AMA - Analyst at $1.5B Endowment Fund

I have been reading WSO for a few years now and would like to give back and help out all of the younger readers on here. When I was going through the interview process for my current role, I had a hard time figuring out what exactly I was getting myself in to, so hopefully I can provide some insight to those of you who are in the same position I was. I am married with an 8 week old daughter, so my perspective may be a little different from other WSO members. I will aim to check this 2-3 times a day this week and see what I can do to answer your questions.

What is your current job title and a one sentence description of your primary job responsibility?

My title is Investment Analyst and I work for a $1.5B endowment fund. The endowment supports a non-profit that does early stage medical research. We manage approximately 20% of the money in-house (this entire amount is hedging strategy meant to reduce our drawdown and limit our upside) and give 80% to outside managers. It's a lot different than most of the jobs people on here are talking about. If you have ever wondered where hedge funds, PE funds, credit funds etc. get their money from... the majority of it is from pensions, endowments, and foundations.

We have an Investment Policy Statement (IPS) that was created by the Board of Directors and the Chief Investment Officer that outlines our target allocation (and a lot of other things), and my teams job is to invest the endowment within the guidelines of the IPS. The most important function of our team as a whole is selecting the best managers to give money to. Most of the time your actual allocation will not look exactly like your target, because 1) you only have slight flexibility to stray from the IPS and 2) your endowment's benchmark is based on your target allocation, and your bonus is calculated based on how you perform relative to the benchmark, so you are incentivized to keep your allocation relatively close to your IPS. Essentially, the majority of your out performance is going to be determined by your manager selection.

My primary responsibility is our quarterly performance report that goes to the Board of Directors. I started 12 months ago, and I spent the first few months getting familiar with the process. I completely automated the report in Excel. The prior analyst was hard coding performance numbers for each manager, which took forever to update and was prone to human errors. I have started creating a few different automated Excel reports for the team. The biggest one I am working on right now is a master spreadsheet that maps out our entire PE/VC/RE program, giving us the ability to project future cash inflows/outflows for all of our PE/VC/RE investments for the next 10 years.

What are previous positions you have held and how many years of experience do you have?

Prior to this job, my first job out of undergrad was as a Credit Analyst at a community bank for 18 months. I live in a small city in the Midwest (200k population, 750k in the entire metro area), and this first role was arguably my best opportunity to get the experience I was looking for while staying in the area.

Undergrad

I double majored in Accounting and Finance. I graduated with a 3.0 cumulative GPA, with a 3.7ish major GPA. I did not focus on school the first two years (played way too much Halo) and had to dig myself out of a hole. I got my last 60 credits over three years instead of two, taking 3-4 classes per semester and doing paid internships so I could avoid student loans and focus on increasing my GPA. I had seven internships during school prior to my first full-time job. The first two I saw as part-time jobs to make money, the next five were my way of slowly getting more and more experience to make up for my poor GPA (which ended up looking a lot better when I graduated).

I went to a non-target school in the same city I currently live/work in. There is a PE firm that hires unpaid interns (I interned there for a semester) and a few F500 corporations that recruit on campus, but there is literally zero traditional wall street presence. There is one small investment bank downtown that has no formal recruiting process and very rarely has openings, and also a firm that does in-house equity research. Theoretically a job at either of these two might have looked better on my resume, but I figured my most realistic shot at getting the experience I was looking for was to take the job at the bank.

What was your most useful class and why?

For me, the most useful classes were the Intermediate Accounting classes. If you do well in those, a lot of the "interview prep" questions you see on WSO are very easy to understand and memorize since you have the strong backbone from taking the more difficult accounting classes (or you already memorized them for class). I also took a class called "Business Communication", which essentially went over writing effective emails and giving presentations. I thought it would be an easy Gen Ed class in my last year, but I actually ended up learning quite a bit. TL;DR version of the class was to get to the point quickly in your writing and to always double-check your work.

What advice would give to current students (ugrad and/or grad students) to help them succeed?

I wrote a WSO blog post two years ago on 6 Ways for Undergraduates to Jump-Start Their Careers. These were what helped me the most when it came to setting myself apart from other competitive candidates at my school.

If you are thinking about doing any kind of buyside role where you need to think like an investor, I found the WSO Hedge Fund Interview Prep Pack extremely valuable. It comes with a lot more information than I was expecting. You could probably spend 100s of hours digging around online and finding similar information on your own, but it is all presented for you and laid out so efficiently that you can pretty much just spend a weekend sitting back on your couch reading through it. As someone who invests in hedge funds (only a year of limited experience), I even learned a few things about the structure and the history of the industry. The sticker price seems high at first, but there is so much information, all written by industry professionals, that it is worth it if you can swing it.

Do you have any professional certifications (CFA / CAIA / CPA / CIIA, etc.)?

I passed Level 1 of the CFA this past June, and am taking Level 2 in June of 2017. One of the main reasons I got my current job was because I told my bosses in the interview that I specifically wanted to obtain the CFA. They said they would pay for me to take it, so I signed up for Level 1 a few weeks after I got the job.

When studying, I got into the office early and studied for an hour and also studied during lunch. This gave me 10 hours during the week, and I studied for 2-3 hours each morning on the weekends to hit the recommended 15 hours per week and 300 total hours. I have a wife and daughter (wife was pregnant during CFA studying), so for me it was hard to find time after work to study. My team was very supportive of me studying for the CFA, so they were okay with (and even encouraged) me getting in early to study before work

How did you initially "break-in" to the industry?

I found my current job posted on Indeed.com the week before my wedding. I had met the CIO of the endowment at a few networking events on campus (she is an alum of the same school). When I saw the job posting, I shot her a quick email and asked if the role would be on her team. She responded within an hour, telling me that it was on her team and that I would be a good fit and should apply. I applied a week later after I got back from my honeymoon, had two interviews over the next two weeks, and started about five weeks after sending her that initial email.

The big reasons I got the job were that the CIO is very supportive of her alma matter, and that I was so involved on campus that the professors/staff she knew at the school were able to put in a good word for me. I also had relate able experience, as I underwrote debt for three PE deals while at the bank and could speak to my limited knowledge of the asset class. I also had been investing my $5k~ savings and was able to talk about my experience during the interview process.

I also think I proved that I would be very valuable to the team during the interview. The job posting requested "spreadsheet programming" experience, specifically related to creating the endowment's performance reports. They wanted someone who was good with Excel, and I knew that I was. I gave a few examples of huge Excel projects I had done at previous jobs and was able to show/tell what I would do to the performance report if I got the job, which I know both of the interviewers liked.

What is a day in your life like during the workweek? Can you give us an hour by hour run down of your typical day?

Like all of these "day in the life" posts you see on WSO, all my days are different.
7:30-8:30am - Usually get into the office somewhere in here. In the 6 months leading up to CFA Level 1 exam, I got in at 7:30 and studied for an hour before anyone else on the team got in. Recently, my team has been very supportive and flexible of our new daughter and some days I get into the office a little slower around 9am.
8:30-9:00am - Take action on any important e-mails I received over night. Usually these are account statement's from hedge funds that I plug into the performance spreadsheet, or capital calls for PE/RE/VC investments. About two-three times a week our PE investments call capital, which I need to coordinate with our accounting team to send the money to the fund. We have a special account that we use only for capital calls, so 99% of the time it is fairly straight forward and I am not scrambling around to try to raise cash to fund the call. We usually receive notice for a call 10-15 days before they are due, so it gives plenty of time to figure out a way to raise cash if we need to.
9:00-10:00am - Usually spend this time reading through emails and staying up to date on everything going on around the world. I try to have a broad range of sources/newsletters that I subscribe to, so I get a wide range of opinions.
- Between the Hedges (usually some good reads in here, links to Bloomberg, ZeroHedge, and a few others)
- ZeroHedge Frontrunning
- CFA Institute Newsletter
- Dealbook (NYTimes)
- WSJ (FYI if you copy/paste the title of a WSJ article and Google it, you can read the full article through the Googlelink)
- Stratechery (good big-picture write-ups on the tech industry, subscribe to the 1 free article per week)
- Stratfor Daily Intelligence (interesting GeoPolitics articles, similar trick to the WSJ above to read articles if you do not have an account)
- FiveThirtyEight Newsletter (sometimes has a good article)
- Musings on Markets (blog posts by an NYU finance professor, probably posts about once a week)
10:00-11:00am - Have a call with either a current or prospective manager. If they are a current manager, they are giving updates on their current views, any strategy changes, and their positioning in the market. If it is a prospective manager, there might be some more introductory type discussions on getting to know how they operate, but they also share a bit on their strategy and positioning.
11:00-12:00pm - Work on any small tasks/projects someone else on the team gave me to work on. These are usually just making quick changes to Excel sheets or making a call to a manager to ask a clarifying question or get more information on something that came up in a conference call.
12:00-1:00pm - It seems like I get a lot of conference calls at lunch. I plug my headphones into my computer and take notes while I eat, check out what the market is doing, and maybe read a few longer interesting articles that I saved from earlier in the day. Also, while studying for the CFA, I studied at lunch almost every day.
1:00-2:00pm - Every quarter (and monthly for some), our managers send out letters with their thoughts on the market and updates on the portfolio. I typically spend early afternoon reading through any of these that I have sitting on my desk. Some days I have two or three to read through and some days I have none, just depends on the time of the year.
2:00-4:30pm - I usually spend afternoons working on various projects that I have going. I keep a list of longer term projects/ideas I can work on (making a spreadsheet that will give us additional info that we do not have yet, adding a feature to an existing spreadsheet, watch a specific webcast, call someone to set up a new account somewhere, etc.)

Lately I have been heading home or going down to the gym to workout between 4:15-5pm. As a senior in college, I would have never thought I would have a job where I would be leaving work before 5pm. I DID bust my ass the first few months to set up a bunch of automated spreadsheets, so my first few months I definitely put in quite a few more hours than I do now.

What is the company culture like at your firm? What is the size of your firm?

I work for a non-profit that does cancer research and my team sits right by all of the operations staff (accounting/grants/business development/IT) so it is nowhere near your typical wall street environment. I am out of the office by 5pm about 75% of the time, so incorporating that I usually work through lunch, I usually work about 40-45 hours a week.

There are about 320 employees, 15 finance/accounting staff (a few of which I interact with every day), and 4 members of the investment team plus an admin assistant. My team specifically consists of a CIO, Deputy CIO, Portfolio Manager and Analyst (me). No one on the team has specific roles or sectors they cover (as in one analyst covers hedge funds, one covers private equity, one covers fixed income, etc), which it seems is not very common in the pension/endowment world (most have specific roles/sectors for each employee). We have an official team meeting once a month to talk about the portfolio, prospective managers, travel schedules, and asset allocation, but we see each other every day so we are constantly communicating. I get to be in on every discussion, so it is really interesting to get the opportunity to learn about how large money managers think about allocating their capital. Our team travels to meet every manager we invest with (typically the CIO and deputy CIO), which makes for some cool trips to China, Europe, South Africa, etc. The Portfolio Manager goes to a decent amount of investor meetings for our managers, so he goes all over the US. I had an opportunity to go to a PE due diligence meeting for a manager that was a 2.5 hour drive away, and that was a cool experience. If I stay in the industry, I can definitely see myself enjoying the fact that I get to go on two week trips all over the world, 3-4 times per year.

The job is not stressful at all, even on days like Brexit or the morning of Election 2016 when the market is down 3-5%. Since we give our money to outside managers and our internal strategy is a hedge to the rest of the portfolio, there's nothing we do to interact with the portfolio throughout the day. Sometimes we'll buy a 3-month TBill in the hedging strategy at in the afternoon mid-week, however that is not a spur of the moment thing, and is planned ahead of time. Theoretically, we picked good managers who will be doing that for us so our job is to sit back, observe, and see if there is anything we can learn from the situation.

Are the sacrifices you've made to date worth the benefit realized by you so far in your career?

This is a tough question, and I am not sure that I have an answer to it yet. My job is nowhere near as stressful as the typical wall street job, but I also am not making as much money ($50-60k. Adjusted for NYC cost of living, my total compensation is about $120k/year). I have a small family, so it lets me spend more time with them, however I may potentially have to work longer since it will take me longer to save up enough to retire/leave the business.

I see myself as being someone who will always be working in some kind of capacity, so even if I tried to move to NY, get a job at a BB for two years, move to PE, and have a $10M net worth by the time I hit 30, I would still be out there working just as much. The path I took is definitely better for my health and personal relationships, so I am very happy with how everything has been going so far.

If you weren't working in finance, what do you think you would be doing?

Honestly, I have no idea. I have always wanted to run my own business, doesn't matter what it is, and my wife wants to own a bed & breakfast. As of right now, my plan is to retire once I have saved up enough money to live off 2%~ of my portfolio per year, and then rent out our house on AirBnB full-time. We always think of crazy products that would make parenting easier, so maybe we will finally come up with something worth pursuing and start our own company.

Conclusion

Overall, I have enjoyed my time here so far. I am getting a wide variety of experience and learning to think like an investor. While I could easily make more money if I was in a different industry, this one is very enjoyable and I feel like I am able to learn about pretty much whatever I find interesting. Hopefully this gives everyone a brief overview of what my role looks like. Feel free to ask any questions you may have!

Throwback Thursday - this was originally posted Nov 2016

Hedge Fund Interview Course

  • 814 questions across 165 hedge funds. Crowdsourced from over 500,000 members.
  • 11 Detailed Sample Pitches and 10+ hours of video.
  • Trusted by over 1,000 aspiring hedge fund professionals just like you.

Comments (34)

Nov 16, 2016

thanks for posting!

WSO's COO (Chief Operating Orangutan) | My Linkedin

Nov 16, 2016

Great content, but really stands out is the easy-to-read format. Thanks.

    • 1
Nov 16, 2016

glad you like it, it's an interview template we have. want to do one? email me [email protected] :-)

WSO's COO (Chief Operating Orangutan) | My Linkedin

    • 2
Nov 16, 2016

What do you see doing in the future? Do you stay in endowment AM or do you make a transition to more of a traditional buy-side manager (like one of the bigger AM's or even an HF)?
The age old question: how's comp (I guess relative to analysts at traditional AM/HF) and is there a track for you to eventually make the higher ranks at your current endowment?

Thanks again for doing this!

Best Response
Nov 16, 2016
Scurti:

What do you see doing in the future? Do you stay in endowment AM or do you make a transition to more of a traditional buy-side manager (like one of the bigger AM's or even an HF)?The age old question: how's comp (I guess relative to analysts at traditional AM/HF) and is there a track for you to eventually make the higher ranks at your current endowment?

Thanks again for doing this!

I'm still not sure what exactly I want to do in the future. This has been a very cool job, I would definitely enjoy it if I stay here long term. If I stay in the AM industry, I would prefer an endowment over a pension, just from what I've heard about the underfunding issues, and it seems like there is a lot of political issues involved with being a CIO at a pension. Our team has 100% discretion on what we invest in, whereas at most pensions I know you have to take most investments to board meetings and get approval.

If I transitioned to a more traditional buy-side manager, I would definitely prefer a HF role because I know I would personally enjoy that. I like digging around for individual stocks, so I'd love getting a shot to do that full-time at an HF.

I can't comment too much on comp just because I don't feel like I know enough about the industry yet, but I have looked at job postings in different markets and my salary of $50k-$60k is definitely above average when adjusting for cost of living.

There is not a specific track, I would have to wait for older members of the team to retire. Probably looking at around 5-15 years before I really get a chance to move up at all (other than getting fancier analyst titles), and then there is always the chance that instead of bumping me up they just hire someone new. I like to think I would get that open spot, but still something that I consider a possibility.

    • 6
Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Nov 16, 2016

Can you explain your hedging strategies and the process that goes into that specific part of your fund? What level of familiarity did you have w/ the markets prior to this job? What level would you say you have now? Where do you want to go after this job? What advice can you give to a PWM investment analyst looking to move towards institutional AM/ endowments?

Nov 16, 2016
BobTheBaker:

Can you explain your hedging strategies and the process that goes into that specific part of your fund? What level of familiarity did you have w/ the markets prior to this job? What level would you say you have now? Where do you want to go after this job? What advice can you give to a PWM investment analyst looking to move towards institutional AM/ endowments?

For our hedging strategies, the goal is to reduce the drawdown on the overall portfolio in down markets. We underperform when the market performs well, and perform "less down" when the market is down. The strategy is based on a few different market signals from a specific service provider that is popular with most hedge funds. Every Monday we get a list of 200 names from the service provider based on a ton of fundamental/quantitative factors that we set ahead of time. This is what the new portfolio needs to look like, so we spend Monday morning before market open buying/selling/shorting/covering to switch our current portfolio over to the new one. I used to help with this, but we automated it so much that I don't even need to be involved any more. The idea is that I would get some more responsibility in this area over the next few years.

Prior to starting this job, I felt pretty familiar with the markets for someone who had never worked in the industry. I was president of the investment club at my school for two years (we had a $50k portfolio of stocks that our student members bought/sold throughout the school year) which gave me a lot of opportunities to learn and meet professionals before I graduated. I would say for certain that I know much more now, and I have realized how little I knew back when I was in school. There are still new things I am learning each day, which is one of the things I love about my current role.

I am not in a hiring position, but what I have noticed is that my team was really looking for someone who actually wanted the job and was interested in institutional investing, versus someone just looking for any old finance job. They asked a question specifically about why I was interested in institutional investing versus a job in PWM, so you definitely want to think about (and have a good answer to) why you want to make the move from PWM to institutional. Also, working on the CFA will show you are serious about making the switch. Getting it beforehand would be the best way to convey you are looking to make the switch, but even if you pass Levels 1 or 2, or even if you only sign up for Level 1, it would show you truely are looking to make the move.

    • 5
Nov 16, 2016
WpgJets:

For our hedging strategies, the goal is to reduce the drawdown on the overall portfolio in down markets. We underperform when the market performs well, and perform "less down" when the market is down. The strategy is based on a few different market signals from a specific service provider that is popular with most hedge funds. Every Monday we get a list of 200 names from the service provider based on a ton of fundamental/quantitative factors that we set ahead of time. This is what the new portfolio needs to look like, so we spend Monday morning before market open buying/selling/shorting/covering to switch our current portfolio over to the new one.

This sounds a little bizarre, especially given this is an externally managed fund. What kinds of market risks are you hedging out? Assume it's more than just market beta otherwise you could just use a single ETF and get most of the way there in terms of reducing the drawdown in down markets

    • 2
    • 1
Nov 16, 2016
Going Concern:

WpgJets:For our hedging strategies, the goal is to reduce the drawdown on the overall portfolio in down markets. We underperform when the market performs well, and perform "less down" when the market is down. The strategy is based on a few different market signals from a specific service provider that is popular with most hedge funds. Every Monday we get a list of 200 names from the service provider based on a ton of fundamental/quantitative factors that we set ahead of time. This is what the new portfolio needs to look like, so we spend Monday morning before market open buying/selling/shorting/covering to switch our current portfolio over to the new one.

This sounds a little bizarre, especially given this is an externally managed fund. What kinds of market risks are you hedging out? Assume it's more than just market beta otherwise you could just use a single ETF and get most of the way there in terms of reducing the drawdown in down markets

I'm not sure why we do it this way versus just using an ETF. I know there are specific goals set by the board, I'm not familiar with every parameter we had to follow. A few years before I started, the team gave the board a few drawdown scenarios which used different options for reducing the size of the drawdown and we implemented the option they liked the most.

Based on how I answered this, I realize I should definitely ask about why we use this specific strategy.

    • 2
Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Nov 16, 2016

What's your general asset allocation between long only, fixed income, PE, RE and HF?

How much are you guys committing per year in PE and RE?

Is the long only and fixed income portfolio essentially set and you're just monitoring?

What's the hiring/firing/watchlist process?

What's the actual comp range, unadjusted for NYC. What % is bonus?

How many GPs in the total portfolio? How many individual funds?

What asset class do you spend the most of your time on?

Just curious as I'm in a similar role.

Nov 16, 2016
TimWSO:

What's your general asset allocation between long only, fixed income, PE, RE and HF?

How much are you guys committing per year in PE and RE?

Is the long only and fixed income portfolio essentially set and you're just monitoring?

What's the hiring/firing/watchlist process?

What's the actual comp range, unadjusted for NYC. What % is bonus?

How many GPs in the total portfolio? How many individual funds?

What asset class do you spend the most of your time on?

Just curious as I'm in a similar role.

The biggest difference I have seen from us and most other asset managers is that we do not specifically have a HF allocation. We do have an "absolute return" category which is all HFs, but none of them are long/short. We have some event-driven, macro, and then some quants as well. Within our equity allocation, we have domestic long only, domestic long/short, international long only, and international long/short. We have hedge funds in those domestic and international long/short buckets, about 1-2 in each one.

We do not have specific PE or RE targets right now. Our endowment is 11 years old, so we have not fully realized any private investments yet (still waiting on all our 2005/2006 vintage year funds that got crushed during the financial crisis). We average about $20M in new commitments per year. We do not look at it as "We absolutely must put $10M in PE, $5M in RE, and $5M in VC", we mostly look at it from a geographic allocation standpoint, as in "we want to get into South America this year, Russia next year, the Great Lakes region next year, etc.". We have a few managers that we re-up with each time, but we have also said no to quite a few.

For our entire portfolio (except for internal hedges), everything is set and we just monitor. We have only terminated one manager since I started, however we have one HF that closed down on us and then we have another one that we are redeeming all of our capital from in Q1 17. We do not have any specific process for hiring/firing/watchlist, we discuss everything in our monthly meetings and come to a consensus.

My actual comp is in the $50k-60k range, with no bonus right now.

We have 30~ GP's and 45~ different funds. We will probably stay pretty close to that going forward, we have a few funds that we are hoping become fully realized in the next few years and we will continue to re-invest all the cash we receive, probably re-uping with our existing managers for the most part.

I get to spend time on all asset classes. I sit in on update calls with every HF and PE manager. I get the LEAST exposure to our public equities, just because most of those are set-it-and-forget-it type scenarios where they pretty much just match their benchmarks every month. I have done a couple projects related to our PE and HF funds, so those are probably the ones I get to work with the most, but overall I get to see everything.

What about you? I'm definitely curious what it's like at other endowments.

    • 4
Nov 16, 2016

How old are you / how many years of experience do you have?

Nov 16, 2016
SanityCheck:

How old are you / how many years of experience do you have?

I am 25 and currently have 2.5 years of full-time experience. I had 1.5 years when I started this job. I always had an internship during my last three years of college, not sure if that counts for anything though.

    • 1
Nov 16, 2016

Wife and kids at 25. Damn I need to get my shit together.

Nov 17, 2016
SanityCheck:

Wife and kids at 25. Damn I need to get my shit together.

Having a kid is honestly more fun than I thought it would be. Tons of work though, and a huge change to lifestyle.

    • 1
Nov 16, 2016

I'm curious as to what your high level framework for determining portfolio fit is - said another way, the high level asset classes / strategies you've described are generally not the ones I would have described as 'hedging strategies'?

Nov 16, 2016
The Stranger:

I'm curious as to what your high level framework for determining portfolio fit is - said another way, the high level asset classes / strategies you've described are generally not the ones I would have described as 'hedging strategies'?

Sorry, I might not have explained it very well, but the "hedging strategy" is an account within our long/short allocation with a very low standard deviation and drawdown. We do not target any sort of specific correlation between our hedged strategy the rest of the portfolio that I know of. The strategy will outperform in a down market and lag in an up market. We put it in place back in 2010 (worst time to implement this kind of thing in my opinion), and have had it on ever since. Our board wanted it implemented back when we were a newer/smaller endowment as a way to preserve our capital in case of another meltdown.

    • 1
    • 1
Nov 16, 2016

Got it, that makes much more sense. In that case, can I ask what rough % you guys allocate to alternatives?

Nov 16, 2016
The Stranger:

Got it, that makes much more sense. In that case, can I ask what rough % you guys allocate to alternatives?

We target 20% to alternatives. We also have a separate 5% target allocation to RE, not sure if it is common to include that in alternatives or not. We have hedge funds within our long/short equity buckets, and also have some credit funds that we consider fixed income, so depending on how you look at it we have 30-35% of the portfolio in alternatives.

Nov 16, 2016

Interesting! I was under the impression most endowments were downsizing their alternatives exposure.

Nov 17, 2016
The Stranger:

Interesting! I was under the impression most endowments were downsizing their alternatives exposure.

I have heard the same thing. As a whole, our hedge funds have done well over the last five years. Maybe we just got lucky and picked the right funds?

We are also trying to ramp up PE a little bit (I'm assuming you consider that alt), mostly in emerging markets.

Nov 17, 2016

Intriguing - I think we're much less bullish on PE overall (not clear to us you're being compensated for the liquidity), but I definitely think you get more bang for you buck with PE managers when compared to the average hedge fund guy (not true across all strategies etc. etc.).

Best of luck to you guys!

Nov 16, 2016

Very well, and it is interesting how I see myself on some stuff you said. But I left accounting & finance in the middle of my course. I actually loved it, but as I run my own businesses, a local crisis have limited me, and I left things to totally dedicate my efforts on studying engineering (which was only planned for the next part of my plans, not for now).

I made the most I could to don't leave my life here, I wished to have kids, and I was starting my third company based on my second company, which was a commercial venture (my first is industrial).
I did it all into excel, years of planning, market analysis, decades of experience (and data) of other companies were helping me, I had already a CEO with +35 years of experience heading it all... I had it all, I controled it all... But it failed miserably...I still got together every single cent I've put into it. But, man...A failure, will always be a failure. Engineering was the next step into the plan, but I had to get it to keep going, because I couldn't just simply stop.

Sometimes I wish I should just have done it simple. Should have taken a wife, should have had kids...No companies, not too much schooling, no quant... I just happen to deal with this all naturally, and I've got into everything, including engineering so naturally, that I've simply done and after a lot of work I realized what I was really doing. Lucky me, that I'm quite talented, otherwise I should be not so good... at all.

I wish you have a good life, OP. And I'm just 26, if you ask me.

    • 1
Nov 17, 2016
Finnantzmann:

Very well, and it is interesting how I see myself on some stuff you said. But I left accounting & finance in the middle of my course. I actually loved it, but as I run my own businesses, a local crisis have limited me, and I left things to totally dedicate my efforts on studying engineering (which was only planned for the next part of my plans, not for now).

I made the most I could to don't leave my life here, I wished to have kids, and I was starting my third company based on my second company, which was a commercial venture (my first is industrial).I did it all into excel, years of planning, market analysis, decades of experience (and data) of other companies were helping me, I had already a CEO with +35 years of experience heading it all... I had it all, I controled it all... But it failed miserably...I still got together every single cent I've put into it. But, man...A failure, will always be a failure. Engineering was the next step into the plan, but I had to get it to keep going, because I couldn't just simply stop.

Sometimes I wish I should just have done it simple. Should have taken a wife, should have had kids...No companies, not too much schooling, no quant... I just happen to deal with this all naturally, and I've got into everything, including engineering so naturally, that I've simply done and after a lot of work I realized what I was really doing. Lucky me, that I'm quite talented, otherwise I should be not so good... at all.

I wish you have a good life, OP. And I'm just 26, if you ask me.

Thank you! Sounds like you have done a ton so far, good luck with your future business ventures.

    • 4
Nov 17, 2016

Roughly, what % of the $1.5B do you allocate to various asset classes (PE, VC, Real Assets, Hedge Funds, etc...). Also, considering elevated prices across nearly all asset classes, are there any sectors your specifically interested in right now?

Nov 17, 2016
TresCommas:

Roughly, what % of the $1.5B do you allocate to various asset classes (PE, VC, Real Assets, Hedge Funds, etc...). Also, considering elevated prices across nearly all asset classes, are there any sectors your specifically interested in right now?

We are about 52% public equities (42% domestic/10% international), 23% fixed income/cash, 5% real estate/infrastructure, 10% absolute return, 10% PE (about 1.5% of our PE is VC, we don't have any specific target for VC though).

We are expecting a pullback at some point, whether it is in 5 days or 5 years, I have no idea. But once the central banks fail to keep asset prices elevated, we think there will be a 10-20% correction. Also would not be surprised if the Italian referendum puts Europe into further chaos and the EU moves closer to breaking up.

The asset class we are most interested in right now is emerging market PE. We like all of our developed market managers, and our PE is a little below where we'd like, so we have been looking at EM PE lately. Been looking at PE managers in Eastern Europe (specifically Poland), and also been looking at Chinese managers (mostly VC, a few PE) with the intent to commit to a few over the next 2-3 years. We just committed to two new PE funds in Indonesia and Vietnam.

    • 2
Nov 18, 2016

Besides any skills you previously had or your personality and personal drive to becoming better, it doesn't sound like the title and job responsibilities of your current job are giving you direct individual security (FI/Equity) analysis skills, which I feel is where all the money(and stress) are at. Do you agree? Do you think that you are getting pigeonholed into a permanent "manager of managers" type of investor or a similar "fund of funds" type of investor? Regardless of your answer, do you think you will ever be able to be in a position where you can research individual stocks or corporate/gov IG and non IG level bonds?

    • 1
Nov 19, 2016
gridironceo:

Besides any skills you previously had or your personality and personal drive to becoming better, it doesn't sound like the title and job responsibilities of your current job are giving you direct individual security (FI/Equity) analysis skills, which I feel is where all the money(and stress) are at. Do you agree? Do you think that you are getting pigeonholed into a permanent "manager of managers" type of investor or a similar "fund of funds" type of investor? Regardless of your answer, do you think you will ever be able to be in a position where you can research individual stocks or corporate/gov IG and non IG level bonds?

All of your points are very fair, and I agree 100% that I am getting absolutely zero experience directly analyzing individual securities through work (at least right now). I am though 1) getting great exposure to thinking about the macro picture and 2) learning to think like an asset allocator, which both would be very useful to successfully picking out individual securities if I am ever in that role. I spent 18 months directly analyzing the financial statements of small businesses ($1m to $200m in revenue) at my prior job, and am getting a good amount of hands-on financial analysis experience through the CFA curriculum, so while I may not be completely maxing out my opportunity to improve my individual Security Analysis skills, I still feel good about what I am learning because I am becoming well rounded. If I ever did get into directly investing into securities, I would love to cover the small cap space because it is so under followed and would be the most rewarding for me personally.

As to your second point, I agree I am potentially pigeonholing myself into a "manager of manager" role, but think there is more to the picture than that. A lot of success in this industry can be attributed to effective networking, not necessarily your actual skills as an investor/manager, so I think I am putting myself in a favorable spot by trying to meet as many different people as I can. I have been trying to make it a priority, even as the low guy on the totem pole, to get as much exposure to managers as I can (plus talking to other endowments). I think the importance of fundraising as a manager is overlooked. You could be the best stock picker in the world, but if you have no money backing you, than you're not going to make much for your self or your LP's. If you have billions in AUM, you could be generating average (or even below average) returns, and as long as you maintain good relationships with your investors and they stick with you, you are going to be banking millions in management fees every year (and apparently keeping them happy, or at least content, if they decide to stick with you). Take for example Bill Ackman. The dude has had terrible returns the last few years, but he's got this "celebrity investor aura" around him, so even though he's lost 10-15% in the last two years, he's had very few redemptions because he's kept his big relationships. He probably built his relationships through his family connections, which is okay with me. I don't have that luxury, so I am going to make it a priority to connect with as many CIO's around the world as I can over the next 10 years, if not to eventually raise money, to at least have a good network to share ideas with.

As to if I ultimately decide that want to be in a position where I am analyzing individual securities, I could see it happening. If that is where I want to end up, I probably want to find a new role in 2-3 years when I finish the CFA, saying in interviews something to the effect of "I was in my role to get exposure to the market and take the CFA, but long term want to research individual securities".

That was a good question though, definitely got me to think about some things.

    • 5
Nov 19, 2016

I thoroughly enjoyed reading your response. Me and my buddy are not yet in the IM industry, but are thinking about breaking in. He's taking the CFA 1 in December, and I am still deciding if I am going to sign up for it in June. One think that I like about IM versus IB and PE is that the path is much less defined and a meritocracy, so everyone gets to their destinations via different ways. To me as long as you have the skills, you'll get an interview. Another question I have for you... All these hedge funds have been performing terrible lately and the fees on mutual funds are so high that they almost aren't worth it. Plus its almost virtually proven that you can't consistently beat the market year after year, and that some people just like the feeling of knowing that the Fidelity PM's are managing their money, as oppose to throwing it into a ghost Vanguard account that is matching the indexes. As info becomes more and more publicly available and as (potentially) the market becomes more and more efficient, what is your view on the landscape of the actively vs passively managed investment accounts? Obviously when you are managing billions, you're going to need professionals to manage them. At my target school, as far as investing jobs, there very very little individual equity security opportunities. There were some fixed income funds around campus, but it seems like the equity research jobs are just so few these days. Has the landscape changed into a more asset allocator type of industry? Tons of kids I know went to BlackRock to work in their fixed income funds or alternative investment funds, but they're doing similar things to what you are doing. I just don't see as much upside to that. And you are right, fundraising is super undervalued. If you can fundraise, you are essentially creating a company with that money. Also how stupid do you think retail investing is? I'll watch Jim Cramer on CNBC takes calls on his show and he'll have "Michael from Michigan wondering whether or not HCA is a good buy." I see eventually the demise of retail investing, and everyone shifting into ETF's and Index Funds.

Nov 21, 2016
gridironceo:

I thoroughly enjoyed reading your response. Me and my buddy are not yet in the IM industry, but are thinking about breaking in. He's taking the CFA 1 in December, and I am still deciding if I am going to sign up for it in June. One think that I like about IM versus IB and PE is that the path is much less defined and a meritocracy, so everyone gets to their destinations via different ways. To me as long as you have the skills, you'll get an interview. Another question I have for you... All these hedge funds have been performing terrible lately and the fees on mutual funds are so high that they almost aren't worth it. Plus its almost virtually proven that you can't consistently beat the market year after year, and that some people just like the feeling of knowing that the Fidelity PM's are managing their money, as oppose to throwing it into a ghost Vanguard account that is matching the indexes. As info becomes more and more publicly available and as (potentially) the market becomes more and more efficient, what is your view on the landscape of the actively vs passively managed investment accounts? Obviously when you are managing billions, you're going to need professionals to manage them. At my target school, as far as investing jobs, there very very little individual equity security opportunities. There were some fixed income funds around campus, but it seems like the equity research jobs are just so few these days. Has the landscape changed into a more asset allocator type of industry? Tons of kids I know went to BlackRock to work in their fixed income funds or alternative investment funds, but they're doing similar things to what you are doing. I just don't see as much upside to that. And you are right, fundraising is super undervalued. If you can fundraise, you are essentially creating a company with that money. Also how stupid do you think retail investing is? I'll watch Jim Cramer on CNBC takes calls on his show and he'll have "Michael from Michigan wondering whether or not HCA is a good buy." I see eventually the demise of retail investing, and everyone shifting into ETF's and Index Funds.

What is your view on the landscape of the actively vs passively managed investment accounts?

Index investing makes sense, but at some point, if EVERYONE is indexing, obviously there could be problems. Bill Ackman had a pretty interesting letter to investors on passive index investing earlier in 2016. Here is his letter, and here is an article on MarketWatch (the three bullet points pretty much sum up the leter). For our public managers with the high fees (hedge funds), they all have different strategies and serve specific roles in our portfolio that we probably could not get through an ETF. We had some that crushed it during Brexit, some got killed. Our managers who's job is to match/beat the Russell 3000/Russell 1000 benchmarks, we typically pay about a 0.10% fee per quarter (not sure exact amount for all of them). At 40 basis points per year, it seems kind of high. I definitely see active management continuing to decline, but I do not think it will ever completely vanish.

Has the landscape changed into a more asset allocator type of industry?

Speaking to the question of looking for jobs while at school, maybe you are seeing less opportunities looking directly at equity/credit research because fewer firms are hiring right now? I'd say most people assume we are nearing the end of the business cycle, so it could be possible that no one is looking to hire right now. No idea though honestly.

Also how stupid do you think retail investing is?

I think retail investors will continue to move into passively managed ETF's, but I also don't think ETF's will completely take over. I love picking out individual stocks in my IRA. Some of them work out well, others go terribly. In employee 401k's though, I think we will continue to see ETF's with low fees replace high fee mutual funds.

I haven't watched CNBC since the day that Twitter IPO'd... I remember my roommate and I just sat there laughing at how hard it was being hyped up. I remember they kept pushing back trading trying to figure out an opening price and it ended up getting delayed until noon. It was literally the ONLY thing they were talking about that morning, the Twitter IPO.

    • 4
Dec 5, 2016

Interviewing with an endowment of similar size on Friday. Can you elaborate on what technical questions may be asked in the super day? I have heard stories of possible case studies being provided to gauge excel skills on the spot. Do you recommend brushing up on any formulas in particular? Any additional information on what to expect or how to go about preparing for it would be helpful. Meeting the CIO and other managers in person.

Dec 5, 2016

I had zero technical questions in my interview. It was the opposite of a super day, I met with the CIO and second-in-command for an hour and then had another interview the next week with the other analyst.

As for what technical questions they MIGHT ask, maybe things related to how certain asset prices would move based on changes in interest rates or policies. I was told I would need to answer "what was your best investment ever", but they never asked it. Some type of variation of this question gives you an opportunity to show how you think as an investor, which is ultimately what they want to figure out.

For Excel, I dump all of my data into tabs each month and then use formulas to pull all the info based on month/year to create our reports. No particular order, but here are some Excel tutorials I have bookmarked that you might find useful:

http://www.randomwok.com/excel/how-to-use-index-match/ http://excelsemipro.com/2010/10/use-the-date-function-to-find-the-last-day-of-a-month/
http://www.mbaexcel.com/excel/how-to-use-offset-match-match/
My interview was not anything too crazy, they asked questions like "why I want to be an investor" and "why institutional management vs. doing ML/MS client-facing type roles". For preparing for potential questions, I would spend 2-3 mins forming opinions on:
1) What Trump's presidency will mean for future returns
2) How higher rates will affect future returns

    • 2
Jan 16, 2017