Homegrown CIO at Williams College - Abigail Wattley (EP.507)

Abigail Wattley is the Chief Investment Officer of Williams College, where she oversees the school's $4.5 billion endowment. She became CIO three years ago upon the retirement of Collette Chilton, whose past conversation is replayed in the feed. Abigail has spent two decades in the Williams investment office, and her tenure manifests the benefits of duration and institutional knowledge in the seat. Our conversation traces Abigail's nearly twenty-year journey inside the Williams Investment Office, from joining as an early analyst to becoming the internal successor CIO. We discuss the consistent mandate throughout alongside Abigail's evolution from analyst to deputy to decision-maker, including the knowledge retained as an internal candidate, the tension between respecting an institution's history and putting her own stamp on the portfolio, and perspectives on hedge funds, private markets, liquidity management, real assets, team development, and AI. 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/) 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

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

• 0:00Speaker 00

  We've been clear eyed about what our strategy is since day one, and that hasn't changed. By having an internal candidate become the CIO, we can stay laser focused on what it is that we're here to do. There was no time wasted or lost repointing the ship. That is a huge benefit. I also, coming into the role, knew the portfolio, especially some of our longstanding relationships, the role that they played, the value that they added, the fact that those were not going to change anytime soon. Having some clear things that we weren't going to be changing was very valuable.

• 0:41Speaker 00

  On the flip side, there were a couple of new people that joined as I became CIO. One of the things that is powerful right now about our team is that we have a lot of people that bring different experience with them from other investment offices. We understand and respect the history of the portfolio, why we've been able to generate the returns that we have over time, what's important to stay focused on. And yet, we're not stagnant in the work that we're doing. That pairing is important. And one of the things that's been very fun for me in having this team is the ability to learn from them, to draw from them the best practices

• 1:23Speaker 00

  that they bring to the table from the different places that they have all worked.

• 1:33Ted Seides?

  I'm Ted Seides, and this is Capital Allocators. My guest on today's show is Abigail Wattley, the Chief Investment Officer of Williams College, where she oversees the school's $4.5 billion endowment. She became CIO three years ago upon the retirement of Collette Chilton, whose past conversation is replayed in the feed. Abigail has spent two decades in the Williams Investment Office, and her tenure manifests the benefits of duration and institutional knowledge in the seat. Our conversation traces Abigail's nearly 20-year journey inside the Williams Investment Office, from joining as an early analyst to becoming the internal successor CIO.

• 2:18Ted Seides?

  We discuss the consistent mandate throughout alongside Abigail's evolution from analyst to deputy to decision maker, including the knowledge retained as an internal candidate, the tension between respecting an institution's history and putting her own stamp on the portfolio, and perspectives on hedge funds, private markets, liquidity management, real assets, team development, and AI. Before we get going, it's graduation season. Commencement speeches are everywhere, and I like tracking some of the best. I highly recommend country singer Eric Church's address to University of North Carolina this year. The good ones tend to converge on the same ideas.

• 3:01Ted Seides?

  Stay curious, find mentors, be true to yourself, remember who got you here, and keep learning long after the classroom empties. It's solid advice, but it's not always easy to act on, because once your diploma's at hand, the structure disappears and the responsibility to build your own curriculum falls entirely on you. So for all those new grads going into finance, I've had the privilege of assembling a continuing education program for investors, available whenever they have an hour and a commute or a workout. So if you know someone just starting out, graduation season is a great excuse to forward an episode or a Spotify playlist. Consider it a gift that doesn't require a credit card.

• 3:45Ted Seides?

  Thanks so much 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. It draws on over 500 million premium sources, including broker research, expert transcripts, company filings, and earnings calls, and keeps working long after you've gone home for the day.

• 4:27Ted Seides?

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• 5:08Ted Seides?

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• 5:50Ted Seides?

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• 6:35Ted Seides?

  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 Abigail Watley.

• 7:14Ted Seides?

  Abigail, thanks so much for joining me.

• 7:16Speaker 00

  So great to be with you today. Thanks Ted.

• 7:19Ted Seides?

  I would love you to take me through the highlights of your career.

• 7:23Speaker 00

  I graduated from Williams in 2005. From there, was very lucky to get a position at Cambridge Associates. I had gotten interested in the economics of higher education. As a senior in college, I was fortunate to get to take a tutorial with our then president of the college, Morty Shapiro. He was an economist. That opened my eyes to this whole world of higher education and finance. That's what interested me in going to Cambridge Associates. I was there for two years. Right place, right time. I was fortunate to be a very junior analyst that happened to be staffed on the Williams account. It happened to overlap with the period of time

• 8:04Speaker 00

  where the college had made a choice to hire its first dedicated chief investment officer, Let Chilton. When she came on board, I started working closely with her. She didn't have much of a team at the time. If you've listened to her podcast, there was a joke about her having a computer and a phone and not much else. When she finally had office space in spring of 2007, I ended up joining her here at the Williams Investment Office. Been here ever since, except for a two-year break for business school.

• 8:33Ted Seides?

  Take me through 20 years of growth inside the office. What you knew, what you came to learn along the way about the investment process, researching managers, everything.

• 8:47Speaker 00

  It's a tremendous amount of growth, both for me personally, as well as for our portfolio and what it is that we do today. When we first got here back in 2007, the history of the office prior to that was everything was managed by a volunteer committee. Early on, one of the things that we did was to put in place a policy portfolio. There were a lot of manager decisions that we had to go through. Being here, even as an analyst early on, was such an eye-opening experience. We did everything from a $400 million transition from a separately managed account that we had to stuffing the FedEx envelopes and everything in between. I remember setting up a lot of the performance reports.

• 9:31Speaker 00

  Some of them we still use today. Sometimes people will say to me, this is how this report works. And I just chuckle and say, yep, I'm sure it works still exactly the same. I know what the ins and outs are. We have continued to develop as an investment organization so much during that time. When we first started, it was 1.3 billion. Today, we're about 4.5 billion in assets. We've accrued a lot of knowledge about what works for the portfolio. We've made mistakes, but we've also made good decisions along the way.

• 10:03Ted Seides?

  If you look at your first couple of years and just take the unit of researching a manager, thinking about a decision, what did you know or not know that you learned in the next phase?

• 10:19Speaker 00

  I didn't know a lot early on. I was here for a year before I went to business school. I came back to the investment office in 2010. I remember sitting down with Colette. I'd gone out to lunch with her. It was my second year of business school. I had a couple of job offers and I was sitting down to ask her advice about which one I might take. She said, well, I'd really like for you to come back to the investment office. Would you consider? Consider doing that. I said, yes, I'd love to. She said, okay, why don't you write the job description for the job that you'd like to do and then we'll talk about it. I remember going home and writing that job description. There were three key things that were on that job description. One was I wanted to own asset classes. Two is I wanted to manage people,

• 11:04Speaker 00

  hence the analyst program. Three was I wanted to report to Colette because I knew that was going to be my opportunity to learn a lot. I think what she did was went to the two managing directors at the time, one on the marketable, one on the non-marketable side and said, which asset class do you want to give up? I like to think that I ended up with great asset classes, but I think they were basically the ones nobody wanted, which meant that I was managing investment-grade fixed income and real assets. I had not a lot of background in either of those areas of the market. Those are really technical asset classes. When you start to peel back the layers of the onion, I had a lot to learn. That was one of my greatest lessons, figuring out how

• 11:46Speaker 00

  to dive deep and learn an area of the market. It started with a lot of conferences. I remember going to a PIMCO bond bootcamp for a week. They used to run this amazing bootcamp, spent a week out in California. Bill Gross was there and they had all their senior PMs teaching us everything there was to know about bonds. That was my indoctrination into the world of fixed income. Similarly, with oil and gas, I grew up in New England, so that meant I needed to go spend a lot of time in Texas. There also was this great program at SMU. I used to call it oil and gas investing for non-petroleum engineers. It was a week-long course and it was the same thing where

• 12:27Speaker 00

  we would sit in a classroom, we would look at well reports, they would tell us what we were supposed to be looking at. I learned a ton from that. There were so many great people along the way who were established in those asset classes that helped me along. That was my first experience, how to dig in in a market, how to dig in on managers. It set me up for what I ended up doing later.

• 12:50Ted Seides?

  Once you built that technical knowledge, you'd say even in those two asset classes, and then started applying it to understanding who was good in the space, what did you come to learn about managers to get to the point where you were comfortable that you felt like you knew what you were doing?

• 13:07Speaker 00

  One of the biggest lessons that I learned is that you can teach people what they're supposed to do, but it's really hard to teach people what they're not supposed to do without them actually making the mistakes themselves. One of the things that I'm very grateful for was how long of a leash I had to figure out some of the mistakes. And that's maybe where I had the greatest lessons. One of them is when it's clear that there's something great, chances are good you should just go for it. In this business, we don't get points for difficulty. We get points for making money. You don't necessarily have to always go find

• 13:48Speaker 00

  the least discovered idea. If somebody's recommending a manager to you over and over again, for example, probably worth taking that advice and at least spending a lot of time on it. The other thing is, Real Assets was not a place where quite as many people were spending a ton of time. The managers were so generous with me and the time that they gave me. It got me comfortable sitting in a conference room for hours upon hours, constantly asking as many questions as I possibly could. They were all so patient with me. That taught me a lot, too. Those are some of my lessons is not being afraid to ask questions, to take their time when you need it. You're going to make some mistakes.

• 14:29Ted Seides?

  How did Colette work with you to allow you to make mistakes, but then not have it impact a portfolio when there aren't really that many decisions that get made?

• 14:40Speaker 00

  I would do a lot of the legwork, the sourcing, the landscaping, the networking, coming up with a short list of ideas. She always met with every single one of our managers before they went into the portfolio. She was very good. Whenever you put a manager in front of her, she would flip to immediately page 47. I don't know how she developed this instinct, but she could get to page 47 within the first five minutes and be like, this is the issue. She would come with me for those final diligence meetings. And that's where I would get a lot of feedback on, we're probably going to lean in this direction. She would, towards the end of the process, help drive the direction of where we were going. That taught me a lot.

• 15:23Ted Seides?

  How did you evolve from covering these two asset classes to broadening across the portfolio?

• 15:29Speaker 00

  The biggest next step that I took was taking over our hedge fund asset classes. Those have been important asset classes for our portfolio. We've been long-term investors in hedge funds. At the time, they might have represented 40% of the portfolio. Because I had built a little bit of a muscle around how to learn to do something new. Stepping into the complexity of long, short equity and absolute return. There's some more sensitivities. How much time you're taking with managers. I had to learn to sharpen my diligence process, which was a really good evolution. It was a different network. There were new people that I needed to talk to from the LP community as well as the GP community that expanded my horizons.

• 16:12Ted Seides?

  In the years before you took over CIO, what changed in the thinking on the investment portfolio here?

• 16:21Speaker 00

  We're in the midst of our asset allocation work right now. It's always a good opportunity to stop and reflect. I have been looking a lot at the portfolio over time. The big blocks of what we do haven't changed. There are on the margin changes that we're making every year. One of the things that has worked really well for Williams is that we've been extremely consistent in how we deploy the portfolio, what works for Williams, keeping at the center of what we do. Why is it that we're here? We're very clear-eyed about that. Our job is to earn a 5% real return, to make sure that we're doing that with the appropriate level of risk that we're taking, ensuring that we have sufficient liquidity because

• 17:06Speaker 00

  we support nearly 60% of the operating budget for the college. Yes, those numbers have changed on the margin. The percentage of the operating budget support, for example. Our goals have never changed. The way that we pursue that has remained consistent. That's a real source of strength for us.

• 17:23Ted Seides?

  How do you think about your strategy and almost your right to win as an LP? What do you bring to the table as the next LP in a fund that you're interested in investing in?

• 17:34Speaker 00

  There are a couple of different things that we will talk about with a manager when we're meeting with them and hopefully getting access to something that may be more access constrained. One is the mission that really does resonate with people. Williams is extremely generous with its financial aid program. We have no loans in our financial aid program at this point in time because of the generosity that comes from the endowment and our donors. That resonates with people. Beyond that, we manage a nice size of assets at four and a half billion. We can have a meaningful position in our portfolio without overwhelming a manager, still be meaningful partners in both directions. We have an amazing

• 18:15Speaker 00

  team here. They are smart and thoughtful. Sometimes people just like sitting across the table from them. We show up to meetings, we're prepared, we ask careful, thoughtful questions. We want to be on the same team as our managers. That approach really can resonate.

• 18:34Ted Seides?

  When it came time for Colette to retire, you've been in a seat for a long time. I'm curious what the lead up to that in your becoming the CIO looked like from your perspective?

• 18:47Speaker 00

  There are ways in which it went fast and also slow at the same time. One of my favorite preparation points, it was public that this transition was happening, probably got announced like in January or February, and Colette was retiring June 30th. We went out to California. We spent close to a week together, meeting all of our managers, anybody that I hadn't spent quite as much time with, particularly on the private side of the portfolio. She was making sure that she had done a careful, clean handoff. That opportunity to spend that time with her, now be in a place where there were questions that I could ask her that I hadn't before. Some of the anxieties that I could share with her and we could

• 19:30Speaker 00

  talk through some of those things was one of my favorite transition points. And there were a lot of different things we had to transition. Manager relationships are so important to what we do. The care and thoughtfulness in which she worked through that was really valuable.

• 19:46Ted Seides?

  In a lot of transitions we see, you don't necessarily see the internal candidate become the next CIO. I'd love to get your perspective on the value of duration. Having been here for 20 years now, becoming the CIO, what are some of the things that you think Williams has benefited from because of the duration of the team?

• 20:06Speaker 00

  We've been clear eyed about what our strategy is since day one and that hasn't changed. By having an internal candidate become the CIO, we can stay laser focused on what it is that we're here to do. There was no time wasted or lost repointing the ship. That is a huge benefit. I also, coming into the role, knew the portfolio, especially some of our longstanding relationships, the role that they played, the value that they added, the fact that those were not going to change anytime soon. Having some clear things that we weren't going to be changing was very valuable. On the flip side, there were a couple of new people that joined as

• 20:51Speaker 00

  I became CIO. One of the things that is powerful right now about our team is that we have a lot of people that bring different experience with them from other investment offices. We understand and respect the history of the portfolio, why we've been able to generate the returns that we have over time, what's important to stay focused on. And yet, we're not stagnant in the work that we're doing. That pairing is important. And one of the things that's been very fun for me in having this team is the ability to learn from them, to draw from them the best practices that they bring to the table from the different places that they have all worked.

• 21:33Ted Seides?

  What are some examples of things that were eye opening for you that other people brought in from their past experiences?

• 21:41Speaker 00

  I spent little time previously on biotech as an opportunity set. Both of the managing directors, Julia and Paul, have a lot of experience investing in that space. That was an area where, early on, they were both saying, we could lean in here, there's some interesting opportunities. They both had well-developed lists of high-quality managers that we should be speaking to. In that moment, I was the least experienced one at the table. I, in some ways, loved that because it was such an opportunity for our portfolio. We had to strike a balance of not doing too much too quickly and being careful. On the flip side, it's exciting when there's an area for us that we can go do good work.

• 22:25Speaker 00

  There's been a lot of interesting process improvements that we've been able to adapt from everybody's experiences, which has had the added benefit of helping us know our portfolio even better, know our managers better, know what we hold. This is a culture that really embraces technology. That's been wonderful to embrace that and improve things.

• 22:47Ted Seides?

  What have you done differently with the tech?

• 22:49Speaker 00

  We have better look through transparency on the portfolio at our fingertips, which is helpful when we're thinking about exposures. What do we own? What do we not own that we should own more of? We've been able to automatically download and organize all of our data from all of our different managers. We used to have probably a person and a half worth of people time doing that work. We have 350 different line items in this portfolio. You can imagine how much content gets posted to Intralinks. To not be spending time on those things is valuable because that means we're spending more time reading and analyzing than just compiling.

• 23:30Ted Seides?

  Curious if there are any other perspectives that other team members brought in about specific managers that you feel like you might have missed because you've been there for a long time?

• 23:41Speaker 00

  We have re-underwritten the entire portfolio because you have to when you have new people coming on board and taking over responsibility for asset classes. That has been humbling. Some of these were asset classes that I might have originally built up. When you look at some of these things through the eyes of another person, you do realize there are certain places where maybe you have gotten more complacent or you've let the story run a little too long. We have been making a lot of really good changes. We all come from different backgrounds, but in some ways philosophically similar backgrounds in terms of the kinds of managers we have historically gravitated to.

• 24:22Speaker 00

  Because we have such a great team here, there's safety in thinking about new things. That has allowed us to look at opportunities that we might not have historically. Things, for example, in the market neutral space or some of the more quantitative strategies, which were not historically represented in our portfolio, at least getting the comfort to say, we should know the space. We should be smart about whether or not maybe there is something to be doing here. We complement each other well enough to be willing to go do that work.

• 24:54Ted Seides?

  What are some of the things that you feel like you can't do because of a seven person investment team that you might like to if you had more resources and trying to cover the world?

• 25:07Speaker 00

  Things that we don't do right now that we've wondered, should we do more of? For example, we don't do co-invest. We don't underwrite direct investments. We're at four and a half billion. We're probably still at a scale where that's okay, but at some point in time, that may be a muscle that we need to build. Another thing we talk a lot about, but we haven't done much of is participate in the secondary market, whether it's selling pieces of our existing portfolio or buying pieces of other portfolios. That takes a lot of time and work and effort and bandwidth. That hasn't historically been part of our practice.

• 25:41Ted Seides?

  I'd love to double click on hedge funds. What do you think today about the role of hedge funds that you said at least once were 40% of what you're doing and how you're participating in that space?

• 25:52Speaker 00

  Hedge funds are no longer 40%, but they're still meaningful. Today, our target allocation across our long, short and absolute return portfolio is 27% in aggregate. We're a believer. They have been a very important part of our portfolio, not only for meeting that return objective that I mentioned. They do so while maintaining our liquidity, also helping us to manage volatility. When you're spending 5% of the portfolio every year, all three of those mandates do matter. Something that gets lost when people talk about returns, if the goal of this endowment was to just put it in a drawer and not spend from it for 10 years, you might do something

• 26:34Speaker 00

  differently than if you knew you had to draw 5% from it every year. In that context, hedge funds make a lot of sense. They've obviously gone through many different cycles and periods where they've done better or worse. This is where Williams is fortunate in that we've had these longstanding relationships. We have the confidence to see through cycles. We have some amazing manager names that have done well for the portfolio.

• 26:58Ted Seides?

  How do you think about balancing the desire for that type of return profile and the known high costs of doing business when 20 years ago, it sure looked a lot easier for hedge funds to generate what you needed for the portfolio?

• 27:13Speaker 00

  The big question is whether or not that's come back in style. If volatility is back and the ability to think about things both long and short may be back. Rates are no longer zero, so that's also helpful. We look at things net of fees. We don't think of them from a cost perspective as the fees. If net of fees, they justify a role in the portfolio, then we are happy to have them. And there is some really good talent. I know asset classes go in and out of style a lot. What you have to ask yourself in that context is, did all the talent leave suddenly? Or is this a more difficult period of time? Hedge funds is a big monolith. There's plenty of talent still. Our job is to make sure that that's what we're accessing.

• 27:59Ted Seides?

  Lot of discussion these days about private market liquidity and where people are sitting and future returns. I'd love to get your perspective on how you're thinking about that.

• 28:08Speaker 00

  We talk about it all the time as a team. We talk about it with our amazing investment committee. Because our portfolio was very cycle tested, we are comfortable waiting, being patient. From our perspective, there is no big headline change in how we're thinking about the role of private asset classes. Where it does change is our modeling as it relates to our commitment pace modeling. If the expectation is going to be that things may be less liquid for a little bit longer, do we need to modestly slow down commitments? Or think about how big those asset classes could become, stress testing some of those scenarios.

• 28:49Speaker 00

  Big picture, we're committed to the asset classes with the caveat that we're aware that timelines could be extended. And we want to be mindful about what that means from a portfolio construction perspective.

• 29:01Ted Seides?

  When you run through that math exercise, where do you come out on the other end of how much you want to reduce your commitment pacing on a run rate basis?

• 29:10Speaker 00

  It's interesting and tricky because one of the things that drives that too is how much growth do you expect from the overall pool? Even when we have pushed out, the expectation is distributions might be further out into the future. When you pair that with this is the expected growth of the pool over time, it's not as dramatic as you would think. We've seen a little bit of a decline in the venture portfolio. The model we're working on right now is telling us we still need to be stepping up commitments and buyouts, interestingly, which is a point of big discussion within the team. Do we think we have enough good assumptions in this model? The other thing I will always say is the models are guidelines. We're mindful of the fact that we are not filling buckets.

• 29:51Speaker 00

  The model may tell us we need to do $150 million of commitments this year. If we don't see opportunity that matches that level, we're just going to do it. We also try to think about things in the average over the next three years versus any one year's commitment budget. It's a moving target. We get to adjust it a lot. It's responsive to the market. The headline numbers are bigger. That is a question mark for us.

• 30:18Ted Seides?

  There's a lot of successes in the venture world that are still sitting as very large late-stage privates that filter into your portfolio. How have you thought about that group of companies that have been winners from venture investments that you don't have liquidity on today?

• 30:36Speaker 00

  This is where we're fortunate to be long-term investors. We can be really patient. For most of those companies, we agree with our venture managers that they're still compounding. Whether or not they're publicly traded, they're still great companies and we're going to benefit long-term from their continued growth. It has had an impact on our asset allocation. One of the things that we did do over the last few years was increase our target to buyouts and venture. There were a number of reasons for that. Part of it is in recognition of the fact that there are a lot of companies staying private for longer and they're going to compound in your private portfolio. What's also interesting about that is whether or not you're still getting venture-like returns on those investments. Or are they something different?

• 31:21Speaker 00

  As long as their equity returns, we're generally comfortable because most important is we want to make sure we have a significant enough weight to equity broadly defined for that growth component. But it has had some impact on both the allocation and then what your expected return might be from those asset classes.

• 31:40Ted Seides?

  How have you thought about liquidity in the context of the whole portfolio?

• 31:44Speaker 00

  We think about it so much. This is something Colette taught us very well, which is our number one purpose for being here is to support the college. Period. End of story. There is no question that that is what we need to be able to do. Not having enough liquidity is not an option. We obsess over our liquidity position, by which I mean it is one of the key topics we cover every week as part of our team meeting. We are regularly going over every line item that comes in and out of the portfolio every week. We know what the forecast is for the next 12 months for every asset class and where the dollars are going. And importantly, where the money is going to come from to support the college. We're also, as part of that, stress testing it regularly.

• 32:27Speaker 00

  We also maintain $150 million worth of lines of credit for the investment office. These are really belt and suspenders, but if we needed it, we would have a backup source of liquidity. We're fully invested. We only maintain between 1% and 2% of the portfolio in cash. That's why we have to be planful about our liquidity. That's a really important advantage long term because it means that the portfolio is in the markets and working. When you have a team of 11 people, as we do here, one of the things that we can be spending time on and thinking about is liquidity and where is it going to come from and planning for it. It becomes a win-win when we make that a priority.

• 33:10Ted Seides?

  If you go back to your original domains, post-business school, investment grade bonds and real assets, how's your thinking changed about their use in the portfolio?

• 33:18Speaker 00

  So much. I was reflecting, I remember it was August of 2011 when the US got downgraded. I was managing an investment grade fixed income portfolio. That was my first moment of panic. Oh no, I'm probably supposed to know what this is going to mean for the portfolio. It happened on a Friday night. I remember being in the office all weekend, trying to figure out what is this going to mean for our portfolio? It turns out it didn't mean much. We've been on an interesting episodic journey with investment grade fixed income. It came out of the portfolio entirely, I think in 2019. We don't take a view on interest rates. That's really important.

• 33:57Speaker 00

  But as one of our committee members likes to say, there was a higher probability that rates were going to go up than they were going to go down. It's not having a view, it's understanding what the probabilities are. We did reintroduce it about a year ago as rates came off of zero, but it's still a modest position. It's 1% position in our portfolio and it's meant to be that rainy day. It's not a big piece of what we do anymore. It used to be 10% of the portfolio back in fixed income heyday. So it's changed a lot. And then real assets, similarly, we no longer do funds dedicated to the extraction of oil and gas. What does it mean to manage a real assets portfolio in that context has had to change and evolve. We're still trying to figure that out. I'm a believer.

• 34:42Speaker 00

  I've seen that asset class work over time. It can be really diversifying for a portfolio. We are not abandoning the strategy. We have had to be thoughtful about what it means in today's context. We have a couple of managers that we like. We're doing things in power, some renewable infrastructure and things of that nature, which we're really excited about. We have to keep pushing and figuring out what it means.

• 35:08Ted Seides?

  Once you came into the CIO seat, what was different from what you thought in all the preparation that you had going in?

• 35:16Speaker 00

  One of the things that reminded me the most of was becoming a parent, because it's the kind of thing where people can tell you what it's going to be like, or you think you know what it's going to be like. The reality of it is still entirely different when somebody hands you a child and says, this is yours. Good luck. I also felt fortunate that I knew the portfolio. I knew our committee. I knew the college and I knew the team. I still felt like, oh, wow, this is new and different. I'm impressed with people who take on this seat and don't have all of that context. It is different when, at the end of the day, you are the person with whom the responsibility sits. Early on, one of the things that becomes challenging,

• 35:58Speaker 00

  but you eventually learn to deal with, is the number of decisions that come your way. Some of them are teeny tiny, some of them are really big and everything in between. Early on, even the smallest decision can feel very consequential, because you feel like you're establishing the expectations, the path, the process. You think about things a lot and it's exhausting. Eventually, you've set the path. Some of those little decisions weigh on you a lot less and you can start to focus on the big ones. Somebody can tell you that that's how it's going to be. The reality of having to hold that on your shoulders is different.

• 36:36Ted Seides?

  If you put the lens back on of learning by making mistakes, what are some of the mistakes you think you made coming into the CIO seat?

• 36:44Speaker 00

  I don't want to say it's a mistake. It's a piece of advice that I will credit to our current investment committee chair, who's amazing, Nate Sleeper. One of the things that I was wrestling with was this tension between respecting our history and understanding that part of the reason that they were interested in promoting an internal candidate was they liked what was happening. I did too. We had a great track record. How do you stay respectful to all of that, yet make your mark and do things your way? The tension between the two and what's the right balance? There's no right answer to that. You have to feel your way through that. I remember saying at one point to Nate, I'm going too fast with anything. Will you tell me if that's the case?

• 37:30Speaker 00

  He said, I don't think that's going to be the case. More likely than not, you're going to look back at where you are after three years and say, gosh, I wish I had done some of these things sooner. As I'm coming up to July 1st will be three years. I'm so happy with where we sit today, even some of the things that we have done. If we could only have done that even faster, that would have been great. It's not necessarily a mistake. You have to have some time to build your confidence. I don't know that I could have gone back and done it differently. It's okay to do things the way that you want to do them.

• 38:04Ted Seides?

  What are some examples of things you now say, I wish I knew to move a little faster?

• 38:09Speaker 00

  Some of the technology that we adapted within the process, we could have done even faster. And certainly now with AI, top of mind for me because I'm trying to figure out, how do we do that at the right speed? There are some changes to the portfolio that we were careful about making. There are a couple more changes to the portfolio that I'd like to make. Part of me wishes we had done it a quarter or two earlier.

• 38:33Ted Seides?

  Love to ask you about running a team. You'd mentioned early on being in charge of an analyst program and wanting to manage people. Now you've got a couple of newer senior people come in. How do you think about being a leader of a team and training people in the business?

• 38:48Speaker 00

  It's one of my favorite parts of the job. We have an amazing team here, smart, dedicated, focused. It is a really interesting challenge for me to figure out, how do I stay relevant to them and value add to the process? One of the things that I've come to realize that is valuable about my time is the opportunity to be able to think more broadly about the portfolio. My analogy is that it's being a snowplow, getting out on the streets before everybody else is awake, making sure that the streets that you think your team is going to want to go down, you've had a chance to just check out and make sure they're clear, that they can run as fast as they want to run.

• 39:30Speaker 00

  You're happy for them to be on those roads that you've gone around the corner. At the same time, you're Running back to the rear too, and making sure did everything that I thought was getting done, keep moving forward in the right direction. We value the opportunity to develop talent. Our first dedicated analyst program started back in 2010. We also have a winter study class we teach on campus. We also have a summer internship program that we run through the investment office. We now have over 150 students that have participated between one of our three programs, which is amazing. We like to say we eat our own cooking. We believe in young talent. We want to be part of developing people for the future,

• 40:13Speaker 00

  whether it's programmatically with our analysts or more broadly with more experienced members of our investment team. What we're very good about is communicating on a one-on-one basis with people. What is it that you're interested in? How can we make sure that your learning curve stays steep? If it's feeling like it's flattening, what else can we do to help make sure that we're steepening it again? I spend a lot of time with members of our team, check-ins, updates, and we have a rigorous performance process, management process, all of those good practices. We try to do well by them.

• 40:49Ted Seides?

  If you look back at the 150 people that have been through this program, starting what 16 years ago, where are they in the industry, generally speaking?

• 40:59Speaker 00

  All over. We did this analysis a couple of years ago, and I should update it. At the time, our data told us about 50% of them stay in asset management broadly defined, and 50% go on to do other amazing things, which is fantastic, too. The 50% that stay are at other LPs, which is fun for us to get to network with them. Some of them are at other GPs, which again is useful and interesting to us.

• 41:26Ted Seides?

  How do you think about the blend of cooperation and competition with peers?

• 41:32Speaker 00

  We tend to lean more on the cooperative side. It's not as if we are going to block somebody out from an opportunity or they're going to block us out. We can still be meaningful at a reasonable check size. We're cognizant of the fact that we are a small team. We're seven investment people covering the global opportunity set. When we can benefit from another person's perspective, we are happy to take the input, the advice. That's not a one-way street. You have to be willing to share. On the margin, we would prefer to be cooperative, learn from other people's experiences. We're competitive in that we want to produce an excellent return for Williams and we know how that stacks up relative to our peers.

• 42:16Speaker 00

  We want it to look great. We also believe we can do that with some cooperation.

• 42:22Ted Seides?

  What are some of the ways you've tried to enhance returns beyond the core structure of find a bunch of managers and stay with them for a long time?

• 42:30Speaker 00

  One of the things that we have been doing over the last few years is exploring areas of the market where we hadn't historically participated. There are talented people in so many different areas. Not being too dogmatic about what works and what doesn't work, being open-minded, that we may find things in places that historically we hadn't, and let's go revisit those. That has opened up a lot of opportunity for us. We can still use the playbook of go find best-in-class managers. That has not changed. But if, as part of that playbook, you say the areas in which you can do that have expanded because we're open to different kinds of strategies, that creates opportunity.

• 43:12Ted Seides?

  As you've built out building blocks with technology, how are you thinking about the next leg with AI?

• 43:18Speaker 00

  We're having so much fun thinking about this challenge. Really lucky that we have a team that is open-minded about what technology can bring to our process. So I think we're going to figure this out in a really exciting way. We are in a place of learning as much as we can. The technology is changing so quickly that in some ways it feels premature to put a big stake in the ground and make some big investment or process change when in a quarter from now, the tools that are available to us could look entirely different or 10 times better. We are experimenting right now without fundamentally redoing things.

• 43:57Speaker 00

  Our team is eager about lots of new ideas, figuring out how do we do things that feel reasonable. At the same time, I don't think we need to be quite on the bleeding edge of discovering everything. That's a risk we don't need to be taking, but we cannot afford to be slow. Finding that happy medium has been fun and it's a project. One of our key goals and objectives for the team for this year, we have a two day process in the summer where we set out all our goals and objectives for the year. We have multiple different working groups across the team that are focused on different themes within AI. Everybody on the team is on at least one team, if not more. We cannot leave anybody behind.

• 44:41Speaker 00

  We meet regularly to talk about work streams, progress, what we're learning and what we should be trying, sharing a lot of insights. It's fun. It's interesting. It's exciting. I don't think we have the answer yet, but we're working on it.

• 44:56Ted Seides?

  What have you found so far?

• 44:57Speaker 00

  The obvious use case is the LLMs and their ability to help enhance our diligence processes to get up to speed more quickly on a particular sector. I had a really interesting conversation recently with my LLM on what was going on in private credit, where the risks were and how we really should be thinking about the questions we need to be talking, for example, to our buyout managers about. That was really helpful for me, preparing me for some conversations. I'll share a funny story about preparing for the conversation with you today. I didn't have a lot of time this weekend to cram. One of the things that I was able to do was take a handful of the podcasts that you've done with other CIOs that I admire.

• 45:42Speaker 00

  Said to it, I'm going to be talking to Ted this week. I need your help preparing. Here are some examples of interviews he's done in the past. Can you practice an interview with me? It was extremely effective in helping prepare me for this conversation today. Those are the kinds of use cases that we will continue to pursue. Somebody discovered recently that it's great at suggesting off sheet references. We found some really good off sheet references by saying, this is who we're doing diligence on. Who in my network would you talk to? Those are examples. I don't think they're revolutionary, but we're using it and we're excited.

• 46:18Ted Seides?

  What were the most intriguing questions that the LLM told you I was going to ask you?

• 46:23Speaker 00

  It didn't tell me intriguing questions. It was good at summarizing your style. Ted is very conversational, very good at asking an opening question and then probing deeper. He also loves anecdotes. So the more you can give colorful examples, that makes your answers more powerful. It felt like I had a presentation coach with me.

• 46:42Ted Seides?

  When you bring this all together, what does success look and feel like to you over time?

• 46:49Speaker 00

  Pretty simple. It's making money for the college. It's doing a great job for Williams. That is absolutely our North Star. We want to put up strong performance. We are competitive about what we're doing here. It's important to the college. We're all big believers in the mission and the work that the college is doing.

• 47:09Ted Seides?

  What are you hoping to lean into over the next couple of years to make that happen?

• 47:13Speaker 00

  It can be daunting to understand our mandate and to think about it in big picture terms, what we need to be able to do. Whenever I get daunted by the task at hand, the best thing for me to do is come back to, well, what is it that we can do today to work towards that goal? Showing up every day, getting to work beside a great team and making good decisions, talking everything through, double checking our work, hustling. This team is well positioned to do all of that, but it is just going to be the accumulation of hard work, day in and day out, that is going to lead to great results.

• 47:52Speaker 00

  There isn't going to be some magic bullet or asset class or manager that we're going to come across. That's going to be the answer to it all. It's going to be that compounding of great work.

• 48:04Ted Seides?

  Well, I want to make sure I get a chance to ask you a couple of 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?

• 48:39Speaker 00

  My hobbies are done in conjunction with my family. I have two little kids. They are Suzuki violinists. I was a violinist. One of my favorite things is getting to practice with them. It's not always fun. There sometimes are tears. When I get to take out my violin and we get to play music together, it's special.

• 48:56Ted Seides?

  What creates the tears?

• 48:58Speaker 00

  You have to practice violin every day and you'd rather be playing outside on the playground or watching the Red Sox. Learning an instrument when you're eight years old is hard. These are the life lessons that I hope they learn from it. Consistency, discipline, and breaking down a problem into its components.

• 49:15Ted Seides?

  What's the best advice you ever received?

• 49:18Speaker 00

  There's a quote that I have taped to my desk. "Life is short and we do not have much time, so make haste to be kind and be swift to love."

• 49:26Ted Seides?

  How do you bring that into the office?

• 49:28Speaker 00

  It's the recognition, the appreciation of everybody's humanity. This is a team that shows up every day and works hard. When I can see them as their whole selves, they can bring their best selves to work. We can do great work together.

• 49:43Ted Seides?

  All right, last one. What life lesson have you learned that you wish you knew a lot earlier in life?

• 49:48Speaker 00

  Just enjoy the ride. We don't have a lot of time. I'm a believer it's all going to work out, trusting the process and that things do have a way of working out. Let's enjoy what we get to do because we're really lucky to get to be here, to get to do this job. Remembering that is really important.

• 50:04Ted Seides?

  Abigail, thanks so much for taking the time.

• 50:07Speaker 00

  Thank you. It's been such a pleasure. I really appreciate the opportunity.

• 50:11Ted 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.

• 50:26Speaker 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.