E235: The First Thing LPs Notice That GPs Never Think About

How do you train the next generation of allocators—and what separates elite investment offices from the rest? In this episode, I speak with Alex Ambroz, Founder and CEO of the Allocator Training Institute, whose mission is to professionalize allocator education. Alex has spent his career building and leading investment teams across Morgan Creek, J. P. Morgan, Cleveland Clinic, Aberdeen, and now as the founder of Allocator Training Institute. We dive into the evolution of the endowment model, how allocators detect hidden risk, the difference between true alpha and disguised beta, and why collaboration—not competition—is the secret to better portfolio outcomes. Alex also explains how today’s top allocators use data, relationships, and operational excellence to stay ahead of market shifts.

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

• 0:00David Weisburd?

  When people ask me why I'm so interested in investing, the best way I explain it is the infinite game of investing.

• 0:07Speaker 01

  Well, I think that's incredibly well said. And one of the things I've heard other people say, but the more I learn, the less I know. When I started my investment career, I remember thinking I knew how to invest. I knew how to pick stocks. And I thought I was very good at it. Obviously, I knew nothing about stocks. It's more than anything. And then after Morgan Creek, I had such a great experience there. I thought I knew the appropriate and only way to invest for institutional and even with families on foundation. And it took me a couple of career fumbles and life fumbles to recognize how much I have learned, but how little I learned.

• 0:48David Weisburd?

  Lex, you've had a storied career, going from Army to Morgan Creek, to JP Morgan, to Cleveland Clinic, to Aberdeen, oftentimes starting groups at these allocators. So let's start with Morgan Creek. So you started there in 2005. What was your experience like at Morgan Creek?

• 1:08Speaker 01

  Oh, learning great was just such an excellent place to start out as an analyst. And I didn't know that. I didn't know going into it that I was going to have this amazing experience. It was a new investment team, our new investment firm, really. The University of North Carolina Chapel Hill had hired Mark Yushko from Notre Dame. He was a senior ambassador at Notre Dame. He joined as the first CIO for UNC Chapel Hill, the U of P system, in 1998. And then from 1998 until 2004, the UNC endowment was one of the best performing endowments nationwide.

• 1:51Speaker 01

  And a large part of that was reflection of the investment philosophy that Lark and Joel Morris Allen, while at UNC.

• 2:00Speaker 01

  He wanted to do something bigger, he wanted to build something bigger. So at O4, he took the investment team with him and started Morgan Creek capital management. And he brought this endowment model to the OCIO, which today is quite ubiquitous, but over 20 years ago, these were really just buzzwords that we all had really worked on before. So the fact that I was able to start with such a high quality team that had such a sophisticated way of thinking about the world and investing was really just fortuitous. The real focus of the portfolio and the management, and this was a little bit different than others,

• 2:41Speaker 01

  was Mark and his co-founders, a guy named Dutch Hyper, came from Wellington, the COO slash COO, and Dennis Mider, who was the sales guy that brought relationships to help found the firm. The real focus that they recognized was that holistic management of the investment asset probably will. So the fact that I got to join, you know, be a part of that and be a part of a team that was focusing on total portfolio, focusing on it on a sophisticated way.

• 3:16David Weisburd?

  As you mentioned, David Twenton, I just wrote the book on the modern endowment style. And Mark Yusko at UNC was starting to invest into asset classes like venture and then offering that in Morgan Creek. As Morgan Creek went from zero to 10 billion in assets, what were the characteristics of the early adopter LPs that embraced the Morgan Creek model? And how does that relate to LPs today that embrace trends early? What are the psychographic characteristics of those type of LPs?

• 3:52Speaker 01

  The first thing I'd say is, well, you mentioned this. And this was really what it was like. You had the book, Pioneering Portfolio Management, had just come out. It's just a couple of years ago there. And it's not like today where people on Twitter, on TikTok, or Substack, podcasts, none of that existed.

• 4:13Speaker 01

  And so a lot on the sharing of these investment philosophies. And then also sharing of investment results. You know, you went to Yale, you were in the endowment community. I remember back then, I'm in Kubo. He used to put out an annual report on the performance of institutions. And if you were in an endowment, you could see the list of how every institution did one by one. And you could see at the very top, you know, Harvard, Jack Meyer, Harvard, David Switkin at Yale. Uh, the folks at Boden, I mean, it was just more consistent, know the top. And so that philosophy, that endowment model philosophy.

• 4:56Speaker 01

  That David Switkin has found and that we, uh, were biggest found as well. That was something new, but there was another piece of the puzzle that Mark Dennis from Dutch realized early on.

• 5:10Speaker 01

  And that was that a lot of ultra high net worth individual or families. And all those institutions below a billion dollars. Were receiving insmial solutions from consultants, from banks, from the Biden. It was, you know, they might have anything something that outdone with equity. Someone else had every money, folks income. Someone else that may have helped them with alternatives generally, but there was nobody. Twenty five years ago, that was thinking about the total portfolio solution. And thinking about the necessity of a spending policy. That reflects the spending needs of the individual institution.

• 5:52Speaker 01

  As well as the liquidity availability of the underlying assets. If you're thinking of a multi asset class approach. That includes exterior to deep private asset that will not be liquid. Or semi liquid asset like some absolute return funds. And so putting that all together into one solution. Is something back then, you know, sophisticated endowments, the other institutional good deal.

• 6:16Speaker 01

  If you were under a billion dollars, didn't have your own investment office, you really didn't have that holistic viewpoint. And so that, you know, which was brought for the Morgan Creek clients ranging from 20, I think the smallest client on the team's asset sheet was 25 billion. I think the largest individual client was one billion. Most were around 250 to 500 million assholes. So bringing that kind of holistic view as well as, and this was something people talk about today a lot. Back then was still kind of new. Forward thinking about access to high quality managers or differentiated philosophical viewpoint.

• 6:57Speaker 01

  So something that David talked about in his book, that a lot of sophisticated investors talk about today is the view philosophically that if an investment manager is down performance wise, that may be the best time to invest. And today, a lot, a lot of people know, a lot of people have heard this. Well, 25 years ago, 20 years ago, that was still very controversial. And a lot of performance, we call it performance chasing, people trying to buy last year's. So that view and implementation of a holistic portfolio solution, recognizing that sometimes it's best to invest when a manager was down. That was new back then.

• 7:42David Weisburd?

  One of the best times to invest might be when a manager is down. Presumably that's because the entire market is down. The manager might have not made a mistake. It's just, just the nature of cyclical markets. And you also mentioned about separating sustainable returns or alpha versus beta.

• 8:03David Weisburd?

  Alpha is somewhat intuitive. You might have structural alpha, you might have proprietary sourcing, you might have a special right to win. What are some hidden ways that managers advertise beta in a way that maybe they mask it?

• 8:20David Weisburd?

  In a way that maybe it looks like alpha, but it's actually a high beta risk. How do you know when a manager is actually masking a high beta strategy?

• 8:29Speaker 01

  So it's an excellent question. The first thing I'd point out, and this is something that.

• 8:36Speaker 01

  Seems to be systemic within the allocator community. I've seen it my whole career. I still see it to this day. When you look at pitch decks for managers, and when you look at the other side of a pitch deck, you look at the holistic, well, performance report or risk report, or you know, something presented to an investment committee on the allocate side. So from the VP side about how that fund is built. And then from the LP side, we're now reporting to the investment committee over there, reporting publicly their pension. Something always jumps out. And that's a lot of statistics around risk or performance evaluation are focused.

• 9:20Speaker 01

  They'll have a number and they'll just start to data. And so you'll see something when people will talk about, oh, you know, our beta or the beta plug. You know, it's point six, seven, point seven. And there are places in my career where we focused on a number, but we wanted to have a beta exposure on X. Now, or give them to a manager. But data from CAPM is just a starting point. And when Fama and French did the three factor model and then the five factor model, well, if you want the five factor model from Fama and French, CAPM is the beginning part of it, and the first part of it is beta, which is just the factor exposure to the market.

• 9:59Speaker 01

  Problem is, a lot of allocators to this day do not do factor exposure work beyond that. Because beta is a factor. It's normally the largest factor exposure. And moving beyond that takes a little bit of quantitative and qualitative work. So in large part,

• 10:19Speaker 01

  a lot of funds have been able to kind of get away with it because they are reporting a true number. And they're just not talking about the other number as much.

• 10:30David Weisburd?

  For those that don't know, Fama French improved on the capital asset pricing model, CAPM, and they found that there was additional factors like whether the security, whether the company was small or large, and whether it was value or growth. So they found other ways to more efficiently price the historic returns versus just the beta of the stock. So by adding those other factors, you're able to more effectively price whether it's actually beta exposure, which is maybe it's a smaller value kind of investment versus where it's true alpha, where it's outperformance for the same risk and return.

• 11:10Speaker 01

  Absolutely. And that, that's something that I find to this day, one of the first analytics we always run, at least for the last decade or so. And just going through our Fama French factor model, see what you built. It's probably the easiest thing to do, it's probably the easiest way to find out stuff that out. The thing where it gets tricky, I discovered, is that our equity law only, equity law short, I did well, value, I did, it's relatively easy to come up with a useful factor model to give that, whether a manager is adding, whether number one, whether they're adding alpha, number two, will type to the consistency of the factors, what they have, number three,

• 11:51Speaker 01

  whether you have any interest in even attempting replicate those factor exposures. If they're only giving you a beta at a certain factor exposure, maybe that's the type of beta that you want. The top thing is, in my career, for macro managers, so like the bridge waters of a world, coming up with a good factor model to explain what, you know, very sophisticated macro managers like that are doing has always been difficult.

• 12:19David Weisburd?

  Going back to the asset allocators that embraced this new Yale model in mid 2000s and other forward-thinking LPs, what are some characteristics of either the institution or the individuals that are first movers in new strategies?

• 12:41Speaker 01

  One thing I always loved when sitting on the allocator's side of the table is that allocators don't see other allocators as competitors. They're very open to sharing information, very open to seeing processes, sharing about on their large strategies. Something that when I was working on Wall Street could get you fired if you did that. If you followed a competitor, even if they were selling new and after what they were working on. For the ones that are able to kind of leap forward in terms of their investment focus and hopefully as well in their investment outcome, it's really two separate things.

• 13:21Speaker 01

  Number one, and this is the first part, not as exciting, but it is useful, is operationalization of EPOSs that allow the investment team to focus on and on lots. For a lot of times, actually in my career, I used to go to physical malls. A lot of times you'll have young analysts or member game investors focused on what we call ETL processes, extract, transform and model. So they're extracting data from different sources. They're transforming it into a way that can be unified others and then they're loading it to the botch with them. So a lot of Excel coming up, a lot of PowerPoint, a lot of PDFs that they email out on Friday night.

• 14:07Speaker 01

  And all of that work, we always said later in my career, if this is, if the task that we're doing is something we could hire a high school student to do, well, we should not be here. If this is just a time intensive task that doesn't really add value, then it's not workable for me. People, the real focus on the investment team, the real value add is analysis. Analysis of the investment, analysis of markets, analysis of the portfolio. Everything focused on the analysis and the decision about how to problem that analysis. So the second thing, so the first is really operationalizing. 第二个，

• 14:45Speaker 01

  is focusing on, and I I hate to use this term because people have used it for so long, but I think it's okay. Is focused on where the pot is going to be, not where they've right now. Well, having a good sense on well, where the markets are moving to or seeing in some phrases, going to seeing. You know, something who they're very slow rate. Where markets and therefore where portfolios are going to go. As long as you can, there's one phase for a different environment. Interest rates just dropped by twenty five fifths. And most people have a very good sense with the change from the operating thing with uh the F O and C.

• 15:30Speaker 01

  That will probably uh continue downwards uh on interest rate. And so it may not be as fast as people expect unless they're the cattle that's only move up there to the election. And being ahead of the expected drop in interest rates instead of being behind. That's that's really the two and that's that can be almost the toughest. Um investing and thinking about the portfolio in the future state. And where you want it to be and therefore trying to invest there. Knowing, and this is the other part, it's kind of cliche, but it still exists and it's still part of our careers. So we have to acknowledge it. Is that if you invest in a differentiated fashion from others and you're right.

• 16:14Speaker 01

  Well, people might just think you got lucky. People may not recognize that you took well, a well calculated risk. You know, a good definite of a portfolio. If you take the differentiated view and the implementation of your portfolio and you're wrong. Well, then you might not have a career. And that's very difficult. And so the default, the natural equilibrium outcome from that bite on.

• 16:41Speaker 01

  Well, career optionality is that many investors then tend to all back to, you know, what is the safest type of, where the consultants dine off on? And that, I mean, you still have decent returns for the portfolio, but that you'll be in the middle of the path, relative to peers or relatives you accepted out from the immune. Given inflation environment that we have and the increased spending with the portfolio. And as well, this is a concurrent thing that is happening more and more so these days when I receive my entire pool.

• 17:16Speaker 01

  The much lower rate of distributions from private assets with nonprofits, which for grant making, salvations, or pension plans, or endowments with pennies. You know, that actually really tricked them off. So having a forward looking thing move part in your portfolio, and that would be implementation on processes. And separately, the first thing I mentioned, having an operationalized process, but you can focus on analysis versus data. That's a way that teams can really.

• 17:49David Weisburd?

  You mentioned that the top allocators don't see other allocators as competition. Explain that. How do the top allocators collaborate with other allocators? Give me very specific use cases.

• 18:02Speaker 01

  I was very fortunate in my career to work on Wall Street and have to work in the allocate industry. So I got to see it. It's like on both sides of the street. When I was working on Wall Street, if I had called, well, while I was at the office, I mean, it's fact, if I was one of the office. If I called a friend, I mean, one friend, and asked them, well, what do they think about the markets? Well, how are they actually, all right, what funds did they like? What tool could be used? Well, I would have thought it found it, did it? In contrast, what I experienced when working on the allocate time with them, I'll give you a specific example of that to have so proud of. Is that you could always call me a fuse.

• 18:48Speaker 01

  And if you didn't know them, you know, if you wanted to reach out to a peer, Alex, you had no connection. You're not connected on LinkedIn. You've never met this person. But I saw, you know, hey, this institution was in a recent magazine article doing something really important, creeping about you. They've implemented top apps, which is talking about now. Or you just call them. You can just email them the name. Well, nothing to fix your brain about how you guys catch this. Boss sets, I got a bunch of, I done a dozen of them. I'll give you one specific example that I think every allocator for influence. It was phenomenal. I was so glad to be a part of it. I was part of the Cleveland Pittsburgh Allocator Group.

• 19:34Speaker 01

  This was a non-topic volunteer group led by Alex. And once a quarter, we would get together in first room at somebody's office, but we'd hang around a lot. And before the meeting, we would send around a template. Well, I was the president of this group two years ago.

• 19:55Speaker 01

  We would send that around a template where allocators would put their portfolio. And they could put in the actual names of the managers or they could put in, you know, just some code they were comfortable with that. And you would put in your exposure sign, be that dollar or something. Yeah, we could get a good sense of how everybody's allocating. This little group would maybe 25 out. And it gave them good work here.

• 20:20Speaker 01

  And then we would get together, uh, once a quarter. And when we would sit around the big contest table, one by one, we would just talk. Talk about, you know, if you're a DB penshi plan, if you're thinking about doing a PRT, a penshi list transfer. And maybe you are, maybe you were thinking about it, maybe it happened. If you're an endowment, you know, and you got a new spending policy that went into the month. The policy behind which you guys decided to go through that process and how's that going? How did it get through the investment committee? If someone's investing in a new asset class or a new country or they're going to visit some country. We would like to know, hey, do we know any managers in India? You know, people raising hand, yeah, I'd like to talk about that.

• 21:06Speaker 01

  We would do that for about two hours and it was a closed door session allocators only. You know, chatroom house rules, so nothing said in the room could leave the room. And then we would invite a GP to come by for lunch. And the GP, y'all know well ahead of time, they were going to be there. They'd come in for lunch, you'd open the door. GP would come in, we'd have lunch delivered, paid for by the GP. So GP would spend a few hundred bucks on lunch. And over lunch for about an hour, the GP was allowed to talk about whatever they want to talk about. It was something interesting for the allocators. I remember Goldman Sachs came in one time, wanted to talk about private credit.

• 21:49Speaker 01

  Um, had a really great discussion, learned a lot with them. Goldman Sachs loved it because they had an opportunity to meet with a lot of allocators in one space. And it was kind of a friendly space. And then after lunch, we all at home. So this was something we did once a quarter, all volunteer led. You know, no cost to the institution, but it was a way for our little group of allocators to get together, share information, share best practices. Um, it was a really unique, uh, but a really, really unique group. And it was really reflective of the fact that for allocators, you know, we weren't trying to sell each other anything or provide school, other information or employees. We were trying to share best practices so that we could all, you know, all stay

• 22:31Speaker 01

  provided better out for the beneficiaries of the capital which we won't put at the moment.

• 22:37David Weisburd?

  Perhaps this is obvious, but the reason allocators are willing to trade information with each other is because most of the new trends and most of the top managers are not capital constrained. In other words, it's truly not a zero sum game, whereas let's say venture GPs at the Series A may not be as willing to share deal flow because there could only be one winners in that space. Is that basically what it comes down to, or is there more dynamic to it?

• 23:04Speaker 01

  No, Dave, that's a phenomenal point. And I'll give you just a quick, you know, soundbite on that part, because this would come out. Sitting around that table or talking with other allocators, and for the most part, yeah, you're exactly right. Almost every asset class was not controlled in terms of we invested and they invested. Actually, that's better. That really helps. We're on the same, we're locking our own. The one place where that may not be true is actually related to what you just said. If our institution has a relationship with XYZ Venture Capital Fund, and we just got an allocation to XYZ Fund 7.

• 23:47Speaker 01

  Well, that's great for us, but us having that allocation is not reflective of us shoehorning out other folks. It's really a reflection, especially for the very hard access venture capital funds, building long-term relationships with those firms. Seeing them and them seeing us as long-term partners and doctors and what they're global and what we're investing in. And that does not infine on the ability for other allocators around the table all around the country to also have built those relationships or acquired those ones with us. So it's truly this kind of separate thing where we're comfortable saying,

• 24:29Speaker 01

  yes, we're invested in this liquid asset class, this liquid fund that you're about to do, that's great. And acknowledging, you know, hey, yes, we did get an allocation to XYZ Venture Fund 7. You guys may not have invested or gotten allocation, but that's not because we did. You know, we've got reached that point while on building that relationship. Happy to introduce you to this team, but you guys are just meeting in a couple of different places. So it's a really different kind of world and it's very nice when you're on the allocator side of the table. People are very friendly. Everyone always says like, oh, what a great question you had.

• 25:04David Weisburd?

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• 25:49David Weisburd?

  Andy Golden, who used to run Printco, he told me one of the reasons he retired is he wanted to see whether he was really that funny or whether it was tons of billions of dollars behind him.

• 26:01David Weisburd?

  And perhaps this is naive on my side or maybe too direct, but whenever I find myself in zero sum games, I'm just explicit about it. You know, I'm trying to partner with this manager, I'm deploying in him. You know, this is maybe not the best time, maybe in the future it'll be future allocation. And if it's not zero sum, I'm happy to make that introduction. What do you think about this perspective of being kind of extremely explicit on where you could be helpful, where you can't versus kind of making excuses?

• 26:28Speaker 01

  Yeah, that's such a really great point. I believe the one thing, and this does come up, this did come up in my career. I have seen this where, you know, if we are in a bad form, if we are an investor in a fund, especially a private fund, well, for the most part, comfortable sharing that with other allocators, talking about it, you know, usually discreetly without publishing this one. Let's go.

• 26:56Speaker 01

  Sometimes it would happen though, where we're evaluating funds. We're looking at investing in certain types of funds. And so we need to keep that discreet. Either discreet because, you know, we know, hey, this is a new fund. They're only taking a certain number of clients. And well, we're one of a few that's a part of it because of legacy relation pools. Well, you know, we really value that and we don't want to share that publicly. So, well, we're not going to share that publicly and we're not going to put it in people's face. Like, hey, we got an active split of fund, you haven't even worded up yet. But it's really a matter of just trying to be respectful, professional and polite and open where you can be.

• 27:38Speaker 01

  The other piece about that too, is a reflection of the culture of the institution. And a reflection of the culture of the senior leadership on your investment team. So I'm just fortunate that the leaders that I work with in the allocated community. Uh, we're very open to sharing, are very open to meetings. Well, some allocators I heard don't really take a lot of meetings. Um, your portfolio is full or it'll all you a thingy. Whereas places that I worked, uh, very fortunate because my personal philosophy, uh, well, hey, it's someone from the town. You know, if we have time, you can meet with them, we'll be upfront, blah, blah, blah, working well enough.

• 28:18Speaker 01

  Well, it's really, I think of the allocator community will definitely be a discretion where necessary. But trying to be polite and friendly because this is a long, long game. And the allocator community at Bagdad is very, very small. Everybody knows everybody. And if they're not in your first line connection, you're all one, usually maybe two, user just one connection away from it. Or everybody talks, um, well, most people are very polite and flexible at the station. Otherwise, uh, they don't really work with it all.

• 28:54David Weisburd?

  You mentioned that as an allocator, you always wanted to go where the puck is going. So let's say you had a thesis on GP stakes 10 years ago when Diallo was just getting started. Assuming that you can't invest in a brand new asset class, how do you operationalize digging into the asset class? And what are those steps for an allocator? Either getting into a new asset class or getting into either getting into an asset class that the allocator had previously not been in. So perhaps they're now getting into venture capital or getting into an asset class that's brand new or that's really risen in the last couple of years.

• 29:35Speaker 01

  That's a great question. At the first, and this is where being on the allocator's side of the table, you're very, you're very lucky in this regard. That if you're encountering a new asset class that you haven't invested with before, or a not becoming asset class. So thanks credit credit for the last 10 years, especially the last few years to spend a little. One thing that you're able to do easily is call every GP and ask to get smarted. So you will call the big banks, about J K Morgan, Goldman Sachs, asking to fly to wherever you are. You know, if you're in Battle Creek, Michigan, Cleveland, or you know, St. Louis, Missouri, they will all fly up, comes to you.

• 30:18Speaker 01

  And you can ask, and we've done this many times, we just want to get smart on this asset class. And every big bank, every consulting firm, you know, they get paid on not just, you know, the friendly meeting, but on the execution, you know, something after the fact. And a lot of times, the execution can only start the initial process of education. And so you reaching out and asking for that education, well, people all hand over a fist to provide it for you. So you have this opportunity from the investment community, the investment managers alone. And you can get lots of different perspectives because they know, you know, you're just entering the dating pool and you're trying to see which type of fund you'd like to swipe right on.

• 31:04Speaker 01

  The second thing that you can do is talk to, like I mentioned, when the Cleveland gets very allocated, we talk to the allocators. So reach out, reach out first to your warrant network and ask like, hey.

• 31:19Speaker 01

  Has anyone invested in this specific fund, this specific asset fund? And you may already know this, but it's a very quick turnaround. You know, within the next day, you'll have a response, you know, oh, we haven't. But you could talk to these guys, this team over here. She has the new CIO brought this strategy to the table. So she'd be a great person to speak with. And you can get them on the phone, even if you don't know them. You just send them an email. Hey, we're not a data, we're looking for a better strategy. We heard great things from someone else, a good old friend would love to talk to you. So within just a day or two, you can have set up a bunch of calls with other allocators who find out and learn more.

• 31:59Speaker 01

  And then the final part, if you're getting closer and closer to thinking about investing in a new tech fund, new type of massive class. Um, well, specifically fund, uh, meeting with them. And one thing that's happened, especially in the COVID and full COVID era, is that a lot of meetings, a lot of initial meetings, especially take place over Zhihu or over Teams types of calls. One thing we always like to do, uh, where I came from, you might have that first call, just kind of get to know people, just kind of level set. Like, okay, is this something, you know, worth meeting about? But then go see them, go see cans, go see the office, going person.

• 32:42Speaker 01

  A lot of these funds are in major metropolitan areas. And there's always an excuse to get from New York City to Boston, Philadelphia, to Chicago, to Los Angeles. Where there's always other allocators, other funds that you can see around that. And if you can make a good day of it, then you can take it worth it. Meaning you don't have to have all of your meetings over Zoom, negotiate, parent, to get to know people. Get to learn a lot more about it and they watch TCH. And that's, you know, really, how else can you do it? Um, one thing I've discovered, especially with new AI tools that have come out like chat to the T. A lot of people say, you know, well, these tools will surpass all the need for the regular investor territory work.

• 33:26Speaker 01

  But one of the problems that you had, especially with, for example, the oracle at the alpine, he had the box here as well from Greece. Is that even if the oracle has all the answers, but we have to know what question. And then once you get the answer, it's happening automatically on a phone. I'm like, what?

• 33:45Speaker 01

  So the best way to get somebody that zooms and I think the best way to build relationships and truly understand people and firm, firm and boss. Is to go meet them, go shake their hands, get to Talapun, ask them questions. Well, ask them questions that hopefully they weren't asked by everyone else.

• 34:04David Weisburd?

  It's, it's funny. I sometimes get frustrated with chat GPT. I ask, I ask it questions and it answers the questions literally. And then two months later, I realized I was clearly asking the wrong question and I get frustrated. I'm like, why didn't it tell me this was the wrong question? It just basically answered it literally. So it's kind of funny how, how underrated asking great questions are.

• 34:31David Weisburd?

  You mentioned you like to go onsite to the GPs. What exactly are you trying to ascertain? What, what are you able to see in an in person that you're not able to see on a zoom specifically?

• 34:46Speaker 01

  Well, what car they drive, Dartmouth. Kind of a funny thing, but we always ask, we always check, we always go to the parking garage, take a look. That's a small thing, but. The first thing that we're looking for is really from the IDD and ODB perspective.

• 35:08Speaker 01

  And something that I'm afraid to say that it took me too long to realize is that the ODB, the operation of the diligence slide is almost always the first point of contact necessary. What I mean by that is historically in the allocator community, operation of good diligence, ODB is usually the last thing that happens. You know, you send the CLO or the head of ops or whoever that is where you're the soul. Usually with a checklist of important things to go see how things are flowing and they're acceptable, okay?

• 35:46Speaker 01

  Well, it's happened a number of times in my career of an allocator that you go down the wire with a number of pawns. You go and bring it them, especially if they're in an afternoon at the long trip to go hit fires through them. And then the ODB thing will come to last.

• 36:05Speaker 01

  And discovers there's a critical red flag. So a critical red flag, for example, could be. The fund is self-administered. All the guy that owns the arm is not new.

• 36:19Speaker 01

  Um, therefore, that's a red flag.

• 36:24Speaker 01

  And finally, in my allocator career with that. That we put these, not many, just a few ODD red, black questions up front. So not the full ODD work. But we want to know, hey, before we come visit the office. Or we come say hi and really get some really guys, we just got to ask a couple of questions here. We just need to make sure as long as all of these are yes. Then we're okay. You know, or no one. So a fund is self-administered. You want, no. But we're not in a visit. Unless it's in Chicago and in Singapore. If the fund, for example, is working with a non top tier. Accounting firm.

• 37:11Speaker 01

  Uh, or has recently changed auditors, uh, multiple times. Like, that's the kind of red flag where, hey, you know what? We've seen this many, many times before. We cannot do it. So there was just a few ODD questions we'll actually put back foot. Before a meeting with any manager. And then when we're going on site. We're doing a few things. I mentioned the cars. Uh, there's this old joke that one of my first CIOs, Mark, used to be saying, you would call it red Ferraris.

• 37:44Speaker 01

  They go into a PM's office and you'd see on their desk. You know, instead of, um, NQ, technically, they love that. You'd see books about, yeah. Books about Ferrari, you'd see the last. You got the magic, you'd see the airport with the labor dealing or anything. And you'd look into the parking lot. And instead of seeing regular cars. You know, e- even a BMW could be a bunch of fun. You'd see, you know, a Bugatti. Or you'd see a Ferrari, a Ferrari, or a compact, but we'd see, actually, no. Like, it's, it happened. And you realize that. The manager.

• 38:28Speaker 01

  You know, as, as good as they were, number, he'll always be a couple of ways. Apple first. One thing I discovered in the allocate, you know, you have much of people say like, oh, performance is not the most important thing. I I love to ask people when they say that. How many managers have used that? That have bonds with followers? What bond have to come? You know. We're always meeting with top half, top quartile, top getile manager. Well, performance is always, almost always, almost always great.

• 39:00Speaker 01

  So you gotta look at everything else. So separate from the discussion amount of evaluating performance or what factor that's supposed to have to. Well, we don't need with the managers, you know, we're looking to park them on, looking at the office, looking to see, for example, security on the office. You know, will we be able to walk into the building? And into their office by kind of tagging along behind someone? You know, that happens sometimes, something we noticed. Some places, uh, you go in, it's like a fortress. Nobody gets into any office without a key card. All the servers are locked up, you know, with a separate key card. Well, they're really legitimate offsite, uh, offsite backup capabilities, things like that. One other, I'll just give you this one last question.

• 39:45Speaker 01

  Uh, that we love to ask. Senior leaders and, uh, junior leaders, but in back with five, when they'll visit a G P. And if you ask it on a Zoom call, you know, you have all the faces, maybe they're all on the same room, maybe they're in different levels. But you're always going to get the same answer if you're on a Zoom call. Is that when you're in person, you like to end the end of the day as in a separate one?

• 40:11Speaker 01

  You will P M into the analytics. What is your in that's from blog? If all do you make from life? How do you generate alpha? You know, that that's one of the problems. And for the most part. Not surprisingly, uh, the answer were pretty consistent. What you hear from the analyst, well, senior or junior, what you hear from another junior PM, and what you hear from senior leadership is usually very consistent. What can be concerning is when those answers are different. Or when the answers differ, like, now we, we may not have an alpha here. We used to make alpha probably just process this thought difficult. And now we make out a different one.

• 40:54Speaker 01

  And if the senior leaders say some bonus, but little, but it's little. And we from fair notes afterwards. You know, hey, what was the vibe? You know, what did you sense from meeting with the junior staff independently of meeting with the senior staff? We've noticed, I, I'll never forget the meetings where it happens, because it doesn't happen often. And that's where you have to go and you have to meet with them. You have to see that feel like this vibe that you get. Whereas the vibe that you get, the feeling that you get when you visit the manager and you meet with the team independently, that they're excited to be there, they see great opportunities, things are going well.

• 41:33Speaker 01

  Staff is being compensated from an equity perspective that leads you to believe what will find to be the next generation of leadership that takes on the power on senior leadership eventually leads. Or you get a feeling that you're visiting a prisoner's of war camp on Park Avenue.

• 41:51Speaker 01

  And they're still getting fed, but they're going to get out of there as soon as possible if they think. And that It's happened eighty-one out of twenty-five meetings that I've been to. But you won't get that in a Zoom call, because everyone will be on the same page, they're going to end up talking. Well, asking, asking those questions independently, being a vibe check, the red Ferrari kind of syndrome. And I think probably most important will don't was fuel. Well, this isn't the full OED trip, man. Uh, mind you, this is the red flag OED talk, you know, just a few questions upfront that,

• 42:33Speaker 01

  hey, if these things are not hit, that we're not meeting, telling that stuff done, allows you to have much, much better meaning what we're hoping to be.

• 42:46David Weisburd?

  We talked a little bit about how LPs get up to date on new strategies or up and coming asset classes. From the GP side, let's say they realize that they're in a meeting with somebody that's getting up to date on an industry. What are the best practices? What have you seen in the very top GPs that are masters in this education process? And how do they turn that into investment over time?

• 43:11Speaker 01

  Yeah, it's a great question. The real critical part, number one, is being able to explain complicated things simply.

• 43:21Speaker 01

  And ensuring as well, because this was happened before the meetings all happened. Go to a meeting and you ask exactly as you ask, the how can they share this information? And you start getting a speech. And the portfolio manager or the P and P have the prepared speech on given topic and they're going to work their way through it. We're not really noticing whether the LP, the allocate it across the table. Are they really understanding what's happening? Well, are their eyes being over because technical language is being used that are not reliable? Sometimes, especially younger LPs, they may not know the right question.

• 44:01Speaker 01

  And sometimes it's hard for the GP to discern that the LP is just nodding their head and saying yes, but isn't really picking up the critical points. So trying to discern like Richard Feynman, if you're in his lectures, do you really understand what gaps were driving to here? And if not, let's all then make sure each part is understood because, I mean, they're sharing what they think is really critical, alpha generating capabilities, and that's valuable. So we should highlight the value that they have and their capability will ride in that alpha, especially on a consistent basis, because that's hard to find. The other thing, and this is sometimes common, not as much common today as it was 20 years ago, but I still see it.

• 44:47Speaker 01

  Ask GPs for some information and they'll send you a link to their pitch deck. You know, a link to the data room, or maybe they'll send you a PDF of their pitch deck.

• 45:00Speaker 01

  But what you need, sometimes you're like, babe, save me the time, send me the Excel file with all the data that we're looking for. And sometimes that Excel file is just the performance or monthly performance. But you want much, much more than, and so anticipating what allocators are looking for. Uh, but hey, you know, here's the historical performance monthly in Excel. And also here on the historical exposures and the profile attribute reports to show the drivers of alpha. On a given basis, here the factor model that you want. Answer all the questions before they can even be asked. Or at least have the answer available easily for the allocators to be able to get to.

• 45:43Speaker 01

  Because the goal on the GP's perspective is to get enough. And the goal from the allocators perspective is to find and break the maximum support their institution. Everyone's on the same page or trying to help their beneficiary. But the key sometimes is that miscommunication or.

• 46:02Speaker 01

  You know, delay unnecessarily because the process by which we're meeting, getting with each other are different. You know, we're speaking French, they're speaking Italian. Yeah, they're roughly, they have the same basis, they're probably the same language, but therefore we're not on the same level. So trying to anticipate that. Get ahead of glazed eyes, get ahead of the data requests, get ahead of being analytic. Not even just the long data, but here are the analytics that you might run. And here are the questions you might have had, and here are we sharing or ask these types of questions. For example, well, outside of factors, that's new.

• 46:41Speaker 01

  Uh, our data to this benchmark, a valid appropriate benchmark because you have to show you clearly what we're inducting. That kind of stuff. You know, that allows the relationship to happen sooner.

• 46:58David Weisburd?

  Said another way, you want to be able to explain the different layers of the thesis. I love the Einstein quote, "Everything should be made as simple as possible, but not simpler." So, explain it to a simple, possible, most possible way without oversimplifying it. Ask and answer questions very, both very literally in that if I'm asking for last month's report, send me last month's report, but also try to get behind the interest of that question. What, why are they trying to do that? Well, maybe they're trying to figure out our track record. Maybe it would make sense to give them a three-year versus the one year that they asked. Just make it simple to interact with you, make it simple to, for them to gauge the relative performance that you have versus the benchmark.

• 47:40David Weisburd?

  So, really realize that a lot of GPs inadvertently think that, well, maybe they'll get to a diligence process without asking about these points, almost like they're hiding diligence information one way or another. If you could, if you could do the opposite, which is lead with that and disqualify the LP before they disqualify yourself, you're also saving both, both parties more time.

• 48:04Speaker 01

  A hundred, yeah, you said it exactly. It's anticipate the larger question of what they're looking for. Try to give them, you know, maybe not too much, but a little bit more than they were asking. They want that they can come to the true understanding that you have, which is that you are providing alpha, fair, fine, and you like them to be a fine.

• 48:25David Weisburd?

  You didn't even have chants to go down JP Morgan, Cleveland Clinic, your time at Aberdeen. So, we're gonna have to run this back, but before we end, tell me a little bit about Allocator Training Institute and who should be double-click on Allocator Training Institute? And who would be the best fit as a potential customer?

• 48:44Speaker 01

  Yeah, absolutely. So, the Allocator Training Institute has created the first training program for younger allocators, naturally. So, it's a three-level program, really geared for those folks who are working in or want to work at an allocator and want to learn topics. I'll give you, yeah, for five drastic patch boats, based on models. You know, how to create a back of my hope, how to evaluate my investment in four, how to run key and knee and now it's to evaluate whether or not that money goes to buy an out, a lot of this will probably market much. So, all of these topics and many more are not taught in undergraduate business school or the graduate business school. I know because I want to vote.

• 49:25Speaker 01

  So we have created as a program that these young allocators can get to see. If I really learn what publicly about how to work at an allocate, how to evaluate.

• 49:38Speaker 01

  We created the program a few years ago, feeling really well. And the audience so far seems to love it because it's the one and only place where you can learn all the quantitative and qualitative tools on how to be allocate.

• 49:53David Weisburd?

  And who would this best be used for? Somebody that just starting out and allocating somebody with a couple of years of experience? Is there any value for senior allocators and who could benefit the most?

• 50:03Speaker 01

  People that find it most valuable have, we say negative one, ten years of experience. Negative one, meaning still an undergrad, like a finance student, who walks to work at an allocator. Either they had had a summer internship and they want to go back, but they're trying to get the skills so they can hit the ground running. A little off to ten years of experience and really, especially for the quantitative tools that we're teaching, a place that we found most valuable. There are some interesting advance before construction methods and case studies that we teach. So for example, what happened to the public school employee, I am a student in Pennsylvania.

• 50:46Speaker 01

  What happened to Cal 30s? What happened to Toddak, actually friend? What happened to diving on how?

• 50:53Speaker 01

  These advance case studies. We teach them in the program, but for a lot of young analysts, not necessarily useful for their career yet, something for their back pocket. So for the senior folks, learning about these case studies, what happened to the senior leaders at these institutions can be critical.

• 51:17David Weisburd?

  When people ask me why I'm so interested in investing, the best way I explain it is the infinite game of investing. And there's a specific thought experiment. So if me and you, Alex, had a million hours to go today and diligence every single asset in the world, from country-specific natural resources to small caps in other hemispheres, to quantum hedge fund strategies, even if we had perfect knowledge of every single asset class in the world, tomorrow, it would be stale. Tomorrow, there's a new administration that comes into a country, a new competitor set that comes in. It's literally this skill that you cannot master, even if you had a million hours a day. It's constantly evolving. It's one of the things that makes it so fascinating,

• 52:01David Weisburd?

  why there's this infinite amount of knowledge that you could gain. Not to keep people from starting to learn or from having this analysis paralysis, but it is this kind of cool thing where you know that you could keep playing this game for the rest of your life and keep on improving yourself.

• 52:18Speaker 01

  Well, Derek, I think that's incredibly well said. And one of the things I've heard other people say this ever and I don't doubt it, but the more I learn, the less I know. And I thought, and this was in the first part, back in the 90s, which I'm only dating myself, when I started my investment portfolio, I remember thinking I knew how to invest. I knew how to fix stock. And I thought I was very fit. Obviously, I didn't know that stuff. In the early 2000s, I thought about startups. I'm learning. And then after Warren Creek, I had such a great experience there. I thought I knew the appropriate and only way to invest

• 53:03Speaker 01

  for institutions and even for families on foundation. And then it took me a couple of career from the life, from the therapy world, how much I have learned, but how little I know. And I think to your point, well, even if we could spend infinite time, you know, a million hours studying every asset fund, everything. Things change tomorrow. We're getting comfortable policies, new frameworks with FOMC, with how they think about interest rates. And so there, all we have to update and then to our food company. Who could have thought, you know, I'll never forget. You know, when cell phones first came out.

• 53:46Speaker 01

  And I remember seeing a camera on a cell phone in nineteen ninety seven. And thinking, oh, that'll never spell a big phone. And now these dickheads. And then Bitcoin, when that came on. Well, I remember thinking Bitcoin, crypto, blockchain, all that stuff. One year after year, all this will never get anymore. And now it's awesome, almost the good days. But I keep being humbled by how little I know and how much I have to learn.

• 54:16David Weisburd?

  On that note, Alex, thanks so much for jumping on. Look forward to continue this conversation live.

• 54:22Speaker 01

  Awesome. Thank you much for your time.

• 54:24David Weisburd?

  Thank you. Thanks for listening to my conversation. If you enjoyed this episode, please share with a friend. This helps us grow, also provides the very best feedback when we review the episode's analytics. Thank you for your support.