Lane MacDonald – Teamwork, Alignment, and Investing at the Highest Levels at SCS (EP.483)

Lane MacDonald is the Chief Investment Officer of SCS Financial, a registered investment adviser and OCIO platform with approximately $46 billion in assets under management. Lane was a U. S. Olympic hockey player and Hobey Baker award winner as the best player in college hockey in the late '80s, but his aspirations of following in his father's footsteps and playing in the NHL were derailed shortly thereafter by injuries. In the decades since, he spent a dozen years in private equity and the last eighteen as an allocator at institutions ranging from the Harvard endowment to the family office for the owners of Fidelity, and now SCS. Our conversation traces Lane's path from the rink to investing, and from dealmaker to allocator, examining what separates great investors from good ones. We discuss the importance of domain expertise, sector selection, alignment, and identification of a durable edge and structural alpha in increasingly efficient markets. We close with Lane's outlook on private markets and the lessons from hockey, endowments, and family offices that inform the team-oriented platform at SCS. Learn more about our Strategic Investments: Old Well Labs. https://www.oldwell-labs.com/ted All opinions expressed by Ted and podcast guests are solely their own opinions and do not reflect the opinion of Capital Allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Capital Allocators or podcast guests may maintain positions and securities discussed on this podcast. All investments include various risks including loss of capital. This recording also contains certain forward-looking statements that reflect the participants' current views with respect to certain current and future events. These forward-looking statements are, and will be, subject to many risks, which may cause future events to be materially different from these forward-looking statements, or anything implied therein. Forward-looking statements that reference past trends or activities should not be taken as a representation that such trends or activities will necessarily continue in the future. Any forward-looking statements in this transcript are based upon information available to the participants on the date of this recording and are not expected to be updated or revised even if experience or future changes. Learn More Follow Ted on Twitter at @tseides https://twitter.com/tseides?lang=en or LinkedIn https://www.linkedin.com/in/tedseides/ Subscribe to the mailing list https://capitalallocators.com/ Access Transcript with Premium Membership https://capitalallocators.com/signup Editing and post-production work for this episode was provided by The Podcast Consultant (⁠ https://thepodcastconsultant.com/https://thepodcastconsultant.com https://thepodcastconsultant.com/⁠ https://thepodcastconsultant.com/)

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

• 0:00Speaker 00

  Our job as allocators is to find people who have a proven ability to capture inefficiencies in increasingly efficient markets. How do you disentangle that? How do you figure out what their ability is to find those inefficiencies? Domain expertise to start, but what's their edge? Is it a sourcing edge, an operational edge, a strategic edge? What are those things that allow someone to capture those inefficiencies? In our sector, many people build trackers that are not statistically significant, not meaningful. You have a few early wins. You think you're smart. How do you find those people who are truly gifted and differentiate in what they do? They see things in a different way, or they just have skills, capabilities that others don't.

• 0:46Ted Seides?

  I'm Ted Seides, and this is Capital Allocators. My guest on today's show is Lain McDonald, the Chief Investment Officer of SCS Financial, a registered investment advisor and OCIO platform with approximately $46 billion in assets under management. Lain was a U.S. Olympic hockey player and Hobey Baker Award winner as the best player in college hockey in the late 80s. But his aspirations of following in his father's footsteps and playing in the NHL were derailed shortly thereafter by injuries. In the decades since, he spent a dozen years in private equity and the last 18 as an allocator

• 1:28Ted Seides?

  at institutions ranging from the Harvard Endowment to the family office for the owners of Fidelity and now SCS. Our conversation traces Lain's path from the rink to investing and from dealmaker to allocator, examining what separates great investors from good ones. We discuss the importance of domain expertise, sector selection, alignment, and identification of a durable edge and structural alpha in increasingly efficient markets. We close with Lain's outlook on private markets and the lessons from hockey, endowments, and family offices that inform the team-building platform at SCS.

• 2:09Ted Seides?

  Before we get going, have you noticed that airline travel takes a lot longer these days? Security lines go on as far as the eye can see, and that's even with pre-check, clear, or the pre-check, clear combo. And flights seem to get delayed regularly for no apparent reason. Well, the next time you have even an inkling of a delay, and long before you have to board, deboard, board again, and sit on the tarmac for an hour before you leave, might I suggest you fill that idle time with successive episodes of Capital Allocators? By the time your plane leaves, you've gotten through at least two or three amazing episodes, and probably made friends with your equally frustrated neighbor in the seat next to you

• 2:53Ted Seides?

  who may not have had the benefit of listening until you tell them to. Make a new friend, productively pass the time, and find your way around the world smarter than you started. Thanks for spreading the word. Capital Allocators is brought to you by AlphaSense. Every allocator sits at their desk for hours preparing the work around investment decisions, getting up to speed on a new theme, prepping for the next investment committee meeting, and tracking what changes across an entire portfolio. AlphaSense just launched something built to help. It's called SuperAnalyst, an always-on agent that works like a power user on your behalf.

• 3:33Ted Seides?

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• 4:17Ted Seides?

  SuperAnalyst. Start a free trial at alphasense.com/capital and see what it has ready for you. Capital Allocators is also brought to you by RidgeLine, the investment management platform built for firms who are rethinking how work gets done. You're at your desk, looking at a line graph of your firm's growth. The line is moving sideways, linear growth, and you know exactly why. You're constrained by your operational bandwidth that's been the same for so long, it just feels like the cost of doing business. RidgeLine is built to change that line's trajectory, to be the inflection point that takes your growth from incremental to accelerated,

• 5:01Ted Seides?

  with the team you already have in place. RidgeLine is the only AI-native investment management platform that brings together the front, middle, and back office with one set of data and powerful AI agents that automate away operational drudgery, so your talent can shift from managing old technology to materializing new ideas. RidgeLine helps asset and wealth managers understand and improve their firm's growth trajectory. To see how your firm compares to 16,000 of your peers, visit ridgeline.ai/trajectory. If you file Form ADV, your firm is already there. Then talk to RidgeLine about how you can do more with the team you already have.

• 5:44Ted Seides?

  Capital Allocators is also brought to you by Juniper Square, the operations partner trusted by the leading private market GPs. One theme that keeps coming up on the show is GPs that build the strongest and most durable relationships with LPs are the ones that have both strong returns and strong operations. AI raises the stakes on operations, and having Juniper Square as your operations partner helps ensure your data is organized, accurate, and accessible, so you can unlock operational alpha. That's why thousands of GPs trust Juniper Square. Learn more at junipersquare.com/capitalallocators. Please enjoy my conversation with Lain McDonald.

• 6:32Ted Seides?

  Lane, thanks so much for doing this.

• 6:33Speaker 00

  My pleasure. Thanks Ted.

• 6:35Ted Seides?

  I want you to take me all the way back to your upbringing because I would love to hear where this all started on the ice.

• 6:41Speaker 00

  My father was a professional hockey player, played for the Red Wings with Gordie Howe back when there were only six teams. He played with the Kings and most of his career with the Pittsburgh Penguins. I grew up as a rink rat, skating before my dad's practices, skating after his practices with my brother. I didn't know I was any different than anyone else. He was my dad. Going to the rink was going to work with him.

• 7:02Ted Seides?

  What was that like with your dad as a professional hockey player before pro sports became the big celebrities they are today?

• 7:11Speaker 00

  Definitely different because he was still a big deal. People treated my dad differently. When he'd go somewhere, everyone wanted to meet him and particularly in his hometown of Nova Scotia, he was a celebrity and even in Pittsburgh to some degree. It was at the point in time where they started to make enough money that he didn't need to do anything else. He did okay. These days it'd be upper middle class, but with a little bit of celebrity around it. The experiences were what I remember. One day, my brother and I were on pregame skates Saturday morning when we were allowed to go to the rink. We skated before the Penguins had their pregame skate before the other team came out and this happened to be the Boston Bruins. We hop on, my brother and I are ripping around and having fun and all of a sudden, one player on the other team comes out from the Boston Bruins. My dad comes out and is like, "Boys, get off the ice." The player on the other team comes over

• 7:56Speaker 00

  to where we're getting off the ice. It was Bobby Orr and my dad says, "Hey Bobby, I'm so sorry." And Bobby, as gracious and humble as he is, made a joke which was, "Lol, don't worry about it. This will probably be the best competition I face all day." So you grew up in that environment and knowing those people, you don't know any different. Once my dad retired, he went to school for 14 summers to get his undergraduate degree while he was playing in the NHL because he didn't have the benefit of playing college hockey. My parents moved into education. That was the transition to now being in a different environment. My father was an athletic director, coach, teacher. My mother was a school nurse, as a registered nurse, and we then moved to Milwaukee where my parents

• 8:39Speaker 00

  were at a school called University School of Milwaukee, private school. Their next step in their career became one about how to get my brother and me the best education we could. We spent the next, for me, six years, 7th grade through high school in Milwaukee. My parents were there for 20 plus years.

• 8:53Ted Seides?

  Where did you think hockey was going to take you?

• 8:56Speaker 00

  Like every young kid, you hope that you're gonna end up playing in the National Hockey League. In my case, I grew up around it, but it wasn't so aspirational. What was really wonderful about it was that it was also demystified. That was certainly the goal, but I also saw all of the negatives that come with a career like that. My father had six major operations on one knee. He's had both knees replaced. Even then, my mother could pack everything we owned in two trunks that if he got traded tomorrow, we were moving from Pittsburgh to wherever. There's wonderful things about that, and for kids dream about doing it because it's what they see. There's also another side of that, which is it's not the end all be all in terms of what your life is, about who you are.

• 9:38Speaker 00

  There's so much more that happens after hockey that it was wonderful to demystify that.

• 9:44Ted Seides?

  Take me through the highlights of your hockey career.

• 9:46Speaker 00

  Oh, gosh, I've been hit by the lucky stick many times, Ted, including playing with you for the business school blades at HBS when I played in that one tournament with you. When I was playing in Pittsburgh as a kid, everyone expected you to be great. I remember hearing so often, those McDonald kids, they're not that good. So everyone expected. Then in high school, we went to the school in Milwaukee, University School, where my dad was a coach. That was where you start to really lean into it. My brother and I loved hockey. We loved playing. We were fortunate enough to have great parents and supporters, but also a great teacher and coach in my dad about hockey and what really matters. My parents' philosophy was you're gonna use hockey to get the best education you can, not the other way around. To be able to accomplish what my father never could, coming from a small town in Canada, we had to go play juniors.

• 10:30Speaker 00

  I think it was my sophomore year in high school, the coach at Brown came to see my brother and me play. We were in a state tournament. Milwaukee hockey wasn't very good. Not many kids are going to go play college. It was a big deal. It was the state championship. My brother played great. I had a good game. Afterwards, the coach told my dad, I really don't think they're gonna be able to play division one hockey. Your bubble gets burst, but you have to keep working. You have failures, you have setbacks, and you just keep working. Ultimately, I was lucky enough to get the opportunity to go to Harvard and play hockey there. I was recruited. I assumed I was gonna make the team, but you don't know how you really stack up. There's always those doubts in your head. The second week of practice, the coach puts me in a line with a guy named Scottie Fusco, who was a returning Olympian and All-American. It's a little bit like playing

• 11:12Speaker 00

  with Ray Nubetsky. If you're playing with Scottie, Scottie Fusco, you've got a real edge. I ended up being someone who fit well on his line. I could skate with him. Hopefully, I could think with him. We ended up playing together for two years. So as a freshman, I got an extraordinary opportunity to play with one of the best players in the country. And that really then elevated me. Maybe there's a real potential here.

• 11:34Ted Seides?

  At what point in time did you decide the potential didn't have the NHL path?

• 11:40Speaker 00

  I was drafted, played in the Olympics. When I graduated, I had a number of head injuries, concussions. I almost had to stop during the Olympic year and leave the team because of concussions. I almost had to stop playing hockey at Harvard my senior year. Very few people knew about what was happening and what was going on. My parents, my brother were great about, you don't need to play. But I love the game. I love my teammates. During my senior year, when I was playing, it was in the back of my mind, this is near the end. This could be it. When I graduated from college, I was fortunate to have the Hartford Whalers, which no longer exists, had my rights. They offered me a great contract. It was a four-year contract, signing bonus, guaranteed money, 700 grand. It's very hard

• 12:21Speaker 00

  to say no to 700 grand. Even if you get hurt, you still have that money. But back to the lessons about life, and there's more to life than playing hockey. It's really about your future. In particular with concussions, you're playing a very dangerous game. Between doctors, coaches, Bill Clery at Harvard, my parents, I understood that it wasn't worth it. That was where I changed focus. It took me a couple of years and a couple of twists and turns to figure it out, because I did play for one year in Switzerland, thinking it's a less physical style of play. I could play in one more Olympics. But that was the recognition that I shouldn't be playing hockey anymore.

• 12:58Ted Seides?

  So as you reflected back on your entire journey of hockey at that point in time, what were the most important lessons from the sport that you internalized, both for your life and then in the future, your career?

• 13:11Speaker 00

  Teamwork. There's nothing more important. You learn so much about leadership. It's a we, it's not an I, in how you lead. The teamwork piece, to me, is something that I've personified forever. It means so much more to have success as a team than individually. We all want to do well. We all want to contribute. Being part of a team and being willing to sacrifice as part of a team.

• 13:34Speaker 00

  So much of that has stayed with me in terms of what I've done in every part of life. That's the lesson that I'm so grateful for. Resilience for sure. You get knocked down, you need to get back up. Get hurt, you gotta be tough. Rejection, but the teamwork piece is the most important.

• 13:50Ted Seides?

  In those couple of years where your hockey career was probably ending, how did you think about what you wanted to do that ended up landing you in the investing world?

• 13:59Speaker 00

  I had no idea. You and me, liberal arts, education. My parents had done very different things, so there's no exposure going up. Finance ended up being something that I saw a lot of people in, particularly going to college, your friends, their parents. That was an eye opening, so I started thinking about finance. I had no idea what that meant, but I had some nice mentors. People were like, if you want to get into business, investment banking is a good path. I remember getting a job at Robertson Stevens and Company right after I stopped playing hockey in San Francisco. I didn't even know what an income statement, a balance sheet, or cash flow statement was. I'm flying out to California as I was going to work in San Francisco office. And I'm reading an accounting book, trying to figure out how all this stuff works. You jump in the deep end of the pool and you figure it

• 14:42Speaker 00

  out. What I tell a lot of young professionals these days, none of this is rocket science. If you're smart, you're thoughtful, you're a good person, you work hard, there's a path. I was so intimidated. I had some great colleagues who taught me modeling. You go in with humility. You hopefully are appreciative. It's amazing how much people will give and share with you. I had some great teachers at Robertson Stevens.

• 15:05Ted Seides?

  What was your path after Robbie Stevens?

• 15:07Speaker 00

  I started a summer hockey camp with a good buddy of mine right after college. We built that camp and that was going on the side while I was working at Robertson. That business was running. We had camps in Quincy, Natick, The Vineyard, and it was a great little business. We ended up selling that to US Sports Camps, which is Nike Sports Camps. That was going on the side, but after Robbie Stevens, I ended up going to Stanford for business school. Spent two years there, which was a great transition. During the summer, I was running our hockey camps, trying to get that to a point where we could hand it off to other people to run it for us. Then I wanted to get into private equity, whether that was venture, whether that was buyout, didn't know. Because I had started a business, I had a little bit of an entrepreneurial experience, it lent itself to buyouts. That

• 15:48Speaker 00

  led me, in my second year, to pursue that path. I thought about consulting and I thought about private equity. I ended up having the opportunity to go to private equity and I started to join a firm called Bank Boston Capital. I'm dating myself because every firm where I worked no longer exists.

• 16:04Ted Seides?

  So you stayed in private equity for a long time. Love to hear the most important things you took out of your various experiences in private equity.

• 16:11Speaker 00

  13 years as a GP, three different private equity firms, worked with great people. I learned so many lessons. I learned about domain expertise and how important it is to really understand sectors, both operationally and from an investment standpoint, to really understand the risks that you're taking when you're investing. I also learned about deal sourcing. I learned about the discipline that goes with sourcing deals, the relationship building that goes with that. I learned about sectors, so many sectors. I spent time in a manufacturing and service distribution focused firm. I then shifted to a firm that focused on consumer, especially retail, education and healthcare. The last firm was media and telecom primarily. An area like retail, what are the real economics that drive a retail business? The four-wall economics in terms of that really drive it.

• 16:54Speaker 00

  In understanding that telecom, understanding data centers, understanding wireless, the exposure to all those different sectors, it was a circuitous route, but provided such a great foundation of knowing a little bit about a lot of different sectors and industries.

• 17:11Ted Seides?

  What aspects of being in private equity most resonated with you and your skill set?

• 17:17Speaker 00

  I love to learn from other people, number one. But number two, I thought it combined the best of banking because you get a little bit of banker. Similar with consulting, you're a little bit of consultant with banking. Oh, by the way, you're also an investor because you're writing a check. And when you invest in smaller companies, you're also as close to being an entrepreneur as you could be. What business do you know where you can learn and combine all of those different aspects into a business that economically, when it works, is very rewarding?

• 17:49Ted Seides?

  At three different firms, what did you learn about what it takes for a GP to be successful?

• 17:55Speaker 00

  One of the keys is domain expertise. I also learned that sector matters. The last firm where I worked was focusing on media and telecom. Media had been a great sector for many years, buying TV and radio stations. Monopolies, stick value, great assets.

• 18:12Speaker 00

  But when an industry that is facing a cyclical and secular decline, which was happening in the late 2000s, no matter how good an investor you are, it doesn't matter. I learned you gotta be picking the right sectors. Technology, healthcare, the importance of leaning into those sectors. I also learned that not every investor is a great investor. And I'd certainly learned this more when I moved to the allocator side. There is a real bifurcation. It's very easy to be an investor. All you need is money. If the question is, you want to be a great investor? Now that's a very high bar.

• 18:47Ted Seides?

  What led you to pivot from the GP side to the LP side?

• 18:52Speaker 00

  More happenstance, being lucky in terms of relationships. I was planning to stay on the GP side, but I worried about the firm where I was. Great people, wonderful mentors, but was going to face these cyclical and secular declines. But I didn't believe there was a future. Our largest LP was Harvard Management Company. I went to tell the folks at HMC, who've remained very good friends of mine, that I was going to leave, but I'm going to stay involved with portfolio companies and sit on a couple of boards. They said, hey, would you ever think about joining us? We're going to rebuild the co-invest platform at Harvard. The Charles Bank team had spun out already. We think you'd be a good addition to the team. That pivoted me from I'm a GP, I'm a GP, to then thinking about being an LP. The other piece for me in that situation, Ted, I received financial aid when I went to Harvard.

• 19:38Speaker 00

  The mission-based aspect of that spoke to me of being able to give back in some way while doing something I really enjoyed.

• 19:47Ted Seides?

  What did you find when you got there that was different than what you might have expected?

• 19:51Speaker 00

  I didn't realize when I got there how little I actually knew about private equity. You think you're a GP and you know so much, but you know so much about so little. You're so deep. When you get to Harvard Management Company and you have the benefit of the history of that whole private equity platform, then you have the ecosystem of LPs that you're spending time with. Then from a GP standpoint, I got to spend six years at HMC, meeting with the best managers in the world, every single day, multiple times a day. Through that, you learn so much about where the bar is really to be great. That was the piece when I got to HMC, it was like how little I really knew about the sector versus what I learned while I was at HMC.

• 20:35Ted Seides?

  As you started to calibrate what you thought was really great from good. Were there particular things before you developed your intuition and judgment that you hung your hat on? It was a signpost for you of something that had the potential to be really great?

• 20:50Speaker 00

  We live in a world that's become, from an investment standpoint, very efficient. Our job as allocators is to find people who have a proven ability to capture inefficiencies in increasingly efficient markets. How do you disentangle that? How do you figure out what their ability is to find those inefficiencies? I mean, expertise to start, but what's their edge? Is it a sourcing edge? An operational edge? A strategic edge? What are those things that allow someone to capture those inefficiencies, not only on a historical basis, but on a prospective basis? People talk about modes. In the allocator world, it becomes, who has that proven ability that something is unique and differentiated and can demonstrate that over and over again?

• 21:35Speaker 00

  In our sector, many people build track recorders that are not statistically significant, not meaningful. You have a few early wins. You think you're smart. How do you find those people who are truly gifted and differentiated in what they do? They see things in a different way, or they just have skills, capabilities that others don't.

• 21:51Ted Seides?

  When you have a platform as powerful as Harvard's, how did you think about doing something different?

• 21:57Speaker 00

  I really thought, once I got to HMC, I was staying there. I was given an extraordinary opportunity to then move from the private equity side, which included the oil and gas and the energy stuff too, in the private equity realm. But to move to public equities, Jane Mandela was the head of HMC, and she was a great mentor, gave me that opportunity. Then I had just gone back to run private equity. I love the platform. I love the access. I was learning every day, also finding a way to be a great partner, sitting on the LP side. How do you be a great partner to the GPs? To figure out how to build relationships that are enduring, and you can do many, many things with GPs. I thought I'd be there forever. Then the phone rang. The first time the phone rang, I said no. The second time, I listened. Someone said, you should just take this meeting.

• 22:42Speaker 00

  With some real hesitation and reservation, because I love the mission, I love the platform, I love the focus on trying to generate the best risk-adjusted returns for the endowment. I love that that's true north. Now, there are flaws to the endowment model, but I never thought I was going to leave, and then it was just a unique and interesting opportunity.

• 23:03Ted Seides?

  What did you come to learn were ways that you, as an LP, could be a great partner to your GPs?

• 23:09Speaker 00

  We're all biased by our own experiences. Being a GP was helpful. It could be as simple as it's a GP who you really like. You want to be supportive, looking at their marketing materials before they go out to raise their next fund. Being a confidant, here's what I think you're doing well. Here's what you're not doing well. Shooting straight in being honest as opposed to telling them what they want to hear is really important. Number two is if you really want to build a mutually beneficial partnership is to be a great partner. When times are a little bit tough, you lean in and you understand things, but you also show up with a real check. You have to be a meaningful investor. If you're a $5 million investor, it's hard to be meaningful.

• 23:48Speaker 00

  Fortunately, reputationally in Dollar Wise or Harvard, we were able to craft relationships where we were the first seat in the back of the bus. But therefore people wanted our opinion and we could share best practices. Everything that we're seeing across the entire universe to help our GPs in terms of how to think about strategy, firm transition, next generation, which I think were important.

• 24:09Ted Seides?

  A lot of people think of a seat like that at a top endowment as the pinnacle of a seat in the LP. You mentioned that in addition to some of those great strengths, there are some drawbacks of the endowment seat. I'd love to hear your thoughts on what some of those drawbacks were.

• 24:24Speaker 00

  There are challenges to being part of these institutions. I love Harvard. I'm forever grateful for the experience I had and I wouldn't be where I am without Harvard. But the institutional biases, and I'll give you an example. There was such a big push that people at Harvard were making too much money. This was before I joined. The only reason they were making too much money is because they were performing at such a high level. Those folks were generally making roughly 48% carry the alpha that they were generating while they were at HMC. All these initiatives at Harvard lead to spinning out these firms. You think about adage, high fields, convexity, Charles Bank. Now you go from them being internal, paying them that to them being external and paying them one and a half and 20 and pass some of that for beta. That is so illogical from an investment standpoint.

• 25:09Speaker 00

  The other one I'd say is too institutional bias. Oil and gas, we all want the world to be green for our kids. That being said, that was an institutional push that happened at Harvard to eliminate all oil and gas investing. When you take a capital intensive sector where many people are running and not deploying capital, that becomes a very attractive sector. The loss to Harvard by not investing in sector of oil and gas over the last eight, 10 years is very meaningful because it was a target-rich environment for returns that go to support the financial aid for students. Those are some of the challenges that people don't think about when they look at these endowments. There are great people running these places and they try to optimize within those parameters, but there are some constraints that exist because of the institutional biases.

• 25:54Ted Seides?

  So we circle back, that phone call comes in. What was the phone call?

• 25:58Speaker 00

  The phone call was from the family that owns Fidelity Investments. One call becomes meetings. They're a wonderful family. It was a unique seat in terms of leading their family office, which is for their family, but also probably for some other owners of Fidelity and the other employees. It was a unique opportunity to be the chief investment officer of a platform like that in Boston with a family that has done so much for the city of Boston philanthropically and otherwise. It was a compelling opportunity.

• 26:30Ted Seides?

  So you go from an endowment to a large family office. What was the breadth of investment activities that you were involved with for the Johnsons?

• 26:37Speaker 00

  If you think about the endowment model, basically the asset classes were the same. Public equities, private equity, net resources, real estate. The expression was different, as it is in most family offices. Once again, with the Johnson family, they had the ultimate advantage as well of duration of capital. In their case, you had some flexibility within that mandate, reputational benefits with that family and how unique as they are in scale. Very few families really have enough scale to really optimize the platforms. They did.

• 27:11Ted Seides?

  What was the expression of those asset classes inside the office?

• 27:15Speaker 00

  It really was more about a willingness to accept concentration. In certain asset classes, there were very high concentration. Different families have different priorities. Some families go the endowment model, they want to partner. Some families like to do things more directly. The Johnson family, as entrepreneurs, leaned more directly as opposed to investing through managers. That was obviously, in hindsight, wonderfully complimentary to what I did with Harvard. But very, very different.

• 27:43Ted Seides?

  What did you see as the strengths and drawbacks of investing directly across asset classes in a seat like that compared to Harvard portfolio of managers?

• 27:54Speaker 00

  It comes back to where I kind of true north in terms of domain expertise. My view is be the best or partner with the best, but have the humility to know which bucket you're in. If you're going to invest directly, you better be the best. It's so competitive out there. The flaws in many family offices, they don't hire the teams. If you're going to focus on direct investing in an area like private equity, in a sector like manufacturing, you better hire a world-class team who's got a real edge, experience, top quartile track record, have the team that can execute and deliver really outstanding returns. Otherwise, you're a tourist investor or worse. And you're showing up, you're looking at things in different sectors, and you're taking risks you don't really understand.

• 28:37Speaker 00

  And many family offices who do direct, some do it well, some rely on less capable teams to do a direct investing. That's where you set yourself up to fail.

• 28:49Ted Seides?

  Now, you have another seat where by all intents and purposes, you could imagine you thought you were going to be there forever too. What led you to end up coming over to SES?

• 28:59Speaker 00

  Back to my teamwork. That to me is so central. I've never been someone who felt like I have all the answers. In the family office construct, I felt we weren't prepared to partner with the best. In many family offices, there aren't enough checks and balances on the decision-making process. The family calls the shot. That leads to suboptimal decision-making. Back to the view of, I want a team to make the best decisions. Those with the most expertise on my team, I want them leaning in, helping to drive that. Often, always, the family has the head size view on those things. In some cases, you may want to invest directly, but in many cases, you really want to partner.

• 29:34Ted Seides?

  When you were thinking about bringing together the best of what you saw at a place like Harvard, the best of what you saw at a big family office, what were the most important principles that you encapsulated that you wanted to bring to the table at SES?

• 29:49Speaker 00

  The opportunity to truly partner with. leading investors playing hockey. I like to play with the best. It makes you a lot better. I ' ll be partnered with the best.

• 29:57Speaker 00

  alignment ' s really important to me. I want to be aligned with everyone around me in terms of from a team standpoint, but also from a capital standpoint. I ' m not trying to pitch you something that I do well, you don ' t do well. I also think if you ' re going to try to optimize a platform, you need enough scale to matter where you can write real checks, to drive terms in some cases, drive structure in some cases, lead to co- invest in some cases. It ' s important to me to not be so big that you can ' t do the small nimble nichey things. We ' re all victims of our past or beneficiaries of our past. Being in platforms like HMC, which was thirty, forty billion was there, thirty to a hundred is the sweet spot where you can have enough capital to matter. But if a five or ten million dollar opportunity comes up that ' s compelling, you still have the ability to do that. It was really around those things.

• 30:43Speaker 00

  The last piece, which is perhaps the most important piece, team. You need a great team. If you want to be a leading investor and you want to try to do something that you are proud of, it helps to be surrounded by a great team.

• 30:56Ted Seides?

  As you came into SCS, I ' m gonna take a step back and talk about the history of the firm and where it was to the point where you joined a couple years ago.

• 31:04Speaker 00

  Like so many things alive, I could take zero credit for the success of this firm, but I ' m good at picking partners and teams. The firm had started over twenty years ago. Pete Mattoon, Tony Abbiati, Doug Adeli, great group of folks had come from the traditional model, Goldman, Morgan Stanley, and just didn ' t believe in the model. They thought, if this was my money, working with ultra high net worth folks, families, how would I do it? They built a model based on alignment. We ' re not trying to pitch a stuff. We ' re going to think in your best interest. We ' re going to provide the scaffolding for a family office, real reporting, balance sheet reporting, everything, all the estate trust, tax management, getting beyond our wealth planning, education around for your kids. What many people failed to do and really didn ' t invest in was the investment side of that.

• 31:50Speaker 00

  So how do you build a compelling investment platform for these families? You have three legs of the stool. You ' ve got the scaffolding of family office. You ' ve got the estate planning and wealth management and the investment side. That was the vision. They started with one client and then over time built it to when I joined, I believe we were thirty five billion and have grown since then. That was the foundation of the firm, alignment and to try to deliver all three legs of the stool to families in a aligned way.

• 32:19Ted Seides?

  And what did you see as your role as you were coming in?

• 32:22Speaker 00

  To take a platform that I liked and I was an investor before I became an employee. I worked on a number of investment candidates, one of those, we chose SCS. That was when I was working for the Johnsons, three and a half years before, where I saw what was here and was impressed. Coming in was to take what was here, Pierre Lockley built the private thing. He's done a great job building this private platform. Steve Perry runs Publix. He is a gifted investor and I love working with him. My view was, what I bring is the best of family offices, the best of endowments, to bring some of that learning to help continue to evolve this platform. So the things that I could do in the family office world, in terms of partnering with other family offices,

• 33:03Speaker 00

  that are only for the multi-billion dollar families, that I can now access. I love this platform. Hopefully, I can make it better and bring all the mistakes I've made and all the learning I've had to help evolve it.

• 33:19Ted Seides?

  So we pull the thread on the investment side. How did you think about the building blocks of asset allocation model and how you wanted to implement?

• 33:29Speaker 00

  This was my last chapter. I spent a lot of time on this, making sure we were like-minded, because the last thing you want to come into an organization and be like, okay, we're ripping this thing up. I wouldn't have joined if I didn't believe in it, but two examples of things that were really important, that are probably the two most important building blocks. Public equities here, we are largely tax managed passive. I work for the Johnson family, so I know active very well. Was lucky to lead the public markets team at HMC too, so I've been around the sector. I have become increasingly concerned about the consistency and the opportunity to generate alpha. Fundamentally, in low dispersion asset classes, like public equity is, the beta is very attractive. I'd still believe there's alpha out there, but we're 70% tax managed passive.

• 34:12Speaker 00

  And if you can generate 100 to 200 basis points of tax alpha, and there are now extension strategies that build upon that, if you're thoughtful about it and don't put too much leverage on it, there's effectively some tax alpha that you get for free. The consistency of that is a foundational piece in public equities. Around the margin, are there some gifted public investors? There sure are, generally in less efficient parts of the market. It could be small mid-cap, it could be Europe, it could be Asia. That really became foundational. Where there's dispersion, you go active. Where there's low dispersion, like public equity, you go passive. Contrast that, private equity, high dispersion.

• 34:47Speaker 00

  And given my history with HMC and being a private equity, there you're active. You lean in trying to find the alpha in the best managers in the world. Because what you get, as we all know, for being top quartile in the outperformance that exists there is worth it. When you think about the implementation here and you think about the two biggest asset classes of public equity and private equity, couldn't be more different in terms of the implementation. That was important to me as a foundational piece.

• 35:15Ted Seides?

  On the public side, so that 30%, that's an active. Given the high bar, because you can generate that tax alpha on the passive side, how do you think about the duration of time where you're trying to measure sufficient alpha that you're willing to pay the fees for an active manager?

• 35:34Speaker 00

  It's clearly a multi-year period. We're very lucky being able to access world-class managers. We write big enough checks to matter. So you get mindshare, you get opportunity. Then underwriting ends up being back to this piece about just spending the time, understanding what is unique about that manager. Track record, team, their process. The investment process is what you're underwriting. So many times, though, people change and evolve the process, whether it's public or private. And when that happens, you're re-underwriting a whole new strategy or a whole new manager. Having managers who stick to what they do really well, inner discipline around that, and have a humility around it too is really important.

• 36:15Ted Seides?

  On the private side, I'd love to pick your brain on co-investing. You started as a direct investor. You saw some of that as a rebuild at Harvard, Fidelity. What works and what doesn't in a co-investment program, particularly in private equity?

• 36:29Speaker 00

  Foundationally, at Harvard, you had the benefit of all the history, all the co-investments that had been done within Harvard's history and across multi-asset classes. The track record was compelling. That led us to do a lot more work as we were rebuilding and lean into it. If you take the mean return in most vintage years from a Cambridge associate's and you back out fee and carry, that's top quartile. I term that structural alpha. If you are smart and thoughtful, partner with mean GPs, do mean co-investments.

• 37:00Speaker 00

  Absent fee and carry, your top quartile. That's the foundational piece, number one. The math is working for you. Then you get into the selection within that. I have a 10-point checklist around co-investing. It starts with a GP. Who the GP is and is this sector where they have true domain expertise? Some GPs are in four sectors. They're great in one or two, but not always great in three or four. Then it gets to the partner. Is the partner a true alpha generator? Not every partner in every private equity firm is created equal. Some are truly gifted investors and some are more beta investors. Trying to align yourself with those truly gifted investors who are leading the transactions in the sector where they have true domain expertise. You want this sector in the industry to be wind at your back. But then you continue to roll through.

• 37:45Speaker 00

  Not far down that list further is alignment. You've got to be aligned. If a co-invest comes to us and the GP's putting in a small check and looking for us to put in a bigger check than them, that's not happening. If it doesn't work, I want it to be a lot more painful for them than it is for us. That's not rocket science, but through the tool of all these sectors investing, you want to be aligned with smart people. It could be a great deal. If I'm not the expert, I'm insecure about not knowing what I don't know. Then if I don't have alignment, I'm worried about if this doesn't work, who's going to be working this deal? That part is really important. The next part is giving people a quick answer. If it's going to be a no, give them a quick no. Don't drag things out.

• 38:26Ted Seides?

  What are some of the other more subtle points on your checklist?

• 38:29Speaker 00

  The structure is important. The size of the deal is more subtle in the size of the opportunity. If you think back when co-investing became big in the late 2000s, all of a sudden it became anchored with a lot of big deals. Big GPs doing big deals and leading to co-invest. The bigger the deal, the less excitement about co-investing. Is it a beta deal? Number one. Two, with that, finding those managers who are doing smaller deals, who give you the opportunity to co-invest. That generally means it's a smaller fund. Then it becomes manipulating that what's a meaningful check to them and what's going to be the check to us. Deal size is underappreciated. I'm a believer that the alpha is in the smaller end of the market. Mid-cap, small-cap, micro-cap funds.

• 39:14Speaker 00

  If you're going to try to pursue alpha in co-investing, that's where your co-investments should sit.

• 39:19Ted Seides?

  How do you think about the co-investment opportunity as a factor in underwriting a manager that you want to partner with?

• 39:28Speaker 00

  It is one of the gifts of co-investing. Having been a GP as well, I've seen so many GPs and how they underwrite deals. You learn so much about who's really gifted in terms of what they see, what they think, the optionality that may be embedded, the catalyst for outsized returns. That part of it is incredibly informative of getting in the trenches. The point of co-investing is not to re-underwrite the deal. It's to benefit from what they're doing. But what they've done and how they share is incredibly informative to let you know about how deep they are, how knowledgeable, what their edge is.

• 40:06Ted Seides?

  How do you think through the chicken and egg of to use a co-investment opportunity to get to know the manager? Or do you have the relationship with the manager so that you can understand them better through the co-investment opportunity?

• 40:17Speaker 00

  Now we'll look at co-investments where we're not an investor in the GP. Historically, we had been limited to the GP. We've broadened that aperture because you can see deals outside of your existing GP universe that it becomes too limiting. That being said, the bar is the same. It is a GP that you would love to partner with. In that GP, it could be a family office, someone who's got true domain expertise, that your conviction in them is very high as a lead investor and they are really compelling. That is still the bar.

• 40:44Ted Seides?

  Both tax-efficient passive investing in the public markets and then co-invest in the private markets. You describe a form of structural alpha or getting at excess return. I'm wondering if there are other aspects of structural alpha that you've identified in your investing?

• 40:59Speaker 00

  Be a great LP. Pick great managers. Not easy, but hopefully you do it really well. You can be top quartile. Number two, the co-investing that I described, structural alpha. Number three, we do a bunch of this, which is seeding emerging managers, helping to launch emerging managers. 20% of each of our platforms that we raise every two years are emerging managers. If you're going to lean in and do that, why not own a piece of it? You can't do that with a $10 million check. But if you have a manager who's going to spin out of somewhere, you can de-risk it. And we in an endowment, maybe another family office show up with 150 million bucks. And they're going to raise 250 or 300 and we're going to help them with introductions. At that point, can you own a piece of the GP for that value add? I'm hesitant to make that a strategy where we're going to do eight seeds

• 41:44Speaker 00

  or we're going to do eight of these because I think that's more bespoke. If an opportunity comes up, many talented emerging GPs don't need that. They can raise the money on their own. You don't want to have the adverse selection. But where are those things aligned? You can de-risk it and you can own a piece of the GP going forward. That is where you can find more structural alpha.

• 42:04Ted Seides?

  Under the lens of partnering with the best, what are some of the things that you've found that help you identify the best compared to someone that is good or maybe even great?

• 42:17Speaker 00

  The math piece, which is statistically significant sample size. You better be doing this for a period of time and it's very hard adventure. There are many Mike Moritzes out there. You start there with a great track record, but then you come down to the other piece. Integrity to me is so important. These are partnerships that are going to be long term. It's a little bit like getting married. It's a long-term relationship in private equity or hopefully within public markets. You're going to be invested for 15, 20 years. The integrity of the firm, the quality of the people of the firm, the culture of the firm are all those things that are part of the mosaic that you need to build. At the end of the day, it comes back to domain expertise, proven ability to capture inefficiencies, understanding investment process wise, how you get to that.

• 43:02Speaker 00

  One of the challenges for me had been, okay, a GP has a $5 million fund. They do great and they're focusing on two sectors. Now they're in hot demand. Next thing you know, it's a billion 250. Now you're underwriting something very different, fishing in a different sized pond, writing bigger checks. They're going to add a sector. They're going to add more people. Now what you're underwriting is something very different than when you underwrote before.

• 43:28Speaker 00

  With GPs who rationalize raising more money without being intellectually honest about it is a first indication that you should be thinking about heading for the exit.

• 43:40Ted Seides?

  When you put that lens on how to organize the team to your operations here, I'd love to hear, based on all of what you've seen in managers and the organizations you've worked with, how you thought about optimally organizing the investment effort at SCS?

• 43:56Speaker 00

  I tell a lot of the young men and women who I mentor, you need to think about your career like an investment. It's the most important investment you're going to make. Be thoughtful about every step along your career. Create optionality. I did a lot of work before joining, so I knew the team. But I am a believer in domain expertise. You can't tell the GP you went to my expertise and then not walk the walk. Domain expertise really matters. From a structure here, we have 11 folks on our private investment team. We have 10 on our public markets team. Within privates, we've got folks who focus on venture. We have folks who focus on buyouts. We have folks who focus on more of an opportunistic bucket and then real assets. Public equity is very similar. Domain expertise wins. So structurally here, we are focused around that. Pattern recognition wise, when a new equity

• 44:40Speaker 00

  long short manager comes in, I want our team, who has seen every equity long short manager for the last 15 years, to be looking at that. Now, we all need to evolve because things change, times change. You need to be thoughtful about that. But I want that depth of knowledge and expertise. I want to be like the GPs we back, where we have an hedge. We can capture the inefficiency. That's structurally how we're organized, to make sure that we're making the best decisions we can make. It doesn't mean they're all going to be right, but the best decisions we can make with the most information.

• 45:15Ted Seides?

  When you have someone on your team that's the most knowledgeable about long, short equity or venture capital, how do you bring in enough insight so that it is a team and you're getting the best of the insights that everybody has and not just that one person?

• 45:32Ted Seides?

  Marching orders say, yeah, they want that manager because they know the most. And that's the manager should make in the portfolio.

• 45:37Speaker 00

  Such a great balance. You need to have a culture of people who want other opinions. The most knowledgeable person may have the strongest voice. It's the flaw in family offices where the system of checks and balances isn't there to try to optimize the decision. There has to be healthy debate around all of it. If people aren't pushing me on things that I'm supporting, I start worrying about a waste second. What are we missing? The senior members of the team have a bigger voice, but you need to have the checks and balances. I'm a big believer in investment committee and non-investment committee of one. Finding the environment where you can really encourage debate is important in making the best decisions.

• 46:17Ted Seides?

  Over the course of a week, month, quarter, whatever the rate cadence is, how have you set up the team specifically? And what meetings you have that lead from initial research on an opportunity to a decision?

• 46:30Speaker 00

  The way our privates team works is that we have two meetings a week. There, the flow is so significant. Looking at funded sponsors, search funds, trying to canvas that part of the universe as well. There's a lot of flow in addition to the larger and existing managers. Then the co-invest piece, we've got to be connected. We have two meetings a week. Those meetings are an hour, hour and a half. In that way, you stay connected. The public's team meets once a week. From a process standpoint, that is where the flow happens. Oh, I had a good meeting last week with so and so. We should put them on our list. They go on our list of something that we're serious about. Who drops off that list? Because what you want is a capacity constrained environment for investing. I want it with my GPs.

• 47:15Speaker 00

  I want it for us where you're having to make hard decisions about what GPs you're backing in the equity long short space, private space, co-investment space. The only way to do that is with. Constant communication in the meetings vetting this. At the same time, it's important that the team is out there meeting everybody. That's where it all starts. Sourcing to me, whether you're GP or LP, too few LPs take the GP mindset. As an LP, you better have a GP mindset and you better source. You better be out there finding opportunities. Peter Lackalade, that's what he's done. He's gifted at building relationships and he's built relationships with some of the best investors in private equity. Because he's gifted at sourcing, he's gifted in relationships. He loves these people in many ways.

• 47:59Speaker 00

  That's his gift. For each of the team, you take 11 people on a private team and they're all out there networking, sourcing. You're going to see a lot of really interesting things.

• 48:08Ted Seides?

  So when you have a team that sees a lot that they like, how do you roll it up into your portfolio?

• 48:13Speaker 00

  It's an enjoyable process because it just ends up being best ideas. There are times where you do think about sizing, where you really love something, but you don't have much space. So you may size it down back to having enough capital battered and not so much that you can't do small things. Ends up being one of getting the best expression that you can in the portfolio. Those discussions I find are some of the most enjoyable discussions. You've got good manager A and really good manager B. How do they fit? Now, sometimes there's an exposure piece because we're very conscious about how much tech do we have? How much healthcare? Where are we in terms of buyout, growth equity venture? In our independent return bucket, how much equity long, short do we have? That ends up being foundational.

• 48:56Speaker 00

  The ultimate ends up being the expression of trying to find the best managers.

• 48:59Ted Seides?

  Using the lens you mentioned earlier of the importance of sector, getting the trends right. I'd love to ask you about your opinion of where we are in the private markets. How are you looking at the opportunity set in private equity today?

• 49:14Speaker 00

  I am still a private equity bull. Inefficiencies continue to exist there that are much harder to find in the public markets. From a math standpoint, if you look back over any 10 year rolling period, privates have performed publics by 580 basis points. Over three year rolling periods, 500 basis points. This last three years is one of the rare three year cycles that hasn't. It's been an extraordinary period. When you look at private equity, all the managers that we get to meet, the fund sponsors, the emerging managers. There are lots of inefficiencies out there. There are hundreds of thousands of companies that exist in various parts of this economy.

• 49:50Speaker 00

  In that inefficiencies exist, that is where the alpha is in private markets. And the question is, how do you access it? On the bigger side, there's some real challenges. As a sector, private equity needs to give money back to folks. The DPI is not great. One other byproduct of co-investing is, from a Jaker standpoint and velocity of capital standpoint, co-investing is more attractive. You don't have to go through a fund investment cycle. Private equity at the higher end, there's just some real challenges in terms of getting capital back overall. I don't think there are as many efficiencies there. There's now this democratization of alts that I have real questions about in certain asset classes, particularly private equity and the expression of it in public markets.

• 50:35Speaker 00

  I'm a believer that inefficiencies will continue to exist in the lower end of the market. Now, I think venture is slightly different in that there are those handful of larger funds, cross-sour funds, who continue to access many of the leading companies. With that becomes more franchise value, I believe, in venture than in the buyout space. Some of those firms that are bigger, I still believe, have an opportunity to perform, given their access to the leading companies, whether it's OpenAI, Anthropic, Cognition. There's more opportunity for the larger venture funds, frankly, to continue to perform than on the buyout side.

• 51:06Ted Seides?

  So as opposed to Harvard or Johnson Family Office, you come to SES is part of a business. The private wealth business has become really dynamic. Would just love to get your sense of how you think, from a competitive perspective, both on the investment side and on the business side, where you fit in with the dynamics that are playing out.

• 51:27Speaker 00

  It's been fascinating. I spent the first 13 years where we needed investors, then HMC and working for Fidelity, where you didn't need money. Now, being back in an environment where you're raising money has been an interesting change, and I've really enjoyed it. This is a great business, the RIA business in itself. We're slightly different here at SES because we focus on family offices. Our average client is $100 million. With that, they have the ultimate advantage of duration of capital, so we can lean into alts. Not many folks are in our category. So let's separate us for a moment where we do something very different from an investment standpoint. The broader market In some ways, it's similar to fidelity. You start at the beginning of the year with a business that with just market growth on average,

• 52:12Speaker 00

  you're going to be up four to five percent per year, assuming fixed income is part of that equation. Maybe it's five or six. So your organic growth is just five, six percent before you do anything. There'll be corrections over long periods of time. Number two, you add clients. That's highly accretive. Number three, you go inorganic and do M and A. Now you've got a business that you can grow without doing anything too heroic. Call it 10 to 20%, depending on how you're doing top line. Very attractive. Now you get the operating leverage in the business, which is a low capital intensity, high free cash flowing business. You're converting a lot of those growth dollars into free cash flow dollars. Hence, private equity was late to this game. Now there are over, I think, 60 private equity backed rollups in the RIA space.

• 52:57Speaker 00

  It's a great business. People have figured it out. Then the question becomes, within that morass, how do you differentiate?

• 53:03Ted Seides?

  How do you think about differentiating?

• 53:05Speaker 00

  For us, it's easy because we differentiate in the alts, in private equity, in the expression of publics, but even independent return. We view it as a fixed income replacement because it's not particularly tax efficient, nor is fixed income. Therefore, we try and construct a portfolio that has a low beta to public equities of point two, point three. There's multi-strat in that. There's equity long, short, but a certain flavors to rightly construct something that is highly uncorrelated. That is where you can really differentiate. If you're doing 60, 40, 70, 30, the democratization of alts is what you're delivering to the masses. That is hard to differentiate from an investment standpoint. You have to have good relationships and sticky relationship with clients.

• 53:46Speaker 00

  Get this end of the market, you can differentiate much more from an overall relationship standpoint, the value you can bring to families and certainly from an investment standpoint.

• 53:55Ted Seides?

  When you put the whole package together, the investment side, the other two pieces of the stool, how do SES's loyal clients describe SES?

• 54:05Speaker 00

  They start with aligned, the foundation of the firm. They also really value the relationships with the client facing folks. Number three is the investment platform. We're so lucky here. Many of our clients are GPs, public, private. I love the conversations I get to have with us folks around investing. I learn every time I have the conversation. Those are the pieces that for our clients, they would highlight.

• 54:32Ted Seides?

  As you came in, To be the CIO, as you said, the last chapter of your career is part of a succession from the original founders. What have you learned about succession that you use as a lens to evaluate money managers?

• 54:47Speaker 00

  Steve Orstaglio, who's a CIO before me, extraordinary person. He did a great job and I'm so grateful for all the things he did. Then when I joined the Johnson family, Ned Johnson had done a lot. Stepping into a platform that he built was daunting. He is one of the greatest entrepreneurs of the generation. Fidelity is one of the greatest businesses created. They're a wonderful family. So that was daunting. This was less daunting, but very enjoyable. Once you become a big machine, the big Apollos, Blackstones, Goldmans, those are machines. More in the boutique area, which I describe as, is more important. Certainly in the private equity realm, the succession of the leadership and ownership. I've seen that handled really well and really poorly.

• 55:32Speaker 00

  The most important thing for succession to be handled well is having founders who along the way share more than they should. Too many founders think it's them, it's ego, it's frankly hubris at times, and they think it's all about them. I have a relationship with the LPs. I'm the one who raises money. I'm the one who built the track record. Now, if you want to have an enduring business, you evolve from being an investment shop to a franchise, you better build a culture, a team, and a capability, but it starts with attracting and retaining the best talent, and that is by sharing more than you probably need to.

• 56:04Ted Seides?

  As you joined in an asset size that feels like it's within that sweet spot for what you found, how do you think about the growth of the business over the next bunch of years?

• 56:14Speaker 00

  It's something our clients ask us about a lot and certainly very mindful of the growth because you want enough capital matter, but not so much you can't do the nimble, nichey things. We're not going to be doing a lot of M and A within our platform, but we will grow organically. I feel we've got a bunch of room to run. In some cases, there are benefits and there are concerns. On the concern side, it is, can you keep doing the small managers? Can you still write a $10,000 check into a great funded sponsor who came out of Summit Partners, who you think is world-class and has a great deal? You want to be able to do that and not get so big you can't. On the good news side... Things like seeding GPs. If you believe in someone, you'd write a check as an LP. If you write a bigger check and can own a piece of the GP, you have the option to do that.

• 56:57Speaker 00

  You have the opportunity to lean into some deals that you really believe in. An area like oil and gas can be chunkier where you can write more meaningful co-investments. It allows you more flexibility. Writing a little bigger check in some cases creates a little bit better access, but you need to balance those two. So it's imperfect. We can rationalize everything. You need to be intellectually honest about that. There are trade offs to getting bigger and hopefully we'll do it at a pace that is consistent with allowing us to make really good decisions. But if we're $200 billion in three years, that would be a shock to me.

• 57:28Ted Seides?

  In the time you've been here, what have been the biggest upside surprises and the biggest challenges that you might not have foreseen?

• 57:35Speaker 00

  Biggest upside surprises, access. I came from HMC. I had breakfast with Charlie Munger at his home in LA. SCS, I knew about the platform, I knew about the portfolio, I knew about the managers. But the access to co-investments in particular has so vastly exceeded my expectations. That's been fun. I think it's interesting when you have clients who have a lot of money, how responsive they are to the public market. Now, one of the benefits of having a diversified portfolio is you're not 70/30. You're not 70% in, so the market's down 20 on a certain day in April. It is fascinating that when you have the benefit of duration of capital, people still worry very much about the short term. Part of my job is to continue to

• 58:18Speaker 00

  provide guidance and comfort to people that we're thinking about the long term here. We're not traders, we're investors. We're not macro driven, we're macro aware. Trying to optimize for the long term. It's important to think about that. Don't react to short term swings. If anything, marginally lean into that. What we do is bring one tranche forward if you're dollar cost averaging into publics. It's not trying to turn too many dials or be too tactical. It's really to be more strategic.

• 58:48Ted Seides?

  Leanne, before I let you go, I want to make sure I get a chance to ask you a couple of fun closing questions. Before we get to the closing questions, I want to tell you about one of our strategic investments. We've made a few and each are working on a product or service we think will be valuable to our community. One is Oldwell Labs, or OWL. OWL is the very best software I've seen for allocators to find and track managers, and I've seen a lot of them. Trust me, it'll be worth the look. There's a link in the show notes so you can learn more. And here are those closing questions. What is your favorite hobby or activity outside of work and family?

• 59:24Speaker 00

  I love working hard because I love pushing myself. If my daughter and I are going for a bike ride, which we do every Sunday in the summer in the Cape, we're going from where we live in Westfalmouth to Woods Hole, and we tie. All my kids are wired the same way. If I go on Peloton, I can't help but chase the leaderboard. I love to play hockey. I get to play hockey with people who are my age, and these days with people who are younger, which is quite humbling. I love the competition. I love working hard. I love pushing myself. These days, when I play with the young guys, I may only make one good play during the course of the skate, but it's fun.

• 59:56Ted Seides?

  What was your first paid job and what'd you learn from it?

• 59:59Speaker 00

  My first real paid job was caddying. My parents are from Nova Scotia, Canada, a very small town. My dad loved to golf, so grew up golfing. They did have a caddy program. This is like a public course. For tournaments, we'd all caddie the young. I got put on a bag of someone who everyone scared me to death. They're like, "He's mean." Last year, didn't even pay the person who caddied for him. I caddied for him. Turns out, he was a nice person. Number one, reputation doesn't always hold. Number two, if you're polite, thoughtful, respectful, and work hard, it generally works out. My parents instilled, like, great values. I came away from that. He ended up giving me a good tip, and I ended up staying connected with him and seeing him around the course thereafter. I went from being afraid of him to, like, really looking forward.

• 1:00:43Speaker 00

  That was a great lesson, where I learned, don't judge a book by its cover. Don't listen to everybody.

• 1:00:48Ted Seides?

  What's the best advice you've ever received?

• 1:00:51Speaker 00

  My parents instilled in this and lived it. Education is the greatest gift you can give a child. That was number one, and they lived it. My dad went to school for 14 summers to get his undergraduate degree. My mom was a registered nurse, did not have the opportunity to pursue a traditional education. They almost overvalued education, but viewed it as the greatest gift. Hence, when I had the opportunity to go to Harvard, they leaned in. The second thing was humility. One comment has always stayed with me. If you need to tell someone how good you are, you're probably not that good. That's something that resonated. People don't want to give you your resume all the time.

• 1:01:22Ted Seides?

  How's your life turned out differently from how you expected it to?

• 1:01:26Speaker 00

  I never thought I'd have a career in finance. I feel so lucky every day professionally. I do something that I really enjoy and love, my family and friends. It's been a great ride. I feel blessed that I've lived a life that I never thought was possible.

• 1:01:41Ted Seides?

  Elaine, last one, if the next five years are a chapter in your life, what's that chapter about?

• 1:01:45Speaker 00

  Start with the kids as always. I've got two kids who are still playing college sports, one who's launched, but continuing for the next five years, I like to stay engaged with them, get to every game I can. Seeing them get launched is number one. Number two is for this last chapter, having the opportunity to build something that I'm really proud of. I didn't really feel like I could do it Harvard or in the family office space. Something that I feel is back to one of those enduring foundational platforms. That is going to be important. The last piece for me in the next five is making sure we have time for friends. We get so busy in life, you focus on family, career, but making sure we have time for friends. As time goes by, my parents are getting older, you're seeing death happen.

• 1:02:28Speaker 00

  It goes by fast, so trying to enjoy that time on all friends.

• 1:02:32Ted Seides?

  Elaine, thanks so much for sharing your wisdom across these incredible experiences you've had.

• 1:02:36Speaker 00

  Ted, such a pleasure to be with you today. Thank you.

• 1:02:39Ted Seides?

  Thanks for listening to the show. If you like what you heard, hop on our website at capitalallocators.com where you can access past shows, join our mailing list and sign up for premium content. Have a good one and see you next time.

• 1:02:54Speaker 02

  All opinions expressed by Ted and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions in securities discussed on this podcast. All investments include various risks, including loss of capital. This recording also contains certain forward-looking statements that reflect the participants' current views with respect to certain current and future events. These forward-looking statements are and will be subject to many risks, which may cause future events to be Be materially different from those forward-looking statements or anything implied therein.

• 1:03:37Speaker 02

  Forward-looking statements that reference past trends or activities should not be taken as a representation that such trends or activities will necessarily continue in the future. Any forward-looking statement in this transcript are based upon information available to the participants on the date of this recording and are not expected to be updated or revised, even if experience or future changes.