E125: Co-CIO Alifia Doriwala on RockCreek’s $16 Billion Edge

In this episode of How I Invest, I sit down with Alifia Doriwala, Co-CIO and Managing Director at RockCreek, a multi-asset and OCIO solutions firm managing $16 billion in assets. Alifia delves into RockCreek’s unique approach to managing customized portfolios for endowments, foundations, and pensions. She shares her perspectives on navigating public and private markets, the evolving role of hedge funds, and the outlook for IPOs and M&A activity in 2025. This conversation is packed with insights for asset managers, institutional investors, and anyone seeking a deeper understanding of market trends and investment strategies.

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

• 0:00David Weisburd?

  How do you go about being a better CIO every year?

• 0:03Speaker 01

  It is so much about talking to as many people as you can and being open to different perspectives and open to different views and honestly, reading as much as you can as well. You know, we are so fortunate. We get so much different types of research, different viewpoints, different perspectives, not only from our managers, from, you know, just the rest of the world. We do a lot at Rock Creek in terms of thinking about the macro environment. We have a board of advisors that are all very much macro thinkers. I think the best way you can be a CIO.

• 0:34David Weisburd?

  So what is Rock Creek?

• 0:36Speaker 01

  So we have about 16 billion in assets under management. We are a multi asset and OCIO solutions business. So part of our assets are managing outsourced CIO portfolios for endowments, foundations, pensions that are less than, you know, call it 2 billion and don't have internal investment teams. And then the other half of our business is focused on multi asset solutions.

• 1:00David Weisburd?

  Give me a couple of examples of how you solve the problems that your clients have.

• 1:04Speaker 01

  It ranges really in terms of a variety of different types of asset classes that we invest in, as well as the kind of niche areas that certain clients want. And it really depends on the client, their type, what they need. And that's why the customization is so important. We don't believe that, you know, there's a one size fits all. You know, we do a lot in terms of private markets investing, obviously. And some of that can be very thematic. So certain areas or certain themes that we want to really focus on for a particular client. There is a corporate pension, for example, that we manage a venture capital portfolio for, and we look for investments that are very much aligned with innovation in the aviation industry. And we have more traditional portfolios where there are institutions that can't access

• 1:47Speaker 01

  the best venture funds, can't access necessarily, or don't have the resources to really do research on certain types of alternatives, and that's where we come in.

• 1:54David Weisburd?

  As we start the new year, what are some themes that you're really excited about?

• 1:58Speaker 01

  So, you know, in terms of private markets, we have started to see a real inflection in terms of our portfolio companies. We are very excited that we think the market might start to pick up in terms of the IPO market. We've been talking to a lot of our portfolio companies that are potentially getting ready to test the market and starting to talk to those initial investors. And we've heard that from kind of both sides.

• 2:21David Weisburd?

  In private markets.

• 2:22Speaker 01

  And so we do think that the market next year is really going to start to open up, both in terms of an IPO market, but also, given the new administration, we do think that there might be a lot more activity or potential prep for activity in the M and A space. And again, all of that bodes very well for our existing portfolio. So in terms of really starting to see markets come back in the venture side, we have, you know, a lot of optimism next year that that's what we're going to start to see. We've already started to see it this second half of this year. In terms of specific themes, I mean, I think, you know, we're at such an exciting time in private markets to be a private market investor and to be able to actually access private markets and innovation across pretty much every sector is, you know, so ripe for opportunity today.

• 3:07Speaker 01

  So that means, you know, biotech, other spaces within healthcare like medical devices, not just your kind of telehealth, which was all anybody talked about a couple of years ago. So we're really starting to expand in terms of how can technology and innovation access and enable access in some of these sectors that we focus on. Healthcare being just one example that we're excited about.

• 3:27David Weisburd?

  So it's intuitive why M and A would pick up. We've had kind of an anti-M and A FTC chair in Lina Khan. What is the reason for why you see the IPO market opening up in 2025?

• 3:40Speaker 01

  Regardless of kind of what your political views are or what you hoped would happen, that there's an uncertainty that's gone. We now know what is the situation for at least the next two years in terms of administration. And I think that uncertainty being lifted from the market is one element of why we think that the IPO market will start to get stronger. I mean, second of all, you've just seen a much more soft landing in terms of interest rates coming down, inflation coming down. We kind of know the path that we will be on if there are no huge exogenous of that events that are going to affect markets. And if that continues, plus you've started to see really strong fundamentals continue from companies that are public. I think that there will be much more appetite that IPOs will be well received again versus two years ago.

• 4:25David Weisburd?

  There seems to be a lack of consensus to where interest rates will be over the next couple of years. What's your view on interest rates?

• 4:33Speaker 01

  Yeah, I mean, I do we think that we'll get to this magic 2% number necessarily? No, in terms of inflation and you know, that obviously corresponds to interest rates. I mean, I think that in the next couple of years, we're going to probably see a lower inflationary environment, which will cause interest rates to remain stable, if not, you know, a little bit lower than where they are now. That being said, you know, longer term, we are worried that inflation will start to spike again, depending on what policies are out there and that'll cause interest rates to rise. So I think it's really about managing that yield curve and looking to see where we are on that yield curve. Um, you know, further out, there's a lot more worry in terms of inflationary pressures and risks. And so we'll have to monitor that and actually see what happens to see whether

• 5:18Speaker 01

  that materializes and what timeline. But you know, I think for the next year, year to two years, we're fairly constructive that we'll be in a similar interest rate environment to where we are today.

• 5:28David Weisburd?

  There's a new governmental agency, DOGE, Department of Governmental Efficiency. If that department is successful, how will that affect interest rates and inflation moving forward?

• 5:40Speaker 01

  Well, we're based in Washington DC, so I thought you were going to ask me a different question because it'll definitely affect DC. And then many of my friends that work in the government across many different agencies. I mean, I think the real question is what will actually materialize and what will actually happen from them. I don't think that necessarily the actions that they could take or may take or that actually take hold will affect interest rates or inflation as much as tariffs and the, you know, it trade issues that we're talking about and the new policies that could come out in terms of different trade agreements between Canada, Mexico, China. I mean, I think that is undeniably the place that we have to look at to see where inflation will go. And that will again relate to interest rates. But there are

• 6:22David Weisburd?

  And assuming that the tariffs hold at these pretty significant numbers, is that going to cause inflation to go up?

• 6:28Speaker 01

  In the long term, yes. Short term, maybe not. But in the long term, I think undeniably it will. I think there's a lot of consensus around that. But again, it depends on the nuances. And I think it's actually really interesting because some of the tariffs that have been talked about would affect most negatively big multinational companies, right, and their supply chains. But this goes back to your question on innovation and privates and where are we excited. There's actually been a lot of technology applied to diversifying supply chains now. And so multinationals are not in the same place as they were maybe five years ago when we were talking about tariffs in, I think, 2018, right? So it's a little bit of a different environment to do, to see, you know, what implications come out.

• 7:08David Weisburd?

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• 8:35Speaker 01

  Yeah, so for a typical endowment and foundation that's really looking in perpetuity to, you know, sustain their assets and

• 8:44Speaker 01

  Again, there's a lot of caveats to this. So have a steady distribution, you know, and a spend that they can plan on for the next 10, 20 years. Those types of institutions can take a large allocation to private and illiquid assets. So typically, we would say anywhere from 20 to 25 or even 20 to 30% in terms of a target for private equity venture. And if you add, you know, illiquid real estate, real assets, it's probably closer to 35, 40%.

• 9:15David Weisburd?

  So about 30, 35% alternative, 60, 65% public.

• 9:22David Weisburd?

  When we were last chatting, you said you were very excited about the public markets today. Tell me about why you're so excited.

• 9:28Speaker 01

  Yeah, I mean, I think there's a lot of opportunity today in the public markets, right? I think that's starting to potentially look a little bit more, um, you know, I don't want to say scary, but uncertain in terms of, you know, how long can we have such a positive public market? But I think there's always opportunity in the public markets. I think that especially in the next year, we think that active management in the public markets is really going to start to be the place you want to invest in versus passive, which is where you, you know, undoubtedly would have been if you had just been looking at numbers for the last three, four years. And so passive has been quite a large allocation in portfolios because it's just done so well, but it's been such a concentrated market

• 10:11Speaker 01

  that active management hasn't been able to do well. We started to see that in the second half of this year change because of the broadening out of the market.

• 10:18David Weisburd?

  Walk me through the decision making on whether you choose to be a passive or an active investor in the public markets.

• 10:26Speaker 01

  Well, it depends on how much value, um, alpha you think there is in a particular segment of the public equity market in terms of your decision of whether you would go active or passive. So for example, US equity markets, which is the classic example when people talk about passive versus active. US equity markets are extremely efficient. So it's very hard for an active manager to be outperforming by, let's call it 200, 300, 400 basis points on a consistent basis because the markets are so efficient. That is not necessarily the case when you look at other geographies or you look at particular sectors.

• 11:01David Weisburd?

  What are some specific opportunities today in the public markets?

• 11:05Speaker 01

  In the public markets? I mean, you know, as much as we talk about diversification and we want diversified portfolios, it's been very hard to argue that the incremental dollar from a macro perspective should go into anything but the US. Our portfolios are definitely biased towards US public equities today. That being said, we do think that there will be selective opportunities again for stock pickers in particular sectors. So if you look at energy, if you look at pharmaceuticals, if you look at a lot of different fintech or financial services companies, asset management, insurance, like, you know, there's a case to be made that a lot of those sectors are going to be very interesting, especially depending on what happens with certain macro policies.

• 11:48Speaker 01

  So I think within the US, we're excited about certain sectors. Outside of the US, we're less excited about emerging markets. That being said, there are always spots to pick in terms of idiosyncratic risks that you can take. But from a macro perspective, I'd say we're still biased towards the US.

• 12:05David Weisburd?

  Unpack the diversification within the public portfolio that you advise your clients to have.

• 12:10Speaker 01

  We are, again, like I said, overweighting, you know, the US versus emerging markets and Europe. And that's not a new view. For the last two years, we've had much less exposure, for example, in emerging markets because we just haven't found, despite valuations being cheaper in certain countries, the risk reward to be beneficial compared to having the marginal dollar in the US. So we have some diversification, but probably not as much geographically as we did in prior years where there were more opportunities in other markets. That being said, we made a lot of money in Japan, for example, last year. There was a lot of momentum in the Japanese equity markets, but again, all through kind of active stock picking, right? Not from a passive point of view.

• 12:54Speaker 01

  So, you know, when we are managing our portfolios in terms of the public equity markets, we want some diversification, but we also want to be able to make the incremental return that we see, given where the macro environment is today.

• 13:09David Weisburd?

  How does starting your career in sales and trading change you as the co-CIO of Rock Creek today?

• 13:17Speaker 01

  Yeah, you know, I feel fortunate that I have been able to have different types of exposure across finance, as we call it, which I always laugh because when people ask me, oh, I want to get into finance. I'm like, that means so many different things to so many different people. And you could do so many different things depending on what your skill set is and actually what you're interested in. So I was fortunate that I was able to do investment banking, which is a very different type of work than moving to sales and trading, where I was really researching stocks and putting on arbitrage trades between like Home Depot and Lowe's and doing risk arb and merger arb, which was a very common strategy when I was working at Wolverine and they had a multi-strategy hedge fund. So again, two very different skill sets, two very different ways of looking at financial markets,

• 14:00Speaker 01

  but both very interesting and really both, I think, informed how I work as an investor and have worked as an investor over the last 20 years. And so I started my career at Rock Creek on the asset management side by really looking and, you know, understanding the universe of investment opportunities across, again, public markets and private markets. So having that background in investment banking, having the background as, you know, working at a hedge fund really informed how I asked questions and did due diligence on potential investment opportunities in those areas. So I was fortunate to have that background because I think it lays the groundwork for actually being able to do real due diligence on investment opportunities,

• 14:43Speaker 01

  understanding how financial markets and capital markets work.

• 14:47David Weisburd?

  Last year's Goldman Sachs report, which surveys over 500 ultra-high net family offices, show that they're only investing 6% into hedge funds today. Why do you think that's the case?

• 14:57Speaker 01

  First of all, the term hedge fund, like what does that even mean, right? Like, a lot of people would say that it's just a fee and a term structure. So it depends when you say, what are they like, like 6% investing in what types of hedge funds? You can have a very stable value type portfolio of hedge funds, where you're investing in relative value strategies in idiosyncratic markets and you're extremely hedged. Not taking any beta or equity risk. You can, on the other hand, have a very directional hedge fund portfolio where you're doing a lot of long short or where you're taking a lot of long credit risk. So when people say hedge funds, I think the interesting thing about that asset class is that it can span so many different types of risks and so many different types of alpha opportunities.

• 15:39Speaker 01

  And so you really have to identify what do you need for your portfolio. Family offices, I think, are probably, well, some of them might be a little bit also more risk, you know, risk seeking. And so in which case, over the last couple of years, they would probably be more biased towards directional equity and equity risk than necessarily wanting to hedge their downside, which is what hedge funds can do for you. I will say that most institutions, endowments and foundations would probably have a higher target to hedge funds, anywhere from 10 to, I've seen 20% in terms of hedge funds. But again, it depends on what type of role they will have in hedge funds. And actually, we had been underweight hedge funds for probably the last two years prior to this year.

• 16:24Speaker 01

  This year, we've seen, again, a lot more alpha opportunities, a lot more stock picking opportunities. And so our hedge fund allocation has increased. So you also have to be a little bit nimble in terms of increasing and decreasing your allocation to that type of asset class, depending on what the market is giving you.

• 16:39David Weisburd?

  What percentage of hedge funds that top institutional investors invest into have, are focused on hedging versus capturing alpha via quant strategies or other arbitrage opportunities?

• 16:52Speaker 01

  I don't know the exact specific numbers, but I would say the vast majority of hedge funds out there are probably more focused on equity long short type strategies and more discretionary than quant. Now, there is a large allocation to quant strategies across both equity and credit and fixed income markets. So quant is a big type of, you know, hedge fund strategy. But I would say that when I see new managers, you know, starting and launching, it's usually in the equity long short space. So quant is still a smaller amount of the percentage of the universe. But I also think that is because you need a lot of resources to be able to start a quant fund, right? One person, you and I can go and start an equity long short fund if we have the background and we can pick stocks and we don't need a lot of resources around us.

• 17:37Speaker 01

  That's not true when you think about the technology and the systems and the data, most importantly, the data you need for a quant strategy.

• 17:44David Weisburd?

  You've been over 20 years at Rock Creek. What do you wish you knew before starting?

• 17:49Speaker 01

  That is a very good question. I think that you learn every day, so I don't know if I could have anticipated what I would have needed to know before I started at Rock Creek. I do think that, you know, before jumping into the asset management world, you know, understanding, again, understanding the dynamics of different asset classes and all of that is obviously very important. And maybe to round out my kind of foundational background, it would have been helpful to have worked at a private equity fund or like at a portfolio company to kind of understand a little bit more of the private markets before I started. But I think if you look at what you can learn at an asset management firm, and especially in my job, like I'm

• 18:34Speaker 01

  fortunate to be able to really be able to talk to every single type of investor out there, private markets, public markets, right? And so I think it's hard to say, should I have done anything differently or known anything before I started?

• 18:49David Weisburd?

  Is that the best way that you sharpen your saw, constantly talking to peers and managers? And how do you go about being a better CIO every year?

• 18:57Speaker 01

  It is so much about talking to as many people as you can and being open to different perspectives and open to different views. And honestly, reading as much as you can as well. You know, we are so fortunate. We get so much different types of research, different viewpoints, different perspectives, not only from our managers, from, you know, just the rest of the world. We do a lot at Rock Creek in terms of thinking about the macro environment. We have a board of advisors that are all very much macro thinkers. And so I think the best way you can be a CIO is to get all, take all that information in, look at the data, be very data-driven in terms of your questions, in terms of your

• 19:36Speaker 01

  investment process, and then think about the more qualitative aspects of what's going on in the macro environment today as an overlay. But I will tell you, I think one of the most important things also is being able to be dynamic and flexible, because I think a lot of traditional ways of investing, especially when you think Long term is to not necessarily look at your portfolio and you know it's long term. It'll be fine. But I think in today's market and day and age, you really have to constantly be just at least open to new ideas and open to the fact that we're getting data every single day and that could change what's going on in the market.

• 20:15David Weisburd?

  Well, Alifia, this has been great to catch up and look forward to signing down soon.

• 20:20Speaker 01

  Thank you so much.