of GPs were our high conviction partners. And from there, we said, okay, if we've decided that these are high conviction partners, that we feel good about their Approach to risk taking and their ability to generate great risk adjusted returns, let's start setting up more of a programmatic approach to co-investing. Let's pick our spots, let's lean in on those partnerships, let's make sure we make it seamless that we can be seen as a good partner. When they, when they call us on a co-investment,

• 18:13Speaker 01

  let's not be in a position where we don't, we're not able to give a quick no. Those are as important as, you know, delivering yeses. And let's make sure that our team is, you know, consistently learning how to do, you know, the, the act of underwriting co-investments, let's learn, let's do that better and better, let's better ourselves so that we can be better partners. And so I think some of the key hires we made during that time to come in and really reposition the private markets program, specifically focusing more on the co-investing side of that, for that part of the business, were really instrumental. And I think now, you know, I still stay, you know, I stay in touch

• 18:57Speaker 01

  with the news that comes out on their program. It's all public. And I think we're starting to see the fruits of that labor. I think their private markets program from a return on risk and from a total cost perspective seems to be doing, you know, extremely well. And so, you know, excited to see that. The other examples I would give would be just more, what were some of the programs that people could really get excited about? Again, going back to culture, like feeling like everyone was rallying around a few initiatives at the time, maybe not popular now, but at the time, really articulating well what our path to net zero or what our, you know, investing in transition could look like. So we, we backed up and we said, okay, what is our-

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• 20:23Speaker 01

  Strategy 2030, what does that look like? How do we get there? And what does that look like specifically for our path to net zero 2030? And so we tied in, we took the broader, you know, what's our North Star? Over, you know, the next five to 10 years. And we included in that, what are we doing around investing in emerging and diverse managers? What are we doing around investing in energy transition? And I think that those two initiatives alone were really good examples of, you know, an organization that cares deeply about making sure that we're hitting the returns we need to, but also acknowledging that we can

• 21:04Speaker 01

  do well with the capital in a way that is, you know, pushing an agenda around energy transition, pushing an agenda around investing in diversity, investing in emerging managers, and still get the outcomes we needed. And so I think that those two rally cries around those two initiatives were good examples of, you know, green shoots where the culture was really, was really growing together in a more cohesive way in order to get those two initiatives done.

• 21:30David Weisburd?

  Things interesting, I always think about this concept of structural alpha. And most people think it's like a very sophisticated information asymmetry or illiquidity premium. Sometimes it's just paying less fees. I had Professor Steve Kaplan, episode 196, he came up with the Kaplan Shore Index. And he quantified a two and 20 structure as 6% in fees. So if you take the two and 20, normalize it. So if you have 50% and two and 20, 50% at zero and zero, let's say for co-investment, you got your 300 basis points of alpha. And, you know, without, without disparaging an organization like CalPERS, in many ways, that, that is a source of alpha. When you have that much money to deploy, it's very hard to pick,

• 22:13David Weisburd?

  this is the one niche manager that's going to outperform the rest. You really have to find these structural ways to solve for these problems.

• 22:19Speaker 01

  A hundred percent. And I know that's, we're really simplifying it right now, but I try to keep things very, very simple. And that's why. I think when I first met the board and kind of talked about what my vision was if I were, you know, what my first hundred days were going to look like, I really leaned in on that exact notion that you just talked about. Like, there are things we can do structurally that are truly low hanging fruit, that we're not reinventing a wheel at all. We're just doing things a little better. We're removing the sand from the gears. We're being better partners. We're leaning into the partners that we have high conviction on and generating returns because we're just doing it cheaper. And so I do think that that structural change

• 23:04Speaker 01

  alone on getting more into a more of a programmatic co-investment approach has been quite helpful. Now, there's areas you got to be careful with. Like, you may not want to lean into that same notion around venture. Like, venture might not be the area where you lean in with really big checks on co-investment. You might want to, you know, temper your excitement around the venture assets on the co-investing side so that you're not, you know, bringing on more risk than you understand, which is, you know, a whole other topic around risk management. But I do think the regular way buyout programs, infrastructure programs, credit programs, where you're deploying these massive

• 23:47Speaker 01

  amounts of capital that just make your head spin, that if you've done the work, and I think helpers as a whole are very good at manager selection. They have real deep talent in that area. I think if you're really good at manager selection, then you should feel good about choosing a subset of those managers and setting up these programmatic programs.

• 24:09David Weisburd?

  I do want to get into the firm that you started, but I want you to first play armchair quarterback, which I know you're not supposed to do. But given that we're in a market today where buyout seems to have so much dry powder, retail, 150 trillion in retail reportedly is going into that. That's without even 401ks.

• 24:28David Weisburd?

  Where could an organization like Calpers actually deploy the capital in the private markets? What would you do if you were in that seat today?

• 24:37Speaker 01

  Well, I mean, this is definitely self-serving because we'll talk about my credit program in a moment. But I think that firms like Calpers really benefited from super smart folks that when we first got the allocation into credit, really leaned into kind of the regular way, direct lending that made a ton of sense. I think as that program has evolved and matured, there's definitely, you know, some wide open space for them to be thinking about some more adjacencies in credit. Just adjacent to the regular way, direct lending. And I think there are definitely opportunities to do more co-investing for groups like Calpers who were very thoughtful in their approach when they first got their allocation into credit.

• 25:19Speaker 01

  And I think they've now shown that they can graduate into more of this programmatic approach that we talked about, that we kicked off on the private equity side.

• 25:29David Weisburd?

  So let's go there. You had a year of sabbatical. You got to think from first principles what you wanted to go into. I'm sure you had many opportunities. You chose to start your own firm. Why did you do that? And tell me a little bit about Square Nine Capital.

• 25:46Speaker 01

  I think I'd start off by saying I've always been very entrepreneurial. I just had to do it within really large shops. I was pretty young when I became a single mom. And so there's just in life, you just have to choose your spots. And so once my kids, I knew I had line of sight to them going off to college. That's when I really decided the time made sense for me to lean into launching my own program. I think taking, look, taking a sabbatical is, is a real luxury to be able to do that. And I did a year of servant leadership, which basically meant I went around my network and said, you have me for free for a year. So the advice is free. Take it for what it's worth.

• 26:27David Weisburd?

  So for your sabbatical, you did a bunch of work.

• 26:29Speaker 01

  I did, but it was fun because I was leaning in, I was like nerding out and leaning into areas that brought me real intellectual joy, personal joy. It allowed me to be around people that I'm constantly learning from. It allowed me to give back in ways that when you have a full-time job, you're not necessarily able to do. And it just gave me such clarity on where I thought the real investment opportunities, like where the puck is going, if you will. And I would absolutely be lying if I said when I left Purse, I knew I was going to launch a credit fund. I knew I was going to do something in private markets. I knew that I wanted to take everything I love about being a CIO,

• 27:12Speaker 01

  but combine it with everything I love about building businesses and, you know, building strategy. I knew I wanted to do it with a team of humans that I really was excited to get up and work with every day. I think the work hard, you know, be kind mantra that I, you know, tried to live by was something, you know, that I kept in mind as I was seeking out who it was that I wanted to build a firm with. And so when I ultimately met my now co-founder, Peter, and he and I shared very similar values on what, you know, what we think is important when you're going to build a firm. And with his background being solely in this part of credit that we've now launched Square Nine into,

• 27:53Speaker 01

  it just got me really excited. I had already spent so much time thinking about where I thought the right interesting thematics were through the lens of where's the capital going to come from? So what do allocators need today? Where can I and Nicole add value in the ecosystem as I build a firm? And who do I want to build that with? And so when those, that trifecta came together, that's when we launched Square Nine and it's been great. It's been, you know, everything I hoped for and more. I think we continue to be in a really interesting part of the credit market where, you know, as I said, regular way direct lending, awesome business, big volume business, stubbornly focused in a appropriately so on a set of sponsors, delivering them a product that, you know, fits a very neat box.

• 28:38Speaker 01

  And then there's the 80% of the market that is not sponsored back. Not all of those would be creditworthy companies, but 80% of the market is not sponsored back. And so. You know, we kind of spend time in this, we call them valuation opaque situations. So why are they valuation opaque? One, if there's not a sponsor, we have to roll up our sleeves and really use like a private equity playbook, if you will, for underwriting. So those are valuation opaque situations. The second opportunity set probably looks like maybe there is a sponsor in there, but they're probably not the top 40 sponsors that get banked all day by direct lenders today. They're likely not following their capital. They're not putting more equity in a deal. So again, we have to come in, roll up our sleeves, do the complex work of setting value.

• 29:23Speaker 01

  So valuation opaque again. And then the third bucket would just be truly opportunistic, you know, situations where, you know, spicier, higher octane situations where, again, we got to come in and really determine value. I think that's a lot of work. Those are complex situations. And when you are raising tens of billions of dollars on your direct lending platform, you don't really need to mess around in these, you know, tougher, more complex situations. But there's a lot to be done in those areas. And so we're just, that's the market we play in. For me, I get comfort that I can bring my underwriting, you know, background on the private equity side and see that type of work being done on the credits that we're underwriting.

• 30:06Speaker 01

  That gives me real comfort, that we really understand the credit. And I kind of look at a bunch of deals that were done in 2020, 2021 during COVID that are probably going to need some, you know, solutions in the coming, you know, months and years. So I think it's a really interesting time for us to be launching into that part of the market. And we are stubbornly focused in that exact space.

• 30:29David Weisburd?

  And now that you're a GP and you're an allocator in several seats, what do you think the biggest disconnect is between allocators and GPs?

• 30:42Speaker 01

  I think when you're an allocator, I can definitely say this, having worn both hats, not only just now, but in my prior life, like it's hard to source and execute deals. Like this is not an easy business to be in. And I think allocators sometimes just don't really understand the complexity and how difficult it is to hunt, find, underwrite, execute, portfolio manage. Like it's a lot. And so really spending the time to really understand how the values being added by these managers, making sure you have real alignment of interests. I think that part is probably misunderstood when you're an

• 31:23Speaker 01

  allocator, looking at a GP. On the flip side, look, I think GPs underestimate that, you know, being an allocator is tough. I mean, you've got so many things pulling at you. You have policies you have to follow. You have procedures that are in stone. You've got exceptional talent that is often being put in a box because they have so many rules that they need to follow. And they're a real mission-driven group. I mean, if you're going to commit your career to working at a state pension, when you know that you could leave and go and work elsewhere and probably make 2X what you're making, it

• 32:08Speaker 01

  takes a very special individual to commit to that career path. And so I think that there should be some empathy and respect from the GPs to the LPs, because I think that they do, they make, the LPs are the ones that are making it happen for the GPs. And it's a lot. Sometimes they really have to push politically to get certain. Partnerships through, sometimes they have to really work the system a lot harder than they would normally need to, and therefore they're going that extra mile for the GP and the GP may not even realize it. And so I just think maybe having a little bit more empathy, kind of going both ways and, you know, kind of working together to understand what problems

• 32:52Speaker 01

  are each other trying to solve for, being a bit more transparent about that would probably make for better, deeper, longer relationships over time.

• 33:01David Weisburd?

  Yeah, they say the best way to build empathy is to be in that spot.

• 33:06Speaker 01

  So true.

• 33:07David Weisburd?

  The only way, arguably.

• 33:08Speaker 01

  It's so true.

• 33:10David Weisburd?

  Founding Square Nine Capital, you had to go from zero to one. How did you go from zero to one as a GP?

• 33:17Speaker 01

  So, look, I think that if I look back on some of the key success factors that I observed when I saw managers, you know, emerging managers being launched and the ones that did well and the ones that didn't, there are a couple, there's a couple of threads there that I think are consistent. So number one, track record for sure, but having a team that's worked together and has been through the ups and downs, the good, bad and ugly, building a portfolio, managing out a portfolio in addition to producing, you know, great outcomes. I just think that that's a much better place to start than have some rock star leave and say, I'm going to go form a firm and try to hire, you know, the 10 best people that I

• 33:59Speaker 01

  can get to join me. I think a team lift out, a carve out approach, in my humble opinion, just is, is a good place to start. I think before you do that though, I think you have to have an honest look in the mirror and say, can I go to a couple of folks and see if my street cred is there? Are there groups that may give me working capital? Are there groups that might put a warehouse facility together for me? Are there groups that I have a good line of sight that they'll be my anchor? If you don't have those three things in advance of leaving a really awesome job to go kick off a fund, I'd probably, you know, think

• 34:40Speaker 01

  twice about it because it is tough. It's tough to raise capital. It is tough to be different, to be differentiated. It's tough. It's just tough. And so that recipe, if you will, those key success factors were things that, you know, I was really thinking about from a practical perspective. And then underlying all of that or overlaying all of that, I should say, was just the idea of are these great humans that I am going to be proud to build a business with that have a similar, you know, value base to me that we know we're going to have tough times? Are we going to be respectful and want to still keep coming at it day after

• 35:20Speaker 01

  day after day? And that human piece of it, that cultural piece of it, I think, is a really important part that can't be overlooked when you are doing something as risky and as stressful as launching a new fund. And so those are just some of the things that I thought about in advance.

• 35:37David Weisburd?

  Something I've actually changed my mind on recently, which is that joy is not only a luxury, it's a luxury to enjoy what you're doing and enjoy who you're working with. It's also extremely anti-fragile. Just listen, there's an interview, Joycovich was asked, this was almost a decade ago, how are you not going to burn out? How are you going to go to distance? And he's like, I like hitting the ball.

• 36:01David Weisburd?

  And it's, it sounds really simple. It's in many ways, the most simple response to that, but that's powerful. If you actually like what you're doing, it's not even about burning out or not. It's about how do I play more and how do I hit the ball more?

• 36:14Speaker 01

  Totally.

• 36:14David Weisburd?

  Sometimes it does come down to something as simple as that.

• 36:17Speaker 01

  Yeah, like what you're doing and who you're doing it with. I don't think you can underestimate the second part of that sentence. I think it's, you know, look, it's easy to, I'm not going to say it's easy. There's a path for people to go and make a bunch of money and do a bunch of cool deals. But if you don't enjoy doing that with the people that are around you, you burn out. You don't, you know, you're not going to feel fulfilled. And so I just think for me, for this chapter of my, you know, I'm calling this my legacy chapter, the thing I want my kids and my grandkids one day to be very proud of. For me, it's going to be as much about the people that I built the firm with as much as what we were doing with the firm.

• 36:58David Weisburd?

  What's one thing that you underestimated going off and launching your own firm? What did you think it was going to be easier than it actually ended up being?

• 37:08Speaker 01

  When you wake up every day and you feel responsible for the people who have taken a risk in their own careers to come join you and the magnitude of that on your shoulders every day, when you're thinking, okay, am I going to raise that next dollar? Am I going to find the next great deal to deploy that capital into? Am I getting the momentum we need? Are we getting the traction we need? Are we getting an LP base that believes in us in the way that we believe in ourselves? I think the weight of thinking about, you know, the folks that left great careers to come join because they believed in you, believed in the strategy, you know, it weighs on me heavier every night than I imagine. I'm a very, I'm an empathetic person by nature, but I really do think each and every day

• 37:52Speaker 01

  about the folks who've left really awesome jobs to come do Square 9. And I really want to make them proud. I want to make their families proud. You know, it weighs on you more than you probably imagine before you've launched.

• 38:07David Weisburd?

  In which way has your empathy been an asset versus a liability, both as an allocator as well as as a GP?

• 38:15Speaker 01

  I love that question. So, look, I think humans by nature want to feel liked and respected and, you know, I-

• 38:24David Weisburd?

  That's what I started this podcast. I'm a people pleaser.

• 38:27Speaker 01

  Right? We're people pleasers. It's hard getting a no, especially when you get a no from people who you're like, wait a minute, how are they saying no to me? They know me. They know what I'm capable of. We've known each other for so long. I think because I have, you know, I think that makeup that I am where I want to, I want to help people, I want to get them where they need to get to. And when you're not feeling that reciprocated, that's hard. That can be really hard and you can't take it personally. And I think you have to learn to grow a really thick skin and, you know, any ego you might have, you have to just throw away when you're launching a fund. And you just can't, if you don't have expectations, I had a mentor say to me when I was very

• 39:08Speaker 01

  frustrated, kind of my first like week, weekend, it's like, man, like, I can't believe these people I'd been so helpful to in their careers and like, they're not even returning my call. And it was a gentleman and he said, you know, Nicole, if you don't have expectations, you can't be disappointed. And I was like, man, oh, my goodness, that is so my mantra from this way forward. And it helped a lot because now I go into meetings and I don't have an expectation. I know that I'm going to put my best foot forward. My team's going to put their best foot forward. I know what we're capable of. But a no might just be no because they just aren't excited about what you're talking about. It could be that they don't, they truly don't have room in their program. It could be that they don't actually think you're as great as you thought they thought you were.

• 39:52Speaker 01

  It could be a whole slew of things. And so learning to not have the expectation really has gone a long way. And I've shared that same wisdom with folks who have come to me in a frustrated moment. And I'm like, here's how I got through it. And it genuinely has helped.

• 40:10David Weisburd?

  And there must be areas where it helps as well.

• 40:13Speaker 01

  If you lead with like, if empathy is kind of a natural part of, of who you are, you end up seeking out other people that you sense that that is a quality that they, that they share. And I do think in our business, which is a people business, it's a relationship business. We are not only, not only do we require these strong relationship ties for capital raising, but for deal sourcing. And then once you're in a deal to be working with the management teams and getting to, you know, the outcome that you underwrote, like at the end of the day, this is a very people centric business, relationship centric business. And so I do think it's, it does help to have an empathy bone in our business.

• 40:55Speaker 01

  Now that said, look, we also are put in positions where we got to make tough calls all the time. And so you can't let that, you can't let your empathy be taken for weakness, so to speak, or let it, you know, override your common sense in certain situations. But I do think having empathy in general as a trait is something that makes you a better investor at the end of the day.

• 41:17David Weisburd?

  You use the word legacy, which is kind of a loaded word. What would you like your legacy to be?

• 41:26Speaker 01

  I want to be able to look back and say that I moved the needle on things that were needle moving for people who who needed that. So what do I mean by that? Like, I started with, I'm a very mission driven person. I want to be able to look back on my career and say, I took all the tools in my toolkit and made sure that I was investing capital that ultimately I know was making, you know, for better retirement for folks, better, you know, socioeconomic outcomes for the individuals that entrusted their capital in us. And we are, you know, as a private credit fund now, I mean, our capital is coming from an LP base. The LP's capital is from these everyday people that make society run and work. The teachers, the firefighters, the janitors, all the, like, I used to love

• 42:11Speaker 01

  at CalPERS, the saying of, you know, we serve the people that serve California. I'm just wired, I'm wired to be motivated to make sure that I am making those people proud. And so I want my legacy to be that I built a team and a reputation for being somebody that truly, genuinely cares that the outcomes are going to make those stakeholders in a better place for their retirement at the end of the day.

• 42:41David Weisburd?

  Well, Nicole, this has been absolute masterclass on deploying half a trillion dollars. I still don't quite know how that's done, but I learned a little bit. Thanks so much, and looking forward to continuing this conversation in person.

• 42:55Speaker 01

  Thank you so much. It was such a delight to be on the podcast, and I think you do an amazing job on the podcast. So thank you for having me. I really appreciate it.

• 43:04David Weisburd?

  That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. Share with one person in your network who'd find it valuable, or leave a short review wherever you listen. This helps more investors discover the show and keeps us bringing you these conversations week after week. Thank you for your continued support.