Capital Allocators – Inside the Institutional Investment Industry

Paul Black is Co-CEO and portfolio manager at WCM Investment Management, a $26 billion manager of global equities that he joined when it was a $200 million boutique in 1989. With so much of the institutional world, including my own training, focused on value investing, I was pleasantly surprised to learn about a large, high performing growth stock manager located in a non-descript building in Laguna Beach, California.
Our conversation starts with Paul’s trial-by-fire entry into the business and turns to growth stock investing, including defining a great growth company, searching for widening moats, assessing a culture tied to competitive advantage, creating a positive culture, learning from mistakes, identifying tailwinds, and protecting the downside.
Paul embodies the principals he preaches and offers some tasty food for thought.

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Raphael Arndt is the CEO of the Future Fund, Australia’s 200 billion AUZ ($135B) sovereign wealth fund that his team manages alongside 55 billion AUZ of other sovereign pools of capital. Raphael assumed the CEO seat in 2020 after serving as Chief Investment Officer for six years. Our conversation from five years ago about the Fund’s total portfolio approach is replayed in the feed.

Our conversation focuses on the significant changes in the Future Fund over the last few years. Raphael and his team spent a year analyzing changes in the global economy, demographics, and markets and concluded the Future Fund needed substantial turnover to prepare for the coming period. We discuss these changes in the external environment and the governance and culture internally required to do something about it.

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Raff Arndt is the Chief Investment Officer of Australia’s AUZ$145 billion Sovereign Wealth Fund, the Future Fund. He trained as an engineer and dove into infrastructure policy at the beginning of Australia’s privatizations in the late 1990s. After investing in the space for six year, he joined the Future Fund in 2008 to head the infrastructure team. Six years later, Raff became CIO.

Our conversation spans all aspects of the management of a next generation institutional portfolio, including a one team, one portfolio philosophy, disaggregating beta and factors from skill in public markets, separating the impact of leverage and timing from skill in private markets, venture capital and co-investment opportunities in a large pool of capital, the option value of flexibility, the team required to make decisions in this format, compensation, fees, views on China, and the current market environment.

Australia created the Future Fund only eleven years ago with a mandate to compound capital for 20 years before even contemplating withdrawals. It has been described to me as a pool of capital with the size and transparency of CalPERS and the sophistication of Yale. I’m sure you’ll soon understand why.

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Today's Sponsored Insight features Chad Summe and Mike Veith, Partners at eGateway Capital, a Cincinnati based, thesis-driven firm that focuses on growth stage, enablement technologies that drive the future of digital supply chains, marketing, and commerce.

Our conversation covers their path to creating eGateway, their investment strategy and process. Chad and Mike highlight the firm’s regional and relationship-based sourcing and value add opportunities that benefit from the importance of the Midwest in supply chains and commerce.

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Tilly Franklin is the CEO and Chief Investment Officer at University of Cambridge Investment Management, where she oversees the £4.0B Cambridge University Endowment Fund. UCIM applies an endowment model approach primarily investing in managers and with an overall emphasis on sustainability.

We discuss Tilly’s background that canvasses operating roles, direct private equity, at Apex, investing at Yale cub Alta Advisors, and the perspectives she brought to Cambridge four years ago. We cover her work at UCIM across developing the team, portfolio, manager selection, and sustainability. Lastly, we talk about Tilly’s experience with GAIN, or Girls Are Investors, a non-profit organization that introduces women to careers in finance.

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George Michelakis is the Chief Investment Officer of Gladstone Management, a $2 billion long/short equity hedge fund based in London. George founded Gladstone in 2006 with seed capital from, well me at Protégé Partners, and six years later bought back the stake when still managing less than $100 million. In the dozen years since Gladstone has won awards for European Hedge Fund of the Year and the top performing five-year fund for three years in a row.

Long before that, George became an International Chess Master and took third in the 1992 World Under-20 Chess Championships.

We discuss George’s path from chess to investing, alongside his college friend Roelof Botha of Sequoia, the challenges of the fundamental long-short equity model, the culture required to make it work, and how he does at Gladstone.

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How will we generate returns to meet important spending needs in an increasingly unforgiving world?
One answer is “Internal Alpha’ – making fewer mistakes alongside making great investments.
Generating internal alpha is rarely taught in the investment field, which is why we created Capital Allocators University.

Read Ted’s bloghere.

Brian Christiansen is Executive Managing Director and Senior Portfolio Manager at Sands Capital, a growth-focused public and private equity manager that oversees $50 billion in assets.

Our conversation covers Brian’s journey to Sands Capital, the firm's investment philosophy and approach to growth investing, six key investment criteria, portfolio construction, competitive advantage, and investment examples.

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Capital Allocators was compensated in connection with participation in this interview, which creates a conflict of interest that should be considered.

Ana Marshall is the CIO for the $14 billion William and Flora Hewlett Foundation and a two-time past guest on the show. This time around, we discuss Ana’s recently published book, The Climb to Investment Excellence. It is an outstanding, thorough guide for any leader overseeing a pool of institutional capital. But don’t take my word for it – the book jacket has praise from perhaps the best list of investment luminaries to ever adorn a cover: Seth Klarman from Baupost, Sir Christoper Hohn from TCI, Paul Singer from Elliott, Doug Leone from Sequoia, Lei Zhang from Hillhouse and Marc Andreessen from a16z.

Our conversation offers a walkthrough of the mountain investors must climb to reach their summit, following the metaphors of identifying the goal, preparing to embark or establishing governance, getting started or setting the investment strategy, working up the mountain or manager selection, and reaching the summit.

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Ana Marshall is the CIO for The William and Flora Hewlett Foundation, where she oversees a $13 billion pool of capital. Ana joined Hewlett eighteen years ago after spending the same amount of time as a direct investor. She was a past guest in 2019 describing her approach, and that conversation is replayed in the feed.
We caught up to discuss what is on Ana's mind going into the new year. We cover inflation, private equity secondaries, liquidity management, China, emerging markets, and ESG. We close discussing where Ana is looking around corners, what's filling her basket of worries, and her plan for the next five years.
Access Stream by AlphaSense Free Trial For full show notes, visit the episode webpage here.
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