E424: 32-Year Notre Dame CIO on Sequoia, Venture Capital & Concentration

What can 32 years as a university CIO teach you about identifying exceptional investors before everyone else does? David sits down with Scott Malpass, Co-Founder and Managing Partner of Grafton Street Partners and former Chief Investment Officer of the University of Notre Dame, to discuss the patterns he learned from evaluating thousands of investment firms and building decades-long relationships with some of the world’s leading managers.

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

• 0:00David Weisburd?

  So Scott, you're considered one of the very top CIOs of the last generation, having been CIO for 32 years at Notre Dame. Let's start with a simple one. What is the number one lesson that you learned while being CIO at Notre Dame?

• 0:13Speaker 01

  With David, I was very fortunate to come back to a place where I had gone to school. So I was an alum. I knew the culture. I knew the campus. I knew the values as a Catholic university. And so very early on, it was sort of easy for me to fold in when there was such alignment of the purpose of the place between the board, the administration, students and faculty, alumni, all the different constituencies of university, each of whom, by the way, thinks they run it, right? But we're so tied together there by this common sense of purpose. And the alignment we had in establishing our investment goals, we had such strong alignment with our entire governance structure. I have realized over that time, just anything is

• 0:55Speaker 01

  possible. We have that kind of commitment alignment on any investment approach. So I was very fortunate to have that. I would hear stories all the time from my peers about they hated their board or their investment committee and they're interfering and the president would offer stock advice. And there's just, I didn't have any of that. It was incredibly clean. So I was very fortunate that way.

• 1:15David Weisburd?

  John Austin, founding CIO at Berkeley, asked me to ask you, how long was your IC Chair, the Chair on your Investment Committee?

• 1:26Speaker 01

  I was fortunate. I worked for two gentlemen, Bob Wilmuth from First National Bank of Chicago, who basically brought me in. And then Jay Jordan, who's sort of a private equity icon, was Chair really most of the rest of that period. That continuity is very unusual.

• 1:41David Weisburd?

  Certainly, he was one of the top, I think, private equity guys of his generation as well.

• 1:46Speaker 01

  He was. And his judgment on even beyond private equity, about people and about markets and everything was extraordinary. He was really an extraordinary man.

• 1:55David Weisburd?

  Last time we chatted, you said investing is ultimately a people business. That sounds intuitive, but what do you mean exactly by that?

• 2:01Speaker 01

  I learned early on it was a people business by watching some of the mistakes people made. They would make terrible decisions about their firm, their asset growth, the terms and alignment. And so these are decisions made by people. But ultimately, I observed more over time, really strong examples of how people influence organizations and really instill a culture, really establish the true north, if you will, for the organization, which is really important. It's easier to get a school like a Catholic school to have a strong sense of what your true north is. And it's very hard in a secular institution to try to figure that out and then rally people around a certain culture. It takes

• 2:41Speaker 01

  a lot of leadership to do that. And so I admired firms where you've had that's kind of strong leadership that was able to establish really strong cultures and allow people to excel at the highest at every level of the organization.

• 2:55David Weisburd?

  What does that mean when you pick GPs?

• 2:57Speaker 01

  When I first would meet a firm, I could tell right away if they really, you know, had their investment philosophy and strategy. How coherent was it? Right away, they tell you what they do, what they don't do, what they're good at, what they're bad at. They don't hide things. They're very transparent. They have a strong confidence, but not arrogance. It's not helpful in managing money because it's a tough game, but you have to have confidence and you have to be professional. So right away, there was just a certain approach that the top managers had in describing their firms, their vision. They're very transparent about mistakes they've made. They don't hide those kinds of things. I probably met a couple

• 3:38Speaker 01

  thousand investment firms in my career and probably hired and fired over 400. And there was sort of that common thread between the best GPs and really understanding what they do, what they don't do, what they're never going to do, and just the kind of people they want to hire, the talent they can attract, and then the consistency of leadership. That's critical. A lot of firms, you have a lot of turnover, partners come and go, you get different approaches, different priorities. But the best firms didn't really have that. They have long-serving partners who brought in the next generation of really talented people as well to extend the culture and extend the firm into decades of outperformance, not just a few years.

• 4:20David Weisburd?

  Is that also the case for the managers that grew their assets considerably? Or is this particularly only possible when funds stay small?

• 4:30Speaker 01

  There have been firms that have grown their assets, but they tended to do it evolving with sort of the global capital markets, with the growth in private markets. There's certainly a lot more opportunity in the world going back 30 years when there was a lot, protectionism was not the norm. It was very much open economic liberalization, more free trade, more cooperation, more trading zones where there was less tariffs. So there was a lot of interesting things happening. And so that was evolving pretty rapidly. And then, of course, the advent of private markets and the explosion of private markets created a lot of opportunities. So there were definitely growth in assets, but a lot of times it was

• 5:13Speaker 01

  different products to take advantage of the opportunity set, different geographies, different stages of investing, all while keeping sort of their core funds very small. So it varied by asset class, but those were some of the common things that we used to see.

• 5:27David Weisburd?

  There's almost a subtlety between being pulled by the market, pulled by your LPs, and pushing AUM growth onto the market and onto your LPs.

• 5:37Speaker 01

  It's been pretty much the norm for firms to raise a lot of money, start a lot of different products. Founders tended to be more disciplined. New generations of partners were more commercial, if you will, transactional, were more focused on their incomes, how they compared to their peers. And I think that's just dangerous. There's enough for everybody. Most of the money being managed is for alimacinaries, right? It's not for profits, whether it's pension funds, endowments, foundations. And they have good purposes. They're doing good works. So I think you want to make sure that you're maximizing the returns you create for them and doing it in a way that has balanced terms. And really thinking about the whole

• 6:19Speaker 01

  pie, not just your own salary and bonus.

• 6:26David Weisburd?

  What do you think behind the founders being more disciplined and the non-founders, for lack of a better term, pushing for bigger and bigger funds all the time?

• 6:36Speaker 01

  A lot of it's the way society's evolved and incentives. We have more transparent information flow. You have the internet, you have social media. Just people think differently. Founders going back 30, 20, 30 years, it was more about relationships, building relationships, and sharing ideas with people you've met, colleagues, friends, professional relationships. It was about the priorities they had. The founders generally led more by example. It's not one thing, but I think it's just how society's evolved and incentives have evolved the last 20 years. It's hard to fight that. I see it in young people today. It's just, that's just how they're trained. And it's not all bad. I mean, they're very talented. They're very smart. They're well-educated. They've done a lot of things. I mean, they've

• 7:21Speaker 01

  traveled. I mean, when I was coming out of high school and college, I had done nothing. I barely traveled. I'd hardly been anywhere. I had a couple hobbies, but younger folks today have been all over the world. They've had a chance to do things and meet people that we never did. So it's not all negative. It's just I really value relationships and relationship building. That adds more value and is more fulfilling, frankly, over time.

• 7:46David Weisburd?

  If you had to summarize your investment philosophy while you were the CIO at Notre Dame, how would you summarize it?

• 7:55Speaker 01

  That's hard. I guess I was always trying to partner with world-class managers and companies/founders who were aligned with our core belief that outsized returns would be achieved by taking a longer-term view and investing behind strong management teams and growing businesses on the right side of change. I've lived through five sort of super cycles in technology, going back to the mainframe and the PC and so forth. And these are massive cycles. And I always believed if we were vigilant and really engaged in talking to people and networking, we would learn about some of these technologies as they evolved. For our partners, particularly our venture partners, we'd have a chance

• 8:37Speaker 01

  to participate in a lot of that growth. At Notre Dame, we built close to 35% of NASDAQ Stock Exchange through our venture partners. And we had a lot of exposure to some of the great companies that emerged over the last 30 years. So innovation was always a constant theme.

• 8:55David Weisburd?

  One of the things I've been reflecting on is that status oftentimes follows returns, but returns do not follow status. In other words, status is a lagging indicator of returns. Did you find out some of your best managers, when they came to you, they were a little bit weird or really thought differently than the rest of the market?

• 9:18Speaker 01

  They definitely had more of a contrarian mindset about things. I wouldn't call it weird. I would just say that they were able to see things in markets and trends that not every, the average person didn't see. And just as importantly, they were able to articulate what that was and could be. But yeah, I think being an independent thinker, thinking in a contrarian way is a very important investment skill. That doesn't mean you're always right, but it does ensure you're going to think about a variety of things others aren't necessarily thinking about.

• 9:46David Weisburd?

  But it is in many ways lowercase contrarian. In other words, truly contrarian, not something that everyone believes that sounds contrarian, but something that's truly contrarian versus your peers.

• 9:57Speaker 01

  Yes, exactly. Those people stood out. And sometimes it took a while to fully appreciate what they were trying to tell you. But the best ones usually were on to something that became something very important in the capital markets.

• 10:11David Weisburd?

  Could you tell early on? That they were on to something or is it something that took five, 10, 15 years to play out typically?

• 10:21Speaker 01

  Well, it usually took several meetings. Those meetings could have been over a few months or two or three years. But it definitely took several meetings. There was a way they could describe things that was unique. I mean, they were smart. They had a strong sense of what they knew and didn't know. They had a lot of experience. A lot of my best managers had operating backgrounds. So they had worked in industry. They understood the challenges of running businesses and companies. They had some domain knowledge of certain sectors. When you work in industry or the corporate world and doing operations, sometimes you're more aware of things as they evolve in innovation and trends. Cause you're right, in the manufacturing space and the technology space where

• 11:01Speaker 01

  people are talking about these things. You're not sitting on a campus somewhere overseeing managers. You know, you're right in the middle of it. So a lot of my best partners over the years had more of those operating backgrounds, which gave them a lens into evolving technologies and opportunities that not everybody would see.

• 11:17David Weisburd?

  I've still been thinking about since the beginning of the interview, you mentioned that you knew what to look for in the right manager. What would be some early signs that this is really somebody to partner with for the next 20 years?

• 11:29Speaker 01

  Number one, they had an affability about them, a personal style that was compelling.

• 11:36Speaker 01

  They understood we were the client,

• 11:39Speaker 01

  that we were representing a large institution that had its own priorities. That we were good long-term capital, being a long-term endowment fund investor. So they showed that kind of respect. They acknowledged that we would be terrific investors because of those characteristics. But they also had a very strong coherent investment philosophy. They were able to talk about their sectors thoroughly. They tell they were real experts in their areas that they knew well. Transparency, openness. I remember one time interviewing a small cap manager in Houston. And they had a good record, but they had a couple of bad years. So I asked the founder, founder of the firm, what would he attribute those years to? And he said, ah, the numbers are the numbers.

• 12:23Speaker 01

  He was very defensive. He didn't really want to talk about it. I'm sure he'd been asked about it a lot. But that's not the kind of response you want. It's certainly acceptable for potential clients to want to understand what went wrong in some years. That doesn't mean it's fatal for them. I just want to understand it. And what did they change in their process? That might alleviate that in the future. And he didn't want to talk about it. So that was a quick no, one meeting and you move on. The best managers, the best people don't do that. They just don't do that. They're very happy to talk about their mistakes and what happened and what they learned from it, most importantly, and what they've done about it going forward.

• 12:58David Weisburd?

  Is there also a greater sense of vulnerability in the top managers and they're able to talk about things like values and what they stand for? Knowing that some percentage of people will not align with them, but some percentage will and will be natural long-term partners?

• 13:14Speaker 01

  100%, 100%. They definitely. I used to ask questions, David, about I wanted to understand the people and their personalities, how enduring their personalities were to creating excellence over multiple cycles. And I would ask them, what are your hobbies outside of work? Do you have a family? What do you like to do outside of work? We all have to have something outside of work, right? And some, literally in the late eighties, a couple of guys said, well, that's none of your business. I'm thinking, well, I got it. I was asking about their hobbies. I was asking. I was trying to get to know them. And so that I learned a lot from, I was just being naive. I was a 26-year-old CIO. I was just asking what I thought were normal

• 13:57Speaker 01

  questions to get to know someone. Some might ask almost anyone.

• 14:02Speaker 01

  And they were, not everybody, but early on, some of the older school guys at the time were kind of defensive. And that just told me a lot. I just processed that in a way that said, eh, maybe this is the right partner for us long-term.

• 14:15David Weisburd?

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• 14:55David Weisburd?

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• 15:40Speaker 01

  Definitely a cohesion, sense of common values, common philosophy, what they all understand, what they're really doing and how they're doing it. Just we would be with analysts. I would always want to meet select analysts or associates at a firm. Of course I'd meet all the partners thoroughly and the vice presidents and so forth. But at least one meeting, I would ask for a group of associates and analysts, maybe three or four, to come in just by themselves. And just talk about the firm and what they're learning, the culture. So yeah, I learned a lot talking to all levels of people at these firms. My philosophy was I want to be with them for a long time. I want to grow with them. I want to be decades-long partners. Some of these younger people are going to be running the firm someday.

• 16:25Speaker 01

  Or have more prominent roles over time. So just getting a sense of what kind of cohesion they have. They all understand what they're doing and why and how they do it. And so I enjoyed that. I really enjoyed the people part of it and getting to know people through the business. That for me was probably the most fun of it, honestly, just having a chance to visit with smart people all over the world in all asset classes. The time spent in their offices, to me, that was, I loved that. I love meeting really smart people. I met so many talented, interesting people in my career. It's just fascinating. That was a lot of the fun of the work for me.

• 17:00David Weisburd?

  It's a very common cross-interrogation technique that LPs have taken from FBI and counterterrorism agents, which is you take, it's basically the prisoner's dilemma. You put the prisoners into different rooms, ask them the questions, figure out where there's consistency and where there's inconsistencies around the story.

• 17:19Speaker 01

  Yeah, I guess you could look at it that way. And I wasn't thinking of that specifically, but I guess we did some of that just intuitively.

• 17:27Speaker 01

  By the way, most of the best firms, the partners would offer that. They'd say, you should visit with some of our analysts without us here or some of our associates. I think that's how it started for me. And then over time I would ask for that, but the best firms would always offer that. They were not afraid of it.

• 17:41David Weisburd?

  It's like the best bluff is no bluff. The best way to have transparency and all these things that you want in a firm is to actually behave in that way. Day in and day out, whether there's an LP in the room or not.

• 17:53Speaker 01

  100%, 100%. That is how it started for me. And I liked that. I was impressed that they offered that. Cause at the time I probably wasn't doing that as much. But we, over time, we did build that into our process for sure.

• 18:08David Weisburd?

  Ties back to what you were saying before, this confidence versus arrogance, this knowing your story in and out, knowing where you win, where you don't win, what your strategy is, what's your strategy. This isn't something that just should be in the mind of one manager or the two managers. This should be a cultural-wide phenomenon.

• 18:26Speaker 01

  It should be very intuitive and spontaneous for them to talk about it, right? It shouldn't be something they have to prepare for or overly think about. It should be so much a part of their culture and ethos and their day-to-day experience that it's easy for them to articulate that in a common way to their potential LPs. By the way, I've tracked some of those younger people have kept in touch and they are running firms. Many of them have their own firms. And you could kind of see it in them back 20, 30 years ago. You could see the beginnings of that

• 18:57Speaker 01

  in their young professional lives. And it's been impressive for me to see younger people like that become so successful. You could tell they had that in them, that they had that strong core and purpose and sense of what they, who they are. And that translated into a successful career.

• 19:15David Weisburd?

  Said another way, those things that you looked for in the beginning of your career, as they played out, they were actually representative of a successful firm?

• 19:24Speaker 01

  100%.

• 19:26Speaker 01

  Absolutely. Strong correlation.

• 19:28David Weisburd?

  You mentioned this coherency of their strategy. There's a famous Einstein quote, "If you can't explain something, you don't understand it." Is there truth to that when it comes to great managers?

• 19:40Speaker 01

  There is to a point, yes. I mean, if you're managing people's money and you're asking people to give you money to manage, you have to be articulate what your edge is, what's unique about you, what's enduring about your work that you can add value over time. It's not just one good year or a couple of good years. What about your approach and leadership and personality allows you to bring that all together to create excellence over decades? That's hard. As you well know, David, there's not a lot of people have done that over decades. There's been a lot of good firms, but to do that consistently and transition to new generations of partners that carry that on,

• 20:24Speaker 01

  that's very unusual, very hard. Certainly, there's a handful or more, but not many.

• 20:29David Weisburd?

  I had previously on the podcast Eric Becker, who co-founded Cresset in Chicago, and they've grown to $250 billion AUM. But between his entrepreneurial career and founding Cresset, he went out and he interviewed the firms and the companies that have been around for hundreds of years, trying to figure out what's the through line in these companies that survive five, 10 generations. And basically, he came to the conclusion that the only thing that could really survive for that long is values and culture. There's nothing else that's sustainable over more than 20, 30 years.

• 21:04Speaker 01

  Based on what you and I've talked about so far, you can see that I would completely agree with that. That would be the common thing I saw as well. Value and culture. That's a good way to summarize it.

• 21:14David Weisburd?

  It's also interesting because in many ways, the exceptions actually prove the rule. So everyone talks about Renaissance Technology, this firm that returned, I think, 40% over 30 years. And a lot of people think there's some secret algorithm that they kept, almost like the Coca-Cola recipe. But really, that's not it. It was really the recruiting of PhDs. It was the machine that built the algorithm that was sustainable competitive advantage. If you ask Ken Griffin, it's not their algorithms. It's not even their execution. It's the culture. It's the recruiting. And the day that they stop recruiting these great firms, there's a half-life to how long they could continue to sustain.

• 21:50Speaker 01

  And particularly in those kind of firms, I always found it hard to, they both worked extremely successful, but I always found it hard to understand what they needed to do long-term to stay so successful. When they did well, why exactly? They did poorly, why exactly? It was hard to sometimes put a finger on what really made them tick. Those two in particular, despite them being incredibly successful. We didn't partner with either of them, but I certainly admire their work and their success.

• 22:20David Weisburd?

  And it broke the Einstein thing that we were just talking about. It's very difficult to simply explain. You're famous for having these decades-long relationships with managers. How did those evolve over 20-plus years? What was the natural life cycle there?

• 22:35Speaker 01

  I'll give you an example. When I was a new CIO, Notre Dame had one small venture relationship in Boston. It was like a million dollars out of 400 million. It was very small. But I did go visit that firm. And I thought, okay, this is a new area. I don't know venture. That was not my background. I was still pretty young. Certainly was aware of some companies that had evolved in the 70s and 80s from venture money, but it was a new area for me. And I happened to be in San Francisco, talking to Dick Barker, who at the time was president of the Capital Guardian Trust Company, which was headquartered in LA, but they had a San Fran office. He was president. And I asked him, I said, "I'm up here in San Francisco. I know Stanford University's

• 23:18Speaker 01

  just down the road in Menlo Park, and I'm hearing a lot about these venture funds. And should I explore that?" And he said, "Well, you gotta meet Don Valentine." And I didn't know who Don was, actually, at the time. I should have, but I didn't. And I said, "Well, I'd love to." He goes, "If you start Sequoia..." We backed him. The Capital Partners money was some of the early money that they used to start companies before they started funds. So they knew them well. So he calls Don, says, "Come down tomorrow morning, 9 o'clock. I go in to meet with Don Valentine at Sequoia. We have a nice conversation." He calls Mike Moritzin to meet me. I let them know that we're doing some new things at Notre Dame. We want to invest more in private markets and venture capital. And I would love for them to consider us when

• 24:02Speaker 01

  they raised their next fund. And they both said, "Well, when we raise our next fund, we would love to have Notre Dame as a partner." And so we started in their early-stage venture fund. And then again, as markets evolved, things became more global, private markets exploded, they went into China. They did China, by the way, extremely well at the time and continue. They've separated companies now. But I won't mention names, but there are other venture funds, top-tier venture funds who tried to do China, and they failed miserably. So a lot of the success they had is they put the right people. Mike Moritz led that. He was over there. They put the right resources on it. They recruited the right people. And they started a Chinese venture operation, which was very successful. So yes, when they added new products

• 24:46Speaker 01

  in capital, but it's been very specific reasons to take advantage of very specific trends. And we evolved with them. We invested in all of those products over time. But their early-stage venture fund is still very small. It's still about 500 million or so, 500, 600 million. It's still small. And that's been the case for decades now. That's good discipline. That's unusual. So yeah, we evolved with them. We learned from them. We're with them in assets. When I started with them, we had $400 million in endowment, 400 million. Now the Notre Dame endowment's over 20 billion. And they were extremely small, but we both evolved. And they would call me. They would ask me my thoughts on LP issues. I would call them and ask them

• 25:27Speaker 01

  for advice on other venture funds and people we were meeting. It was a really collaborative, really wonderful relationship. And despite their incredible success, I never had trouble getting to see them, talk to them. I never had any problem. They didn't treat me any differently from day one to 30 years later. I just felt a common bond in the sense of we've done this together. And this is really great. We've created some great companies. We created massive wealth for a lot of nonprofit institutions. And there was just a common sense of fulfillment. And we had fun doing it. That's a good one. And there's a few others, but that's a kind of unique. There's not many like that.

• 26:05David Weisburd?

  Outside of investing and putting capital into subsequent funds, which obviously is very critical, how can LPs be better partners to GPs? And how could GPs be better partners to LPs?

• 26:18Speaker 01

  Sometimes GPs can underestimate the complexity of the LP's portfolio and decision-making. Institutions sometimes have a lot of hoops to throw in investment committee meetings, and their fund is only one part of the overall equation for an LP. It can be a small part even, but it's only one part. LPs also have to consider liquidity. Most of their LPs of venture funds are spending institutions. They spend 4% to 5% a year. So the liquidity requirements, the pacing of commitments is important. Over time, how much are they committing and when? The vintage year thing, and then stacking those with all your other partners. So LPs have a number of their governance structures. It's not just about one manager

• 27:00Speaker 01

  in isolation or one LP in isolation. They have to understand that LPs have a variety of challenges they're dealing with. And I think as a GP now, it's easy to underestimate the amount of time it takes on the non-investment work, the capital formation, the compliance, the staff office, audits, all that, and the operations. That's a lot of time. And then probably as an LP, we didn't appreciate how much of our GPs are spending on that, too, especially early on. When you're on both sides of the table, you do learn different things about each other that are helpful to the relationship over time.

• 27:40David Weisburd?

  You developed a reputation at Notre Dame for not having sharp elbows. What does that mean exactly? And how did that turn into an edge as an investor?

• 27:52Speaker 01

  It wasn't really in our culture to have sharp elbows. I mean, we always thought the best in people. We weren't naive, but we thought the best of people. We wanted to get to know them. We felt if we treated people well and were consistent in our relationship, they would treat us well. We would get more in our allocation. We certainly were not afraid to speak up for ourselves. But we also, look, at the end of the day, we don't run those firms. So they're going to decide allocations. They're going to decide, make those kind of decisions. But I found it more helpful to really build relationships, try to really get to know people, make our case, and then make our asks, and then trust them to do the right thing. And honestly, our best partners always did the right thing. I would never have been surprised.

• 28:36Speaker 01

  And that was usually pleasantly surprised, but I was never negatively surprised. I always thought it was a fair decision, and I could trust them. And trust is really important, right? In any relationship. Some of the agribusiness schools had sharper elbows. They worked out for themselves in some ways. We just had a broader sense of the world and humanity and our place in the world. I think it just came from our religious heritage, if you will. It's a different mindset. Whatever religion you are, it's just a different mindset. And that was our founding. So we just thought differently about things like that. It wasn't fun for me to have sharp elbows. I could do it if I had to, but that wasn't my first thing I thought of.

• 29:17David Weisburd?

  Reminds me a little bit of David Swensen's strategy, which was somewhat paradoxical. He wanted to do the right thing for Yale. He wanted to do the right thing for other LPs. And he also wanted to do the right thing for the GPs. And you might think, well, how is that? How could you do the right thing for all the parties? But if you structure things in such a way, it could actually be a win-win-win for all parties.

• 29:41Speaker 01

  We certainly tried to find the optimal balance of that. I'm sure we missed some opportunities, good and bad. But if we missed enough of the bad ones and got enough of the good ones, we were going to have a pretty nice portfolio. That was something I would preach to my team. Let's make sure we avoid the really bad ones, the ones that blow up. They do not fit our criteria. We might miss a good one here and there, but that's okay. We're not going to get everybody, but we got our share. We definitely got our share.

• 30:06David Weisburd?

  Oftentimes, the Notre Dame endowment was early in a manager and you provided that signal that GP so desperately needed. And you chose not to hammer people on the terms. Why?

• 30:18Speaker 01

  We would talk about terms, but we weren't overly obsessed with changing them just for our benefit. We had a broader sense of the partnership, their challenges. We just want something fair that we thought was fair. We had no problem paying up for excellence. I did not mind paying premium carries over certain IRR thresholds, if you will. I'm happy to pay up for excellence. As long as there's a balance, the terms are balanced in that sense. We would actually encourage that sometimes. Rather than go to just a flat, let's say 30% on a private fund, we'd say, why don't you start at 20 and go to 30 or maybe higher than 30? If you're earning over four or five X of the fund, I'm happy to pay people more for that kind of work.

• 30:58Speaker 01

  It varied by firm and situation, but we very much would talk about terms, but we were just more balanced about it and not trying to get every penny. And I think we just felt if this was a long-term relationship, we would say what we thought was important and they would take care of us over time. And they did, and they treated our LPs very well.

• 31:18David Weisburd?

  Reflecting back on premium carry, obviously at the time you had no issues paying it. But looking back, did those investments end up on that basis in a better situation than the non-premium carry? And in retrospect, was that maybe the wrong decision with a perfect hindsight?

• 31:37Speaker 01

  The ones we did premium carry for did very well. It wasn't everybody, right? But the ones we had, we selected did extremely well. So that worked out very well for us. No question.

• 31:50David Weisburd?

  And rather than negotiating fees in a lot of these situations, you negotiated capacity rights. Tell me about that.

• 31:58Speaker 01

  As we moved along, especially in some of our public portfolios, actually, public equities, we were very pleased to see sort of a younger generation of emerging talent coming in, in the stock picking world, kind of globally in different niches, different subsectors or different niches.

• 32:14Speaker 01

  But the only way they were going to be successful, David, was if they stayed small. They couldn't raise billions and billions. They had to stay relatively small. And we were happy to fund them early with the understanding that they would grow at a more measured pace, mostly organically. And that if they ever did raise money, we would have certain capacity rights. And in some cases, they had to get our approval. We didn't always ask for that. It wasn't always necessary. Sometimes they didn't want to do that. That's fine. But we did get a little more aggressive in that with some of these public managers because it's a lot harder game. It's tough. We all know how hard it is to beat the market consistently over time, the stock market. So yeah, we did. We did negotiate some capacity rights that if they ultimately were going to raise money,

• 32:58Speaker 01

  we would have the right to take whatever, 50% of the new money they raised or 25% or something like that. Again, it varied by situation. And it helped them understand how being smaller to medium size was better for them too, long-term. And those worked out pretty well overall. Not every one was super successful, but overall they worked out pretty well. They stayed small and nimble. They had good returns and we got good public exposure. That approach was very successful for us.

• 33:30David Weisburd?

  Is there an economic rationale for staying small? In other words, there's more durability in that kind of business? Or is it purely doing right for investors?

• 33:42Speaker 01

  I just think if I wrote a book someday on the 10 most important investment principles

• 33:49Speaker 01

  and what ruins a firm, size is number one. Absolutely no question. They just get too big for the strategy. They get sloppy. They get greedy. They start living off management fee. The incentives are not aligned. And I watched this movie play out over time. When I first started, all the management fees were budget-based. They would show you the budget. They set the management fee based on the budget. And the only way they really made money was through incentive comp, through the carry. And that was pretty standard in the business. And then you started getting these large buyout funds raising billions of dollars, charging higher management fees. And that changed the game a bit, and then that became more common. But to this day, we did a lot of venture.

• 34:33Speaker 01

  We did a lot of lower middle market, a lot of micro cap E. And now at Grafton, we're doing the same thing, the same areas. And the management fees are still with those firms are pretty much budget-based. They're not making profit on their management fees, the ones we're working with. They might have a little bit here and there. They might be putting money away for the future, whatever. But and there's nothing wrong with that, but they're not making, they're not getting rich off management fees, the people I work with. That's changed a lot, obviously, as private markets have exploded and institutions want to put more money in privates. It's just the capital flows, the growth and assets under management and private equity funds has just absolutely exploded. And I don't have the numbers in front of me, but I think late 80s,

• 35:17Speaker 01

  the entire amount of money raised in private equity vehicles was just a few billion dollars globally. Now it's hundreds of billions every year. It's completely changed. So it's important to sort of pick and choose what's important and what we believe will add value over the long term.

• 35:33David Weisburd?

  Actually, I once saw a graphic on management fees and venture specifically. And the small funds had 2.5% and then the very large funds had 2.5%. Everybody in the middle was like 2% and some were like 1.5% with concessions, meaning either management fees were literally just to keep the lights on. They just couldn't be negotiated because it was existential. Or management fees were just, we have such a market position. You want to get into these top quartile funds. So you're going to pay the 2.5. It was kind of like almost a form of carry.

• 36:05Speaker 01

  Yeah, exactly. I observed that as well.

• 36:10David Weisburd?

  I want to go back to 1988, when you had just become CIO at Notre Dame. Tell me about how you went about building out your strategy at the investment office.

• 36:22Speaker 01

  We needed to change the whole approach, honestly. And thank God I had the strong investment committee chairs we talked about earlier and Bob and Jay. I basically laid out a blueprint for what I thought was going to be critical. And it started very simple. I needed more of a budget to hire talent and build a team and for travel.

• 36:42Speaker 01

  I remember that the budget for the office then was so small, I could barely even travel much, much less hire talented investment professionals. I was very fortunate. The board really helped kind of educate the administration, if you will, more about how this has to work, what we need to do here. And people bought into that. We never really had any resistance. The expenses were paid out of the endowment income, like a mutual fund as well. So that helped. It didn't, a lot of pressure on the operating budget of the university because it was paid for out of the endowment pool, which is standard procedure. And so we just, over time, we were able to build that. So for me, it was basics.

• 37:22Speaker 01

  Getting a team to help me, having enough money to do the research, traveled to New York, San Francisco, London a few times, eventually China. Started going to China a lot. Well, we started in the early 90s, but really picked that up in the late 90s. Yeah, so that was critical. And then over time, just getting, okay. When I first started, David, we didn't have that many managers, but they all came through campus at least once a year to present to the committee. Well, that was a waste of time. There was no reason to do that. That was my job. I mean, I wanted the committee to focus on other things, higher level things. And they got it. Luckily, they said, you're right. You do that. The chairman of the committee used to deliver the performance report at committee meetings

• 38:08Speaker 01

  as opposed to CIO. And I said, Bob, I could do that. He goes, yeah, you should do that. I mean, they were just very happy to just let me do it. I just needed to ask them or tell them or say, this should be, this is something I should do. They never said, oh, no, I got to do this. They never said that. They knew. They just wanted to make sure. I was young. They wanted to make sure I was ready, that I had the credibility, that they wanted me to succeed, so they didn't want to do everything too quickly. But as soon as I would bring something up, they'd say, yeah, that's something you should do. You and the team should do that. And so we, just over time, we evolved to where we had the delegation of authority and investment authority to run with everything, report appropriately back in line with common standards of large investors.

• 38:53Speaker 01

  But the staff was really running things. Eventually, I would say the two things the investment committee really focused on, which they should, was risk and liquidity. What kind of risk are we taking and what kind of liquidity do we have? And especially in the time of emergencies, which we had, by the way, in the global financial crisis, right?

• 39:12Speaker 01

  Ultimately, everybody survived partly because everybody got bailed out.

• 39:19Speaker 01

  If that hadn't happened, who knows what would have happened. But that did reinforce the importance of liquidity for spending institutions who are spending 45% a year and the operations depend on it.

• 39:31Speaker 01

  I can't remember when I started in 1988, endowment spending as a percent of the total budget was probably under 10%, probably like 5%. And now it's probably close to 40, mid 30s at least.

• 39:48Speaker 01

  That's a big difference. In some ways, it's really good, but in some ways it's a challenge, right? Because markets are variable. So you had to build in protection. You had to build in cushions, you know? You can't overspend. This is a lot of decisions to make. Committee had, those are the things I wanted the committee spending time on, not evaluating some stock manager, never building anything about. So we got, that's a good point with that. But those are basic fundamental things that I had to work with, work on over time. And we got it all done and without any angst really, which is very unusual.

• 40:23David Weisburd?

  You were 26 when you became a CIO. In hindsight, was it crazy for them to make you a CIO at that age?

• 40:30Speaker 01

  At that time, no. Today it would be.

• 40:34Speaker 01

  We had such a basic portfolio. I had an MBA. I'd been on Wall Street a couple of years with the Irving Trust Company. I had done work with some pension funds and their allocations at Irving. You know, so I had just enough experience to deal with the kind of portfolio we had at the time. And then with their leadership and support and competence, I grew from their support over time. And the bad, I did a lot of benchmarking. One nice trait is I had been a science major undergrad. I was a biology major. I graduated a biology degree and then went to business school. So I knew I didn't know a lot of things. I was not a know-it-all. I knew what I didn't know. I was not afraid to ask people stuff because I wanted to get it right. It was my school, my alma mater. I was newer.

• 41:17Speaker 01

  I wanted to get it right. So I didn't mind asking questions. I didn't mind going, visiting other schools. People like Cambridge Associates were very prominent, working with endowments, particularly the big endowments at the time. They had great data on how schools were investing and asset allocation and all that. Nakubo, all those resources. And I really dug into those and was truly trying to learn what was happening out there and why. I was very, intellectually, I just knew that there's a lot I didn't know. And I had to learn this on the job. But I had the support of the institution, the long-term support to do this and do it right. And that's the difference. You don't always get that. There's been a

• 41:57Speaker 01

  lot of change early. But I did it at a pace that they could stay with me. I communicated well, maybe over communicated sometimes. But I felt that was really important to getting their, gaining their confidence in what we're doing. So it was a lot of work, but, but it was fun. Because I knew we were all in it together, which is, again, very unusual. We were very lucky.

• 42:19David Weisburd?

  Fast forward to today, you started Grafton Street Partners. Tell me about Grafton.

• 42:23Speaker 01

  So when I stepped into my role at Notre Dame, it was, now we're in COVID, which I don't recommend doing that. But that's how it worked. And about a year and a half later, I got approached by a couple of large family groups that I've known over the years. And they wondered if I would have any interest in helping them with their investments. And I thought it was very interesting. I ultimately decided, well, let's actually raise a small fund, all equity, public and private, half managers, half directs, and really build some long-term compounding vehicle and long equities. Using my Rolodex of relationships plus my two very talented investment partners, Andrew and Stephen, who I taught at Notre

• 43:07Speaker 01

  Dame and who I, two of the best students I ever had. I taught over 1,000 students. They were my first two phone calls. So you can tell how highly I thought of them. And I knew Andrew Charneski had more of a background in the private side. Steve Santrack had more background. He had some private background, but more on the public side. It ultimately ended up at Viking and then Tiger Global. And he's a terrific stock analyst. We have an in-house stock portfolio that's absolutely killed the market over the last four and a half years. Very concentrated, but some very long-term companies. I knew I couldn't do this alone. I'd rather raise a fund than just do it for one or two families. And so we ended up just reaching out to a number of high network people that I knew and they

• 43:50Speaker 01

  knew and family groups. And to this day, all of our clients, except for one, are family office groups. And we're, like you said, we're about a billion three now. We almost doubled their money in the four and a half years, four years we've been in existence. But I love the vehicle. I love the long-term nature of it. I love the compounding. I love the public and private aspects. It does, so you have liquidity, you can reinvest realizations back into the market, back into new deals. And it's sort of, it's achieving what I'd hoped it would achieve. It's just a great kind of high teams net returner for somebody who wants a long-term aspect of their portfolio. And not a hedge funds. It's a long, pretty

• 44:30Speaker 01

  much long-only. Great people in stocks and the public markets and the private markets who are really skilled and talented in what they do. That's how it started. And we're having a great time. I love investing. That's why I was even intrigued to begin with. I just love investing and I love doing with really great people, as I did at Notre Dame. And now I have the same dynamic here at Grafton. By the way, of our, all of our investment team, I taught at Notre Dame except for one. So I've known these young people a lot of their adult lives. And I've seen them as students. I've seen them, their values and their integrity and their work ethic. That's a real advantage. So I've been able to continue a lot of the same things I did at Notre Dame here at Grafton. We don't have some of the

• 45:13Speaker 01

  institutional requirements I had at Notre Dame, right, as an officer of the school and very involved in a number of initiatives, a lot of initiatives. So it's a little more focused on investing, which is nice. At this point in my career, it's something I'm really enjoying.

• 45:24David Weisburd?

  I'm so curious with your experience, how did you build out the private book? So what were your first principles?

• 45:30Speaker 01

  We knew that we were really going to do venture capital in its various stages and micro cap PE, buy and build stuff, lower middle market. I never did the big bond funds. Never did.

• 45:43David Weisburd?

  And this was both Notre Dame and at Grafton?

• 45:46Speaker 01

  And Grafton, both. Although at Grafton, because we're smaller, we're actually do much smaller opportunities and more real micro caps, real buy and build stuff, putting much smaller dollars to work. You know, just something a billion dollar fund can do that a 25 billion dollar fund just can't do. Plus, Andrew and Stephen have a lot of direct investing experience. At Notre Dame, we were institutions hire managers. We're doing that plus direct investing. And we've been able to add a lot of value in that as well. I think I have good judgment on people and opportunities. And like, I read the memos, I meet with the founders. But they're doing the deal execution and the due diligence on those. So it's a nice synergy. And then the managers, that's where I have most of

• 46:27Speaker 01

  the expertise. And where I spend a lot of my time is developing manager relationships, meeting with new managers, potentially new managers, emerging talent. I love meeting with emerging talent. So it's a nice combination of skills that's come together to form a really good long-term compounding vehicle.

• 46:42David Weisburd?

  How did you go about building out your venture strategy?

• 46:44Speaker 01

  I started with a couple of names that I've known over the years, worked with over the years, three or four names there. And then we started meeting with a lot of new emerging talent in the venture space. So we have a number of seed funds where we really like the principles. In some cases, they, this might be their first institutional fund, but they have a deal record. They've done one-offs here and there. They, some of them worked at other large firms and then now are on their own. So they had to have some deal experience, some record of some sort. But in some cases, their first really broader institutional fund. And we have a number of those. So it's a combination of that. And

• 47:28Speaker 01

  then for the rest of the private book is, like I said, the lower middle market, micro cap PE, and then the direct stuff we're doing, which is, that's about half and half.

• 47:37David Weisburd?

  What's the hardest thing about building out a venture book?

• 47:41Speaker 01

  When we started in 22, of course, that was a different time. And as you have an evergreen fund, it's a new fund. So you're getting, making commitments. There's no realizations for a while, right? So you're going through the J curve. You're not getting a lot of value yet. Luckily, public markets did exceptionally well in 23, 24, 25. So we rode that heavily. And that's why we've generated almost a 20% return combined over that period. And now, now we are starting to get a lot more markups, new rounds of financing in our private book. The manager portfolios are starting to mature now. It just takes time. People who do private investing now. And we were a real startup. I mean, this was

• 48:23Speaker 01

  a real startup. So now we're at a point where we're getting a little more equilibrium between the two, public and private, and getting more contribution to privates and eventually more liquidity. We've had a couple IPOs recently. We've had some nice markups. There's, we think there'll be a lot more realizations over the next 12 to 18 months. And then we'll plow that back into new opportunities in the fund. So it's starting to get a little more of a steady state equilibrium in terms of the cycle, which will be helpful.

• 48:53David Weisburd?

  How did you think about your deployment schedule, whether it's private equity or venture?

• 48:59Speaker 01

  It was more opportunistic. We had a group of firms we wanted to work with as they were raising money. We invested. We didn't feel any need to do anything. We didn't feel a need to do this quickly or all at once or anything like that. We're taking a long view. We had a target list of groups. We were meeting some new people. People like Dave Thomas at Riverspan Partners, came out of Golden Gate, lower middle market industrial. I knew Dave from Notre Dame. I had actually worked, Notre Dame had invested with him at, at Golden Gate. So I knew the kind of person he was and the skill he had. Now he's raising his own thing, smaller. The first fund's like 300 million. They've done four deals so far. They're doing really well. That's the kind of firm we like. Real

• 49:44Speaker 01

  strong principles, great integrity, long-term view, good values. We have a real, deep expertise in some sector. They're hard to find, but there's, we don't need very many. We're just a handful of those and we're going to earn some pretty good returns for our clients. So it's just, it was opportunistic and then just kind of leaning on some people that I've known, my network, and then also adding new emerging talent as it's evolved.

• 50:09David Weisburd?

  Goes back to this information asymmetry. The best venture returns, some of the best returning funds were not actually funds, was David Sacks's angel portfolio, Marc Andreessen's angel portfolio. And the reason for that is they knew these people personally. This was not them hiring managers to go find the next slew of talent. Marc Andreessen knew these people. He had worked with these people. And that information asymmetry you mentioned with your students, it's just such an underrated thing. When you know the person, you know exactly how they're going to act.

• 50:37Speaker 01

  Couldn't have said it better. That's exactly right. You had to play your strengths. And that's just something, I know this network of people that I was involved with at the school and they're extremely talented. And I've met a lot of others, other places as well, over almost 40 years now, I guess, 38 years. And so it's nice to be able to continue to work with a lot of those people. It's a lot of fun for me.

• 51:02David Weisburd?

  And you mentioned you weren't too concerned with getting into too many funds. Obviously at Notre Dame, you had certain constraints in terms of number of funds you had to be diversified to a certain extent. I've had people from formerly Ivy League endowments talking about, there's just too much diversification from LPs today, that you don't need 50 funds with 20 positions and over 1,000 positions. Where do you stand in terms of diversification? And how necessary is it? And is it overblown today?

• 51:36Speaker 01

  I do agree with that sentiment. I think the big endowments had way too many managers, too many buckets, in some ways too risk averse. In some ways, they should have been leaning in more and taking more volatility.

• 51:50Speaker 01

  They also raise a ton of money. And so that gives you a cash flow. I mean, cash is fungible, right? I mean, it gives you a cash flow that a lot of institutions don't have. So I do think that people have too many managers, still do. Generally, it's gotten a little better at some of the big endowments, but I had to do it over. I would try to be a little more concentrated. It's hard. Incentives are to have more managers, more diversification, kind of CYA a little bit. We got a lot of diversification. It's a lot of equity, a lot of equity beta, but we have to do a lot of different styles, you know? And it worked. But I mean, Grafton, I don't have that same dynamic, right? So we're much more concentrated.

• 52:33Speaker 01

  We're going to have more volatility, but I'm just really looking more at the end game here. How much, what can I do for my clients over a 10 year period? The interim doesn't bother me as much and it doesn't bother them that they know what they invested in. And we're not spending. We're reinvesting realizations back in the fund. There's a three year lock. They can, they can ask for liquidity after the three years at a certain pace so they can get liquidity. That's no problem. But we're not spending like an endowment every year. So we have learned from that in this format and been more concentrated. And we're not doing real estate. We're not doing private credit. We're not doing any bonus fixed income. We're not trying to diversify that way. It's not an endowment model.

• 53:15Speaker 01

  It's purely equities, long equities, about 60% private, 40% public.

• 53:20David Weisburd?

  What learnings have you brought from the LP position into what it takes to be a great GP?

• 53:26Speaker 01

  As an LP, you don't fully have a window into how much energy goes into the business part of the GP. And on all the compliance, the back office, capital formation, communications with your LP. There's a lot to that. I mean, just writing letters and that's a lot of time. Most letters are terrible, by the way, right? So if you want to have something that people are going to read, you want to have a lot of thought to it. And I think we've done a nice job with that. We're doing semi annual letters. So twice a year we do a longer one. And then the inter meeting, the two other quarters, we do something a little more streamlined. But we try to make those two bigger ones really interesting and more meaningful and more content that can be useful to people. But that takes time. My partners and I do that. We, all three of us are involved.

• 54:09Speaker 01

  It's a fair amount of time, which probably as an LP, you don't think about as much. You get the letters. You kind of assume they have some template, some junior analyst fills in most of it. And then the principals add a nice intro and closing or something. And that's probably not, wasn't true. But now I know how hard that is. So yeah, you learn a lot about the time involved in those kinds of activities that you didn't maybe focus on as an LP. As an LP, you're thinking about them mostly about their investment selections and what they're doing with their companies. And you're forgetting they're spending a lot of time on all that other stuff, too.

• 54:43David Weisburd?

  Do you have this theory of mind of the LP, of the customer on a deeper level than probably 99.9% of GPs? What are you able to understand about LPs that most GPs are not able to understand?

• 54:57Speaker 01

  I know that LPs, we were talking a little bit earlier about all the challenges they have and some of the unique dynamics they have institutionally. And so I'm aware of that, right? I'm aware of they have boards. I'm aware they have a governance structure. They have liquidity needs. They're, they compete with each other and they won't say that, but they do. Returns. So I'm just aware of the cultures of those places and how they think about stuff. We haven't presented to a lot of institutions because of the time involved. We really want to invest. Family office groups are better at making decisions faster, we found. And I just can't do 10 meetings with one potential LP and then three investment committee meetings. It's just not of interest to me.

• 55:42Speaker 01

  We didn't start the firm to do that. We've done some and we'll continue to do some. And we'd like to have more institutions, maybe more midsize, smaller institutions, you know? But yeah, they have a process that a lot of us just, they got to check a lot of boxes. And I get it. I get it. I was in that seat. So I do appreciate what they have to go through and it's not easy. But they're not, a lot of them aren't very good at following up. They're just kind of sometimes arrogant about. Feeling GPs, you know, professionally, I would never do that. So yeah, but I guess to answer your question, just being more aware of all the challenges they have and being understanding of a lot of that.

• 56:25David Weisburd?

  Sometimes even if the behavior is the same, understanding what's causing it could make it easier.

• 56:31Speaker 01

  And when I've advised some funds that are raising from institutional investors, I was like a senior advisor. And so I would tell them, these are some things you're going to run into. Don't let it deter you too much and stay positive. Just work with it. It's going to take time. That's just the nature of it. And just be available to them. And then over time, that works. I have used that experience more to advise sort of people raising funds as our senior advisor, if you will. More than a Grafton, I guess.

• 57:04David Weisburd?

  And the flip side of that is once they're in, they're in. A lot of these institutions are in for three, four funds. So it might be painful on the front end, but it's long-term capital.

• 57:13Speaker 01

  If you do well, they're typically going to stay with you 100%.

• 57:19David Weisburd?

  Looking back at your career, what decision or decisions are you most proud of?

• 57:27Speaker 01

  I am most proud of building really a first-class organization for Notre Dame with a lot of talent. Something that reflects the school and its values and its ambitions. I was proud of the team culture we had, the impact we had on students and faculty, particularly like financial aid. We grew the financial aid endowments tremendously. And we weren't even meeting full need when I first came back to be CIO. We were not meeting full need. And now we have some of the most attractive financial aid packages in the country. Where below a certain household income, there's no, you don't pay anything. And the loan component has come way down.

• 58:09Speaker 01

  I think we're at a point now where our, our average student has less than 10% of cost as debt, even lower than 95% as debt. It's, that's way, I mean, I financed over half my expenses at Notre Dame with long-term debt, your student debt. So our kids are not leaving with a lot of debt, very little debt. Most have none. That's a big change. So I'm very proud of that. Now they're getting more of a kickstart when they go out there. They're not writing checks every quarter of the student loan funds that they have to pay back. I think having some skin in the game is good, but I think too heavy a burden is tough. You got five, seven, 10 years there. It just makes it tougher if you're writing those kinds of big student loan debt checks. I had that, but you know, I didn't mind it.

• 58:54Speaker 01

  I did it because you just do it. But it sure feels nice to be able to have kids start off in a little better financial position than we had back 30, 40 years ago. So I'm very, those are the things I'm really proud of.

• 59:07David Weisburd?

  What's your biggest regret or the biggest mistake that you made as CIO?

• 59:14Speaker 01

  As a younger CIO, you, you focus on returns a lot more than you do risk. And I think the telecom bust and bubble in 99, 2000, I learned a lot about risk. We did really well through there, but it was volatile. We had a fiscal 2000, which was June to June. We had about a 62% return. I think it was the highest in the country at the time. And then the next two years we were down seven and then six, I think, seven or eight. So the pattern was a little volatile. The combination of three years was really good, but it did occur to me that when the Nasdaq was at those levels, I might've put a little hedge on, we might've, sort of obvious today, right?

• 59:59Speaker 01

  But I wasn't thinking about that as much. So I learned from that. Luckily, it was not a painful lesson because we did well. But I did feel we could have done some things that could have added more value than we did. A little more attention to the risk and liquidity. I learned throughout my career, particularly those middle years, that I now focus on a lot more. So that was probably just, wasn't a big mistake. There's nothing that would happen. I did learn a lot from that. And the global financial crisis too, in some ways, just how much capital can you really lock up? I mean, we have the private book, plus public managers have lockups, hedge funds have lockups. All of a sudden, now you've got a lot more of your fund locked up than you thought.

• 1:00:44Speaker 01

  And the markets, your market thing's way down. And so when it comes time to spend, where are you going to get the money from? So just being more conscious of that and having a liquidity policy that makes sure your institution's never at risk that way. Just tightening that up, I think we did a good job of that, but it's something we had to learn. Nothing happened. We had no problems, but it was a good learning at the time.

• 1:01:08David Weisburd?

  What about the speed of your decisions? Did they become slower or faster?

• 1:01:14Speaker 01

  Fast, much faster. Yeah. As we got confidence and experience and delegation of authority, and we didn't have a bureaucracy, we had to be weighed down. But we can make very quick decisions. Ultimately, if I need to make something really quick, that normally would have required some sort of review. I could call the chair of the committee and he had the authority to give me permission on just about anything. If I really had to do it like right away, this is an opportunity that came up or just something, maybe we heard about something late and we had a chance to get in a fund. But we had to tell them like the next week and maybe it was a bigger number. Yeah, it varied by situation, but we set it up that ultimately the chair and I could make those decisions if we had to.

• 1:01:58Speaker 01

  And then we could report back to the committee appropriately. And we didn't have to use that very often. I had most of the authority to do what I needed to do. But you want to, you have to be quick sometimes. You just have to. That's the markets. That's life. I mean, it's, you can't take months to review something and then let it get back to them. I mean, so you got a lot quicker, a lot faster.

• 1:02:19David Weisburd?

  To be honest, I thought you were going to say slower because there's value in seeing more cars and getting to know a manager more over time.

• 1:02:27Speaker 01

  Well, we got better at it. Yeah, we already, we got better evaluating the managers. We asked better questions. We're more efficient on our time and how we use their time. Quality of review was just better and better. So yeah, no, it definitely was quicker. It's definitely quicker.

• 1:02:42David Weisburd?

  Is that just good advice for somebody building their career as investor as to go slower in the beginning? And as you get better to increase your speed?

• 1:02:53Speaker 01

  We all learn our jobs better over time, right? I mean, I was at 32 years. I was a much better CIO at the end than I was at the beginning. I had good instincts, but you just get better. You recognize patterns quicker. These patterns of excellence in people, that may come from my science training, by the way. That might've been where I added value to the team even being with a soul, sort of science. Having been a science major, I recognized systems and patterns maybe faster and saw things in people that led to excellence over time. It wasn't just the numbers or I really could see that. So I think over time we got better and not just me, but the whole team got better recognizing patterns of excellence in people. And what was the perfect template for us with the manager?

• 1:03:36Speaker 01

  And we just got better at that and we could make better decisions that way, faster decisions. And we got to more people. We could interview more firms, meet more people. We weren't bogged down as long as some of these decisions. We had, honestly, in a typical year, we would have interviews with 500, 600 investment firms. And maybe include, that might include some current partners, but we've met a lot of people all over the world. And so we had a big network and you had to make a lot of decisions quickly.

• 1:04:06David Weisburd?

  Is it true? A lot of LPs will say that there's a huge incentive to meet a manager once, but who we have a second meeting with is very selective.

• 1:04:16Speaker 01

  That's fair, and I don't think that's all bad. You get more reps that way. I know I took a lot of meetings early on. I probably wouldn't have taken 15 years later. But those reps were good because you also had to understand bad patterns, you know, what's not good.

• 1:04:32Speaker 01

  I remember meeting with the CFO of Enron when they were raising those private partnerships. Before we knew about this fraud, they were still riding high.

• 1:04:42Speaker 01

  The CFO came out to Notre Dame campus, met with me and some of my team. They were raising those private funds. And I asked a very simple question. I said, how do you determine as CFO, what goes on the balance sheet of the company and what goes in the funds? And he pulled out the pitch book, literally, and had a line on it. The board of directors has waived all conflict of interest policies. That was in the pitch book. I'm like, this is a problem. This is, I've never seen that one. So yeah, I mean, some things stand out pretty bad quickly.

• 1:05:12Speaker 01

  And then probably 30 days later, they got indicted.

• 1:05:17Speaker 01

  That's an unusual situation, obviously.

• 1:05:19David Weisburd?

  What do you hope 50 years from now, people will remember about your career?

• 1:05:23Speaker 01

  That I helped build Notre Dame into a world-class institution. I did it while teaching and supporting students.

• 1:05:32Speaker 01

  Like I said, I taught over 1,000 students. I've helped hundreds of them with job advice, networking. I still hear from students and former students all the time through LinkedIn and emails, just asking, hey, can I get 10 minutes? Will you spend a few minutes with me? I'm looking at this. I always do. I don't think I've ever said no to any of those. I always try to make time. It may take me a few weeks to get to them, but I'll get there. I just, that was part of my vocation, honestly, was giving back and helping the school and helping these students. We've all been young people. We've all been twenties and late teens. And we know how helpful it is when somebody takes an interest and really gives us good advice and is available as a sounding board to us as we move along.

• 1:06:14Speaker 01

  You can't have enough people like that in your life, mentors and people who are interested in helping you. That's a wonderful thing to have. And I think as a young person, knowing that and taking advantage of that is a real advantage. And I'm happy to do that. So that ethos and those kinds of things are really what I hope people remember.

• 1:06:31David Weisburd?

  Scott, I think this has been a three or four year process to get you on the podcast. So it's really great to have you on. Thanks so much for sharing your wisdom and looking forward to doing this in person soon.

• 1:06:41Speaker 01

  Thank you, David. I really enjoyed it. Thanks so much for having me.