Governance Over Everything: Inside the CIO Seat (WVU Live)

0:00 Welcome to the Dakota Live podcast. I'm your host, Robert Morier. The goal of this podcast is to help you better know people behind investment decisions. We introduce you to chief investment officers, manager research professionals, educators, and other industry leaders to help you sell in between the lines and better understand the investment ecosystem. If you're not familiar with Dakota and our Dakota Live content, please check out our website at dakota.com. Before we get started, I need to read a brief disclosure. This content is provided forformational purposes and should not be relied upon as recommendations or advice about investing in securities. All investments involve risk and may lose money. Dakota does not guarantee the accuracy of any

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1:31 can make for you. Visit dakotaarketplace.com today. Well, good afternoon everyone. I am very happy to be recording live from West Virginia University. We are back on the road. Uh this is our sixth episode of going to a university campus speaking in front of students about the asset management industry and as always we are joined by very special guests uh who make and take time to speak to our students and to our audience about how they operate within their respective roles at their respective institutions. Uh we're thrilled to be here in Morgantown, West Virginia. We're thrilled to be here with West Virginia University students. Uh last night 18 of our students and I drove in a speeder minivan uh with my dog Murray the golden retriever that's currently in the hotel uh hopefully not

2:17 eating all of the towels. Uh and something interesting happened uh about 40 minutes from arriving at the hotel. Our transmission went out and the car broke down. So, if any of you have ever been in a car where the transmission goes, the engine's roaring, the tires are still moving, but there's no power behind it. And I was thinking about that because we did make it back to the hotel, believe it or not. And I thought about that as a metaphor for what we do, which is basically that you need the power, you need this foundation, this process to move these decisions forward. And usually uh that relies very heavily on governance. We're going to talk about governance and what that means for each of these respective institutions. Uh but I'm very happy that we did make it here.

3:03 We I did have to swap out a van. Uh your enterprise rental car, I'll give them a shout out is very wonderful. I'll be sure to tag them to this episode. Um, so we're fortunate today to sit down with some very uh special investors whose job every day is to make sure that the transmission works as well as the people who educate the next generation uh of investors here in Morgantown at West Virginia University. So on one side directly to my left you've got the West Virginia University Foundation. Jim Betha is our chief your chief investment officer. I'm going to read his biography here in a minute but before I do I just want to quickly tell you about the organization. On one side, we have the West Virginia University Foundation, which oversees philanthropic assets supporting the university and its health system. On the other side with Craig Slaughter, the chief investment officer

3:49 for the West Virginia Investment Management Board, which manages retirement assets for teachers, public employees, and other beneficiaries across the state. These organizations operate with very different mandates, uh, but share the same core responsibility, which is fidiciary stewardship of long-term capital. So, I'm going to quickly read their biographies for you. Jim Betha is vice president of investments and chief investment officer for the WVU Foundation. Jim recently joined the foundation after serving for 15 years as chief investment officer at the University of Iowa Center for Advancement where he oversaw the growth of a multi-billion dollar endowment and built a reputation for high conviction manager selection and disciplined portfolio construction. In his role at West Virginia University, he is

4:35 responsible for stewarding the foundation's investment assets that support the university, its students, and affiliated institutions across the state. The WVU Foundation serves as the university's primary fundraising and investment organization, responsible for managing philanthropic capital on behalf of the institution. Today, it oversees more than $3 billion in total assets and plays a critical role in supporting scholarships research academic programs, and long-term financial stability for the university. To his left, Craig Slaughter, chief executive officer and executive director and chief investment officer of the West Virginia Investment Management Board. Craig has spent decades helping modernize West Virginia's public investment system and transforming it into a sophisticated institutional portfolio. Today, he

5:23 oversees a diversified investment program managing retirement assets for teachers, public employees, and other beneficiaries across the state. The board manages the investment assets of the state's public pension and trust funds. Over time, it has evolved into a globally diversified institutional allocator responsible for stewarding tens of billions of dollars on behalf of West Virginia's public workforce. And last, but not least, Josh Hall. Josh the Milin Pushkar, Dean of the John Chambers College of Business and Economics here at West Virginia University. Josh is an economist, a scholar in an institutional leader who has played a major role in expanding research, experiential learning, and industry partnerships at the college. Through his leadership, the

6:08 business school continues to strengthen its role in preparing students for careers across finance, economics, and the broader business world. Uh we will also have a rotating seat. Josh has very kindly volunteered to rotate his seat with a few other guests. Uh Craig's colleague Luke George who is an investment analyst for the West Virginia Investment Management Board. He's also an alumni uh of WVU and Marie Hibbert, professor and chair of the department of finance here at WVU. And Brandt Hammer, a professor and faculty adviser for the student managed investment fund. Thank you all for being here. Jim, thank you so much for being here. Thank you for agreeing to do this. This is a wonderful opportunity for all of us at the podcast, the students. Uh you joined the foundation uh earlier this year after spending 15 years in Iowa. Uh it plays a

6:55 very unique role now, the West Virginia University Foundation in this ecosystem. How do you define the core mission of the foundation's investment office? >> Yeah, so we support uh the donor dollars that we get that were raised at WVU Foundation, but we also manage money for WVU and WVU medicine. So um that is about $3.4 billion that we manage in in different pools. Uh and our mission is to provide for those two organizations. >> When you arrived here, what what were you focusing on? You've got this kind of a whiteboard. I mean, obviously the foundation's been here a long time, but you now get to use your own color. You get to put your own touch on on the portfolio. What were some of the first things that you knew you wanted to do out of the gate? >> Well, first things I wanted to do is is meet the constituents. We've got two uh

7:42 outside constituents and and so there I went from one found one board that I worked with at Iowa to three boards that I work with here at WVU Foundation and it was meeting those players. What are their concerns? What are their um issues with the portfolio? What do they want to hear from me? How often do they want to hear from me? It is it's a lot, you know, so now I have 12 board meetings and and other meetings uh throughout the year. And it's really getting to understand those folks. Um and and and just reach out to them, reach out to the university, what do they need? What does the the college of business need from me? Um and and and organizationally too. Do we you know what what are what questions are donors asking you? What do we need to talk about with them? Um and and that was the big piece of it at the beginning was just trying to understand that how do people think about risk? Uh

8:28 what are their concerns in the portfolio? And then talking with the staff, getting to know my staff. I didn't know them. I knew a couple of them, but but didn't really know um the the other folks on the team. So, we're a team of seven. And so, I had, you know, was that four new people uh to meet with and getting to know them and and what their roles are and and what do they like about the job, what do they not like about the job and how can we craft it so that, you know, we want them to grow and we want them to be happy and um progress in their careers hopefully WVU Foundation. Um but just trying to understand that and and really getting around that then it becomes a portfolio right and so we're we're we'd gone through asset allocation studies with all the different portfolios that we run. So we run five different portfolios. We've gone through asset allocation studies with all of those. And now it gets into where do we need to find where are the holes in the manager

9:14 line up? Where do we need to allocate capital once we've done a pacing study from the private capital perspective? What are the openings in in that? And it's now we're kind of going through that process of of help me understand the managers, what is the role of each asset class? Um and then kind of figure out what we want to do going forward. >> That's great. Thank you, Joe. Getting the students involved a little earlier. you've got seven on the staff now you're going to have an eighth. So you're thinking about hiring or you will be hiring an investment analyst. So for the students who are thinking about a career in investments, what are some of the characteristics that you're looking for in that hire? >> Yeah, I think the biggest thing is is the growth mindset. So you always need to be constantly asking you know wanting to learn questioning what you've done or the decisions u that you've made before you know 3 five years ago is that consistent? We we've seen this before

10:00 with active management worked for a long time and then it didn't. Hedge funds worked for a long time and then they didn't. Private equity worked for a long time. We'll see if it still is. Um, and so just because capital's going to someplace and it's the easy thing to do, maybe that's not where you should be spending time. You should spend time in active management now in the public equity space because not everybody's looking there. And so that's really what you need. It's constantly learning. And and you see that when if you study for the CFA exam, you're, you know, you're learning for three years there um, a lot. And really you just need to keep doing that the rest of your career. The markets change all the time. We saw this after COVID when you know private or VC was venture capital was the greatest thing in the world and now you know you're not getting liquidity from that portfolio. So things change and you have

10:46 to be able to adapt to those change. So it's that growth mindset of of do I know really what's going on in the portfolio and kind of skate to where the puck is going not to where it is right now. >> Yeah. Good. Thank you for sharing that. Craig, you did hire a West Virginia University graduate three years ago, Luke George. He's going to be joining us. What were some of the characteristics that you were looking for or saw in him that you could give uh some advice to the students in the room? >> Well, um, one thing that's probably not going to help necessarily, but is is is important to know is is in an organization is is fit is really really important. you know, you know, the type of person they are, just the, you know, their their character, their personality, all that sort of thing. So, you know, Luke fit really well. But aside from that, I

11:32 mean, you know, he had a, you know, he demonstrated a real u uh focus on, you know, the investment industry. I mean, he he, you know, throughout, you know, he'd shown that he was uh he was interested in it very early. He'd gone, you know, he he'd progressed. He'd gone through all the steps and and and was, you know, WVU school. Uh he he'd done everything he could to prepare himself and u you know, he just came in he he he seemed prepared for the interview. That's I mean, it's all it's like with anything. I mean, you got to you know, everything you're faced in life, the better you prepare, the better you're going to be able to deal with it. And it showed and so we we took a chance on him and it was a great hire. >> Thank you for sharing that. for the students and for our audience as well. C

12:18 could could you describe the fidiciary responsibility of of managing public pension capital uh for the state of West Virginia? >> I I guess I'd first like to start with just what is a fiduciary and uh I mean I'm not sure if all of you all know but you know you know in in in law actually I have a law degree also. So in law it's actually you know being a fiduciary is one of the the uh highest duties in the law and it's because you're acting on behalf of someone else. Uh you're not acting on behalf of yourself. Uh you got to subvert your goals, your desires, whatever uh to the to the needs of of of another party. And that's what makes it so difficult because we're all naturally self-interested

13:04 and but you got to get beyond that. So um you know with the investment management board we you know most of our assets 80% of our assets are defined benefit pension plans and um uh those you know which means they have there's a whole slew of beneficiaries teachers public employees um you know janitors u you know cops firemen you you you know just pretty much runs the gamut and they're all relying on this on this pension And so our duty is to those people to make sure the the we do the best job we can to make sure that this fund has the assets when available to pay their benefits when the time comes.

13:49 >> For the students who might be less familiar with what a chief investment officer does for a state pension fund. What does a typical day look like for you? >> Well, for me it's it's actually pretty u it it's there's no typical day I would say. Um, you know, maybe for some in chief investment officer is a little different. Um, I serve all the, you know, you you mentioned CEO, executive director, CIO. I really have wear a number of hats. Um, so a lot of my job is managing a relationship with the board and other stakeholders that uh uh that are interested in what we do. You know, legislators, the you know, the beneficiaries, taxpayers, so forth. I mean, communicating with all those people was a big part of my job. Um, but then also, you know, overseeing the the

14:35 investment staff. I'm fortunate that I have really a uh very seasoned, experienced group of investment professionals. I can really let them run on their own quite a bit. Uh they don't need a lot of handholding from me at all. Uh in fact, some of them are probably be better investor or better investors than I am. Uh so >> thank you for sharing that Josh. Uh how important is it for universities like West Virginia to expose students to the real world investing some somewhat of what Brandt's doing uh but invest exposing them to capital markets and and the uh the ability to be able to look at an investment in a way that these institutional investors do as well. >> Yeah, it's uh I think it's super

15:22 important. I mean anybody uh you know all the if you think about the top uh kind of investment firms what do they all hire out of their internship program why you've got to kick the tires and and if we're doing our job here in the Chambers College we're providing them as much of an opportunity here to show what they can do so they can get that internship or get that initial job. I mean, ideally, you you come to that interview and this person's like, "Well, this this this feels like a fit because they feel like they're already on my staff because of what they know and what they understand." And um and the more we do that across all our disciplines, the better off we are and the better off our students are. >> What does experiential education mean to you here at W? >> Well, we're very I'll use an example of

16:07 the student manage investment fund. Um, I think our fund is unique because it's both a class and a paid job. Uh, as a paid job, uh, they're hired as analysts. They receive performance bonuses. Um, it's an attempt to try to mimic as much uh the, uh, a real job as as because I mean, and they are getting paid and we're fortunate enough to have a a donor who is willing to to pay that because he feels that important that that aspect of it is so important to him and to the students. So um we try to we try to get as much uh because then you have to defend your answers right our students do uh presentation to the original 10 investors on the fund every year and uh those are some hard questions. These are people who've been very successful and

16:54 you got to get up there and defend what might not have in retrospect been a great decision but uh you can if you could articulate why you made that. It's that type of thought process that Jim was talking about earlier that uh you know you you know you always you always have to have that critical mindset. >> Thank you so much Jim. How important is governance structure when you think about building a successful endowment portfolio? Yeah, I think when when CIOS get together and we often do, endowment CIOS get together, um there's two things we talk about, governance and staffing. Very rarely do we talk about, hey, what's your favorite private equity fund? Um and so governance is a huge piece of it. And so there, you know, when I was interviewing here, it was help me understand your governance process. And it became clear like there's management's responsibility which is the investment side and there's

17:40 the board's responsibility which is which is to help us and guide us and govern us but it's not to tell us you know go out and buy Apple stock. We don't buy stocks individually but you know I could that's sometimes um I' I've heard of things like that of go invest in that fund or go do something um that maybe the staff doesn't want to do. And so that's a big piece of it there. There's this concept of governance alpha where you know if it is go find this fund that's a lot of friction right you know you have to you have to figure out how to do that and then you really quite honestly if I was a staff member in that situation why bother right if your if your board is going to tell you what to do why would you really want to work for that organization what does your CIO do you know what what's my role in that situation you don't really need a CIO if your board's acting as CIO um and then one of the things you have to think about from a board well we meet with

18:26 three different boards they meet with us four times a So we have anywhere from 15 minutes to two hours to talk to them each quarter about what we're doing. And it's really hard then for them to say you should do it this way, right? And that's not really their role. But sometimes when you think it is, that's where you get into some problems. And and I I know um that's happened at other organizations and and sometimes when you see a CIOS leave, that's why and the other CIOS know like probably don't apply for that job because there's there's some issues going on. It is a very small group. I think when I got into this industry in in 2010, there were 100 endowment CIOS. There roughly 100 endowment CIOS today. A lot of those folks are the same players. Um, and we all kind of know each other. And so, um, that like I said

19:11 earlier, that that's what we talk about is governance. And so, that is that is very crucial to what we do. Thank you for sharing that, Craig. How do you design a portfolio? more specifically making decisions for the long term while still being cognizant of those short-term political pressures that exist being part of a state pension fund. >> I think the most important thing is is is to uh is to isolate those political pressures or or wall yourself off from them. Um the you the one of the key things I you know one of my mantras in the very beginning when I was trying to build this out was governance was the key and it's true of any organization good governance is the key to long-term success and for all the reasons Jim just

19:57 outlined. I don't need to go into that in more detail. It's uh it it's probably a little different in the public fund space because you have or probably even more important I should say you got that element of politics and um it's um and and I and I kind of drop back and say you know you know kind of point out that there's a uh this this con well to highlight that there's this concept of time of time horizons uh in in the investment universe and uh and that the problem with the you know what happens with politics and public pension plans is a time horizon mismatch um you have to the extent you have politicians who have a role in in the governance process you know their time horizon is very

20:43 short term I mean literally tomorrow because they're always thinking about the next election um you know pension plans have you know infinite time horizons uh it's probably the most longdated you know managed asset you could manage which which provides a lot of advantages in in the the and and uh creating an investment portfolio. But you got to be able to take advantage of those. Uh if you can't take advantage of that because of politicians, then you've basically destroyed the the the advantage. Um and public fund land, that's a it's it's a huge problem. And uh uh the it's uh it's again probably what what causes uh you know the most p the half or more of the

21:31 public plans to uh underperform. They end up having um you know inconsistent portfolios. They you know they you can't keep staff so they keep having turnover. That turnover generates changes in the portfolio. and and my personal philosophy is, you know, consistency in a portfolio long term is the key to success. Um there's, you know, probably a million ways to manage a portfolio, but the key is being able to do it the same way with the same philosophy over time. So um so creating an structure, a structure that insulates uh the you know investment process from politics is the critical point. on that point, how do you balance consistency with evolution? So, as markets evolve, as strategies

22:19 evolve, as technology has evolved very quickly in the last 18 to 24 months, how do you balance the the evolution of what you see aesthetically with the the foundation of the consistency that you were just talking about? Well, it's uh when I talk about consistency and philosophy, it's a very it's I'm talking about it very in a very general sense. Um and you know, part of it is in the way you approach, you know, the the the the the issues that arise in an investment landscape, you know, how you do asset allocation, what factors you consider, I mean, how how the governance, how the decisions are made. Um and and and if you if you stick with the you know whether you you know

23:06 how you want to uh you know weigh the risk and return dynamic and in in the investment portfolio because uh you need to have you know some people some people in my space worry more about uh risk than others and so they'll structure a portfolio a certain way. Um now within that you know that concept you you could there there you know with innovation the changes in capital markets there are different ways to you know reduce or reduce or enha enhance risk u and and likewise in on the return side reduce or enhance return but the question is is which one are you focusing on most and you know th those that's what I mean by the philosophy is you know how that all plays out for the total portfolio.

23:52 >> That's helpful. Thank you. Josh Craig mentioned innovation. What does innovation look like here at the university within the business school? >> Yeah, I mean we we have uh um innovation in our entrepreneurship and innovation program. We have an incubator, but I really think things are changing so fast, right? Uh we're very proud here that uh our placement at graduation and I always talk about that. I never talk about six months. People always want to talk about six months and I'm like who wants their kid living on their couch for 6 months, right? at graduation's gone up for 10 years, but but I mean, we look out in the world and you're you're like, well, how can we keep targeting that? We know what's worked in the past, much like investing, but what's going to work in the future? And I think you can only do that by by continuing to retool um you know, just last year, we had a

24:39 faculty member actually not take a take a sbatical, but to go into a firm and better understand uh the changes they were seeing. We have uh our finance faculty. We pay for them to go get additional certifications and and things they they they feel they need. So it's really about trying to be like any organization and have that that growth mindset and um you know understand what your purpose is. Your purpose is to help your students who are paying you tuition to get jobs and to do that you need to be as one step behind that cutting edge. >> But we're going to talk a little bit about the investment partners. Jim, institutional investors ultimately rely on external managers across public markets, private markets, alternative strategies. When you're evaluating a new

25:26 manager or strategy, what are those characteristics that you're looking for in a partner? We talked a little bit about Craig talked a little bit about fit with an employee, does that fit also uh remain consistent with your asset management partners you you have on board? >> Yeah, I think to some degree it does. You know, you're not working for them, so their culture might be different than than your culture. Um, but you do want to make sure, you know, we're a small, we're three and a half billion dollars, so we're a small um, organization, maybe a large asset manager from an endowment perspective, but but small compared to probably what you manage. And so, we're not going to get, you know, if you go with a larger firm, we're not going to be their first phone call. And so, um, trying to figure out what the information flow can be, how can they help us, um, get information about what they're seeing in the market and we can

26:11 use that, um, to what we're seeing elsewhere. And does that make sense? We u when I was at Iowa, we were hearing from our our portfolio managers in the in the private equity space. Nobody's moving. We can't get CEOs to go take a job somewhere else. And then we saw that organizationally we couldn't get anybody to move to Iowa City. Um or it was very difficult to get people to move to Iowa City when you got a two and a quarter mortgage. It's really difficult to take that 6% mortgage rate. Um I just did it so I know I know that. Um and so you got to find that fit of of do you like the people? Everybody says like would you go out to dinner with them? Would you have a beer with them? That's kind of true. At the end of the day, I think that's a sliding scale because if they make you money, you really don't care. Um, you do on some level, but I think it just that's more kind of people like it's a flowery talk that people like to hear.

26:56 But you have to have a fit. You know, what works um for for our organization might not work for PIT. Um, it probably won't because they're PIT. Um, but you know, that's just that everybody's different. you know, every endowment is kind of trying to get the same target return, but the way, you know, our strengths are different from somebody else's strengths. And I kind of think about it as endowments, every endowment's kind of a small endowment office. Even if you talk with University Chicago with 20 some odd people, they'll say they're small. Um, so you do probably two or three things well. And so figure out what those two or three things are for your organization and was the fit for that. You know, if if you are really good at selecting private equity managers, lean into that, do more of that. um but then don't try and force something else into the portfolio. And

27:41 so you're trying to find what that fit is, not necessarily from a cultural standpoint. That's part of it, but also does it make sense? What are the strengths of the organization? You know, if if you're Stanford and you have a lot of alums in the VC space, you're probably going to have a lot of VC in your portfolio. And so figure out what those are. What are your alumni networks bringing to you? Um and so it's all that's different for every every organization. It's different even for for Craig and his team. Um and so that's what you're trying to find is and and really you know even from an asset allocation standpoint people always ask what's your asset allocation asset the asset allocation that works for you is the one you can tolerate through all cycles right you know what is your risk tolerance and we all kind of have the right return so what are what does that manager look like for you is going to be different um and so that's really what

28:28 you're trying to do is find what that fit is um and it's going to be different everywhere >> what does that process look like maybe a search that you did recently a search that might be up been coming. So if you put uh the students in the room with you, what's the discussion look like? What asset class have you identified and where does the work begin? Uh we teach a manager research and due diligence class at Drexel University. We hand them the asset managers so they don't have to go out and look for them. But they're real asset managers with real answers and real marketing and real pitchbooks and good stories. So how do you how do you start that process? And just really quickly, if you don't mind, what does it look like as it flows through? >> Yeah, the hardest part is get to that process of of who are the two or three managers you're looking at. And that's different in different asset classes. Um, if you're looking at at public

29:14 equity markets, there's probably some database that you can go to and sort by some criteria, whether that's three-year return or 5year return or or what does that look like? You want quant manager um active management um fundamental. Um, and so that's a lot of it. And so a lot of the team will go out and and meet with other peers. What do you like? what do you think? Who's the best in that space? Um and and so that process will look different as private equity because there's not a lot of databases. It's opaque. Everybody claims they're closed until miraculously they're raising capital and everybody's open. And if the returns are bad, they're going to be really open. Um and so, you know, it it's it's going through that to get to that space of now what do I look like critically? Look at critically. Um you know, in the private equity space, I always make this joke whenever I hire a new uh analyst. They meet with buyout

30:01 managers, they'll talk about proprietary sourcing. It's like everybody I got this great thing. I do proprietary sourcing. It's amazing. It's like, okay, you hear it once, they'll see how interesting it is. When you hear it 50 times, like not everybody can do sourcing the same way and have it be proprietary. And eventually you learn nobody's doing proprietary sourcing. Um, so you kind of figure out what that is. What's that fit for you? Um, and then kind of have that internal process of what this looks like. Do you like the manager? Why do you like the manager? And it's really trying to figure out like what is their process? Is it repeatable and are they actually adding value? Um, everybody wants to buy low and sell high. That's really hard to do in practice. Um, and so trying to figure out what they are doing. And quite frankly, you don't have enough data points to know whether the manager is doing it from skill or luck. You think of like a private equity firm.

30:46 You're on fund three. You've made 50 investments. You're starting to get some statistical significance to what you're actually doing and everything's a little bit different. So, you really don't know. It's it's kind of a guessing game. This is a very gray job. It's not black and white. Um and so that makes it very hard. You're trying to figure out, do you like the people? Is it repeatable? Do you believe in the story? You're never going to know until, you know, if it's private equity 10, 15 years down the road. Uh but you have to be comfortable and get everybody on board with your decision. And it's really just kind of having that faith in that manager because it isn't it isn't a science. Dakota Recommends is your source for the highest quality coffee shops, restaurants, hotels, and event spaces in every major city where business happens.

31:33 Dakota Recommends is thoughtfully curated by our team who has been traveling and hosting events in the investment industry for over 25 years. Log in to Dakota Marketplace today to see how Dakota Recommends can help you make your next trip better. Craig, you you've done a lot of work in alternatives with hedge funds in particular. You're working with significantly more capital than the West Virginia University Foundation. Has that or can it prevent you from working with those managers who are smaller, more nimble? How do you design the portfolio potentially knowing that you might lose access because of your size relative to

32:19 other plans like a smaller endowment that can be arguably a bit more nimble? >> Actually, I I I would argue that, you know, our size, which is about $30 billion, is is really kind of a in the sweet spot. uh we're not too big that we uh get priced out of every or just are just don't even can't really look at small managers. Um and and and and again we're not so big that we move the market either like you you know cowpers which California public employees I I forget where they are 400 billion 500 billion I mean you know when they sneeze the market pays attention and you know they quite they really have terrible returns also but um

33:04 >> it's the governance I think >> yeah it is the governance we've lost California and pit university black >> so um and yet we're we're large enough that you know I really pretty much feel like every manager in the world will take our call uh because we can they know we have enough dollars to to allocate. Um so you know we like small managers uh and uh we we have a mixture of both but uh it it it just you know depends on what we're looking for and uh uh ideally we like to to get them when they're a little young and small and then grow with them because they're usually very focused when they're young

33:50 and small so to speak. Um and u they're generally better managers. It begs a a fun question for our students. It's uh 5:15 at the end of this day. How many emails did you receive in your inbox from the beginning of the day to the end of the day? >> I average >> I think it's usually a hundred. It's probably more today because we just posted a position for investment analyst and I got a lot of emails for that. But so there's a slight uptick, but on an average day it's 100 emails. >> Okay. Probably a little less for me because we got a robust spam filter. That's that's good. How do you uh you know the saying how do you how do you drink water from a fire hose? You have so much information coming. I know you you both have very uh sharp staffs uh

34:36 you know that do a lot of that work for you that can cut through the noise. Uh but that's still a ton of information and you know we're in an information generation now where every student in this room is just being flooded with so much. So, how do you do it when you're a fidiciary? When that decision is more than just, you know, what are you going to watch next or where are you going to go tonight? It's it really has meaning and it all it all does, but in particular when you're representing other people's capital. >> Pick and choose. I mean, and and I've I've kind of learned um you know, found a few sources that really work for me that I find, you know, I can trust and trust their thinking and and and uh people who I think are really, you know, bring something extra to the table and I

35:22 ignore everything else. And you know I you know of course read the papers read New York Times the Wall Street Journal kind of gives me a good bal balance of what's going on in the world and how two sides look at it. >> Makes sense. >> But uh yeah >> I appreciate that. I'm not I got to ask you too how many how many emails do you have at the end of the day? >> Couple couple hundred 200 250 something like that. But you know a lot of it's you know for your awareness type of thing. So uh it's it's not too bad. and what type of student are are you trying to to put out into the market? So, when you think about what uh Jim and Craig are doing on a day-to-day basis, the teams that they're building, when you think about your WVU students that are here in the audience, what are some of those attributes that you're hoping that

36:07 they'll take out into the markets? >> Yeah. Well, you know, I was I was listening very intently with what Jim said, and it seems to earlier about u fit, right? And and to me ultimately fit is about knowing who you are and what your purpose are is. It's not about a a certain archetype. It's about do you know kind of kind of what you want and who you are and what your strengths are. So we're Clifton Strengths campus. I think that's very helpful for that starting point. I'm a maximizer. That's my number one. Um and it clarifies things for me. And I find when by exposing students to more and more and taking on more and more, you're kind of honing who you are as as a person to get out in the world and and and we have a

36:53 career closet downstairs and uh where where students can apply and get a suit of their own and and do it when you're a sophomore. Don't do it in your senior because we've all seen that person show up for that interview and this is the first time they've worn a suit and you you have to get comfortable in yourself as a business person whatever industry whatever thing that is and you're going to be successful. So what whether it's hospitality and tourism or finance put in the reps >> kind of reflect on that and go out and you know be ready to work. >> That's great. Thank you for sharing that. Uh let's talk a little bit about asset allocation. You touched on it before, Jim. Uh there's no shortage of uh significant events going on in the world, whether it's geopolitical uh

37:40 technology uh or just things at home in our own state, our own communities, our own universities. So how do you think about asset allocation in in really any environment? I was going to ask you this environment, but I have a feeling you might ask you might answer it in any environment. >> For us, um we do have five pools. So he's trying to understand what the what what are the goals of those pools. So one wants a 4% absolute return and then we've got an endowment that you know 7 or 8% um return arguably absolute return there too. Um and I would say as a long-term investor some of this is noise right and and so you have to figure out is this going to be a sea change and what's going on? If it's not then it's just noise and you can kind of have your constituents understand what's going on. make sure

38:25 give them confidence that you're on top of this and you're thinking about this, but you're not necessarily going to go out and sell stocks just because something happens in Iran. We're not going to go long oil futures because something happens in Iran. That's not really how endowments are set up, at least not how our endowments set up. Um, and so it's it's making sure people understand what you're trying to do, what the time horizon is. For a lot of our um pools, they've defined that time horizon. They say five years. Okay, we'll we'll try and figure this out for 5 years and and develop an asset allocation um that we think can last for 5 years, but we go back and we look at these asset allocations each year. We have our deputy CIO uh Jen Kunanan who runs that program for us. And it's it is a lot of work to go through all the different pools and running asset allocation for them and explaining to them why we're making changes and this is what it's going to take. You know, if

39:11 you lower or increase your private equity or private whatever portfolio, it's going to take years to do that. You don't do that overnight. you don't allocate that 5% overnight and and this is how we're going to do it. This is the methodology that we're going to use um to get there. How much capital are you going to put together each year? Even that's a little fuzzy because you can commit to a fund today and it doesn't start drawing capital until 2027. Um so you educate around that. But but really the asset allocation um doesn't change much yeartoear. Um it is a long-term as a long-term investor it really shouldn't. If it does, we've probably done something wrong. Or again, there's been some massive change. If if they ban private equity investing, we'll have to make um something. I hope they don't ban private equity investing. Or maybe I do. We'll see what private equity returns are. >> That actually raises an interesting

39:57 question for both you and and Craig. And I think this is actually helpful for the students as well. Are are private markets still delivering the kind of value institutional investors expect? uh or are public markets becoming more attractive again? Not that they weren't before, but when you think about careers, I have no shortage of students who tell me they want to work in private equity and venture capital. And you have no shortage of managers who are calling you both uh trying to get you to invest in a private equity or venture capital fund. Um, but when you think about the environment today, is it the time to be deploying capital into those areas or do you think that public markets are starting to show a different a different different side? >> I think you had a key piece of that question was what do people is what they

40:45 u expected the return to be changed. That's not changed. What you're going to get probably has. And so I think it just it's there's never been a case where an asset class has grown to, you know, the size that anything has. Anytime something just grows exponentially, returns go down. We saw that in active manage, you saw it in hedge funds, you're seeing in private equity, you're seeing in direct line, you're seeing everything. It's just inevitable. Um, but the expectation for that return. We still need the same return. That hasn't changed. It just it's made it a little harder. I would argue your point on active management. Where active management wins is on the downside. And I've been saying it for, you know, three years. We're at equity market highs for three years in a row. At some point, we're not going to be anymore. And that's going to flip. That's when you

41:30 want to have active management. So for everybody that's flipped over to 100% passive. You're going to have 100% down capture. If you have active management on some percentage, you're going to have less than 100% down capture. So you're going to add alpha there. But you have to have um the wherewithal to at some point and you're never going to time it right, but at some point maybe you then step back out of active management and use it just like you would any other investment where sometimes you're going to keep it um for a long term, but sometimes you you don't like you don't buy high yield when credit spreads are tight. You buy it when credit spreads are wide. And so you maybe you have to time some of those things. I'm not saying you should be a market timer, but maybe just think about things differently. Well, thank you for Craig. Same question. >> I kind of tend I mean I I've been doing

42:15 this for 30 37 years now and uh you know I've learned that things really don't change that much. Um so I mean I I think um I mean they do but they don't. Um so if private equity uh you know in the private markets in general I think it's just going to be more important that you do a really really good job of selecting those excellent managers and it's always been true but it's even more true right now I mean we went through a period where you know in a way everybody was excellent uh could do well and and uh but um you know quite honestly relative to the the the public markets it you know US public market it you they I don't know that it was all that much

43:00 different. Um you know uh you know we shoot for you know 300 basis points over the Russell 3000 uh over time with our private equity portfolio and we we've been able to do that and I I think we still can do that. Um it's not going to be easy but you but I do think maybe maybe there's going to be more disparity between the good and the bad. um you know so the very very large funds I I we stay away from those uh because I think they're going to have a really really hard time um but uh if you're in smaller you know bid buyout uh I think there's still a lot of a lot of juice or alpha to be had. >> I appreciate that. Have things changed

43:46 much at the university level? >> Uh yeah I mean I think they have. you know, you saw in the news today, uh, and all the higher ed news is about nobody wants to be a, uh, a university president anymore. Uh, and, uh, I mean, I I you can see why they're saying that it is a very difficult job. I mean, you're you're interacting with a health system, especially a job like this. You're interacting with the health system. Um, you you you have fundamental changes to the economy uh, going on. you get this this public questioning of the value of of higher education. Uh it is not a it is an easy time but it's a great opportunity time because we you know you interact with the students you bring here all the time and and you can see the value um that good faculty engaged students

44:33 can create on the lives of people and it's that type of thing that uh makes you want to come into work every day right and we're very grateful for the foundation all our alumni employees that that let us um it is those foundation funds and those gifts that allow us to strate strategically plan, >> right? It allows us to take a chance on a program. Um uh a good friend of mine said philanthropy is the thing that lets you uh create the thing you can envision and and we've done that with a lot of things whether it's our student manage investment fund or this building and uh we it wouldn't be there without philanthropic dollars and the return on those. >> That's great. Thank you so much, Josh. All right, let's have some fun. We've talked enough about markets. We're going to have a couple uh fun questions for

45:19 you both, for all of you actually before we uh we start to rotate your seat. Uh Jim, I know you're new to the area, but what's one place if you're advising students from Philadelphia in town for the first time that you've seen in the last area that you would recommend that we see? >> Cooper Rock. >> Cooper Rock. Okay. Uh Craig, if we want to understand West Virginia, specifically the economy, in 15 minutes or less, what should we read? What should we look at? Where should we go to understand the state? probably any hollowa would be would work. It's not the whole state, but it does it gives you a sense for for some of the the dynamics that come at come come into play and and affect politics. Uh the um unfortunately >> I appreciate that. Josh, where should we go to dinner? >> Uh original Mario's Fishbowl.

46:06 >> Okay, students, where should we go to dinner? >> Blackberry. >> All right, good news. We went there for lunch, >> so we're a step ahead. Thank you for that. Uh Craig, first thing you look at in the morning when you're uh when you're going to work >> or when I get up >> either or it might be your sounds like it might be your dog, your boxer. >> No, I I look at the clock to see what time it is and see if I have to get up. Um no, I I I read the paper. >> Okay. >> Uh it's uh >> Which paper? >> Uh I just read the Charleston Gazette. Uh well, except it does it only comes out five days a week. So, two days a week, I'm searching either the New York Times or the Wall Street Journal. You know, I I follow up with those two uh papers during the day generally, but that's the Charleston paper in the morning. >> A fun fact about your chief investment

46:51 officer. What's harder, running an endowment portfolio or running a 50 mile ultramarathon? >> Um, in the short term, the 50 mileer because, uh, that's that's going to hurt for a couple days, but endowment's the long-term thing, so that's going to hurt for your career. So, yeah. >> Yeah. Makes sense. That makes a lot of sense. Craig, getting back to the investment side, what's something that a manager says in a pitch meeting that instantly gets your attention? >> I'm probably not the best person to ask this because I I let my staff do all the manager meetings uh for the most part, but uh I mean I I'm really just looking for, you know, conviction and uh and and their philosophy. I mean, we wouldn't have brought them in if they you uh well, we get people come you cold calls all the time, but uh I I am I'm looking for, you know, conviction and a and a

47:37 clear well thoughtout philosophy on how to make money. >> Okay, makes sense. What's your ick? And when the when the meeting starts, someone says something, h I can't believe they said that. Whenever somebody talks about something being correlated or uncorrelated with an undefined time horizon has an undefined uh measurement interval, it drives me crazy. And usually when they do it, they don't even say they just say it's uncorrelated with no numbers to back it up. And um we we invested we invest in a fund that they sent me an email because they didn't know who I was that said that their product was uncorrelated to the S&P 500. And I was like that's all it said. We're we have no correlation to the S&P 500. And I was like I'm pretty sure that's a lie. What's one word you wish could be completely removed? Something gets

48:24 overused. >> Oh. Um, >> you just signed to find your contract. >> Oh, no. I figured you're safe right now. >> Is it interdisciplinary? Be honest. >> I That's a great It is. The accident is a great one because um, you know, or getting out of our silos is more of a phrase, right? and and silos are great. You to to broaden you have to first deepen. >> You have to truly understand your area before you can contribute across areas. And we try to get way too ahead of that. >> Maybe just for each of you, uh we have all of these students in the room. We're grateful that they all made time for us to listen to this podcast. If you wouldn't mind leaving them with a little bit of advice, uh maybe something that

49:10 was said to you at some point in your career. And I always like to say too, it doesn't necessarily mean need to be the nice stuff. Sometimes it's it's advice that you receive that that hurt. It wasn't easy. >> Yeah. I would say don't be afraid to take risks. And it's a hell of a lot easier to take a risk when you're 22 years old than it is when you're 53. Um so don't be afraid to move somewhere. Don't be afraid to take a job that maybe you don't know if it's going to pan out for the long term. And you know, you think you know what you want to do right now. When I was your age, I was an engineer. I'm not an engineer today. And so you I had to pivot. And so just have that um thought of like this might not be what I want to do forever and you're going to change yourselves and so just be open to that. >> Wonderful. >> Um I would say you know be honest with yourself. Uh and I say that for two

49:56 reasons. One is, you know, everybody everybody has weaknesses, uh, at least one, but and knowing what they are is really important because that's what you got to manage uh, through your life and and hopefully you can manage it manage it in a way that you can leverage it up to to overcome it, so to speak. Uh the other thing about that you correlated to that is um you know being honest about your yourself and and what you've done is is is knowing the difference between luck and skill in this investment business. there's a huge amount of luck and u and and and I actually we had a a very honest money manager who who once told me said you know you you won't know

50:41 whether it's you know my success is luck or skill for 30 years statistically. So I don't know if that's really true but yeah it's it's it kind of highlights the whole thing. You you got to respect the fact that you know what's happened may just be luck and and don't fool yourself >> with that. I would just say the ultimate cheat code is working more than other people with a purpose. If you spend the ne first 10 years of your career working 50% more than other people, you'll be 50% ahead of them. Uh when it comes, you know, you'll you'll be on year uh 35 and yet be only 30 uh years old. And uh uh and opportunities come from being around. And uh so put the time in uh but put the time in with a purpose. And uh I

51:27 I know very few people who haven't been successful doing that. >> The world of private markets has exploded. There's more and more information available to you across private companies, private fund managers, transactions, private fund performance, evergreen funds, and more. Staying up to date and organized of all that data becomes very difficult and more and more important. That's why we launched Dakota Private Markets, a tailored platform from Dakota Marketplace that includes GP data, private fund performance and custom benchmarking, AIdriven account summaries and qualitative detail, private companies, transactions, and much more. Dakota Private Markets is your tool to stay uptodate on the world of private markets. You can learn more and get started with Dakota Private Markets

52:12 today at dakota.com. We're grateful for the three of you for putting your time in. Thank you for being here. I think it's a good time if you guys are all right with it. We have a few extra minutes for a couple student questions and then what we'll do is we'll rotate that third seat. We'll do one question each. But um does anybody have any questions that they've come up with that they'd like to answer? We've got a couple minutes so we've got a few. >> My name is Muhammad Abu Zetun. I am from Drexler University. I'm studying electrical engineering and computer engineering. So um my question is going to be for you. Um, you mentioned that the market has been performing strongly over the last 3 years and because of that you want to avoid being down 100% in the upcoming year or so. As a result,

52:57 you you also said you use management to adjust the portfolio by relocating investments into other assets or even moving to cash. So my question is what does active management actually looks like in a practice and how do you decide when to rebalance shift into different investments or hold cash? Another question is in addition to that you mentioned that you wouldn't take a long leverage positions in oil just some another country uh some stuff happened around there and since that could be considered noise rather than a real risk how do you determine whether an event like that is just short-term noise or a meaningful risk that should influence your um investments for example

53:45 considering that UAE has a lot of data centers and US um technology companies headquarters there. >> Thank you. >> Yeah. Um I you know you don't really know if something's going to be a short-term or long-term sea change until years down the road. But I think um you know looking at oil prices, Iran has to pump oil at some point, right? Or or there's going to be some more strife going on in the country. Um or other people will come into the market and flood it with their oil. So prices will, you know, it's a supply and demand thing, right? The reason why oil prices spiked is because the supply is going to be constrained. The demand is going to be constant. And so we saw this during CO too when the demand dropped. And so oil prices fell. Um and so eventually market participants will over supply and

54:31 price will come back into equilibrium. I would think um if we run out of oil then obviously that becomes a different situation. Um, on active management, I think it's kind of the same thing is is, you know, if if you if you're worried about the market being a little bit frothy, then you would say, let's let's invest in active management. Now, you'd have to have a view in that of saying that active management over the long term doesn't work, right? If you think it will, and it can. Um, but generally it doesn't it has not kept up. Um, you know, there there's kind of legal reasons why diversified fund can't own the same uh percentage of uh tech companies as the index does. Um, and so they're going to lag when you have an environment like you've had the last 3 to 5 years where seven stocks or 10 stocks, whatever have have led the way.

55:17 And so you'd have to think that would change. Um, you know, maybe small caps start doing better than large caps. You know, that would be a reason why you might go into active management. And so you really just have to have conviction in those beliefs, but you're never going to know if you're right or if you're lucky, right? You could be wrong but lucky and or have good timing or be too early and and you know, you lose your job before it works out or keep uh on the other side of it, you hey, this has more room to grow and then the market tanks. So you kind of need some luck in that. Um and and I'm not an advocate for market timing, but just things that you're kind of thinking about is how do you change the portfolio on the edges, not 100% one way or the other. So it's not, you know, we're going to go to cash, we're going to go to equities. It's not as binary as that. It's, you know, for for, you know, honestly for endowments typically is like 1% more, 2%

56:04 more. You're not taking major swings typically. Um, but maybe you're, you know, going 5% more inactive than you were in passive. It it's really more at the margins than huge binary changes. How about a West Virginia student? >> Thank you. >> Uh, hi, my name is Brock Price. I'm a finance major at West Virginia University. So, I guess my question is for both Jim and Craig. So, what would be like the biggest difference between like an entry- level analyst working for an endowment versus a pension fund? >> Well, I'm not sure I I can I I can answer that necessarily and and it probably depends on on the endowment or the pension plan because um you know, I I know all all my peers in the public fund space. Um and you know, there's there's a lot of variety um out there.

56:50 you know, some of them actually, you know, buy, you know, uh, manage money in house. So, they have, they actually make buy decisions. They might be hiring somebody to be an analyst, an analyst in the sense that they're looking at different, uh, companies, the actual companies themselves, uh, in the public markets, for example. Uh, those those are tend to be more rare. They tend to be more like u uh like us in the sense that they're hiring money managers. um you know um uh Luke who was you know one of our analysts he's uh um you know you're you're you're a good part of the your first few years is just spent um you know uh going you know shadowing our

57:36 investment officers as they go talk to money managers. Uh in our shop we have a very flat um you know structure. So you know we we we meet periodic we actually we meet every week and just have a conversation around the room but then more in depth about our asset allocation and you know what's going on in the markets and and so forth. We we meet quarterly and you know everybody the analysts all sit in the room they have a vote just like everybody else. Um now people may not put as much weight on their vote uh uh or opinion. so to speak, because of the experience level, but we want to hear it. Uh so, uh we try to we try to involve our analysts in the whole process from the very get-go. Uh it just the reality is most of the time

58:22 they're just shadowing and listening and watching. Then as as they show some facility, they you know, we you know, like Luke starts asking questions, you know, and they're good questions. So, you kind of encourage him to do that more and so on. It's it's a it's just uh

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