TLDR;
This Dakota Live! podcast episode, recorded live from West Virginia University, features discussions with Jim Betha (WVU Foundation), Craig Slaughter (West Virginia Investment Management Board), and Josh Hall (John Chambers College of Business and Economics). The episode explores institutional investment, governance, experiential learning, and career advice for students. Key takeaways include the importance of a growth mindset, good governance, adapting to market changes, and the value of real-world experience in preparing students for careers in finance and investment management.
- Importance of governance and staffing in endowment management.
- Balancing consistency with evolution in investment strategies.
- The significance of experiential learning and real-world exposure for students.
- Advice for students: take risks, be honest with yourself, and work hard with a purpose.
Intro [0:00]
Robert Morier introduces the Dakota Live! podcast, which aims to provide insights into the world of investment decisions by interviewing chief investment officers, manager research professionals, educators, and industry leaders. He mentions Dakota Marketplace, a database designed to streamline the fundraising process for investment opportunities.
On the road at WVU [1:34]
Morier expresses his excitement about recording live from West Virginia University, marking the sixth episode of engaging with students on university campuses to discuss the asset management industry. He shares a story about the transmission of their car going out en route to West Virginia, using it as a metaphor for the importance of a solid foundation and governance in investment decisions. The episode features guests from the WVU Foundation and the West Virginia Investment Management Board, who will discuss their roles in managing long-term capital.
Jim Bethea Intro [4:11]
Jim Betha is introduced as the Vice President of Investments and Chief Investment Officer for the WVU Foundation. He recently joined the foundation after 15 years as CIO at the University of Iowa Center for Advancement, where he oversaw a multi-billion dollar endowment. At WVU, he is responsible for managing the foundation's investment assets, supporting the university's students and programs.
Craig Slaughter Intro [5:07]
Craig Slaughter is introduced as the Chief Executive Officer, Executive Director, and Chief Investment Officer of the West Virginia Investment Management Board. He has decades of experience modernizing West Virginia's public investment system. He oversees a diversified investment program managing retirement assets for teachers, public employees, and other beneficiaries across the state.
Josh Hall Intro [5:50]
Josh Hall is introduced as the Milan Puskar Dean of the John Chambers College of Business and Economics at West Virginia University. He has played a significant role in expanding research, experiential learning, and industry partnerships at the college, preparing students for careers in finance, economics, and business.
Rotating seat Intro [6:23]
Josh Hall has volunteered to rotate his seat with Luke George, an investment analyst for the West Virginia Investment Management Board and WVU alumni, Marie Hibbert, professor and chair of the department of finance at WVU, and Brandt Hammer, a professor and faculty advisor for the student managed investment fund.
WVU Foundation's core mission [6:43]
Jim Betha defines the core mission of the WVU Foundation's investment office as supporting donor dollars raised by the foundation and managing money for WVU and WVU Medicine. The foundation manages approximately $3.4 billion across different pools to provide for these organizations.
Jim's early focus at WVU Foundation [7:22]
When Jim arrived at WVU Foundation, his initial focus was on meeting with constituents, including three boards, to understand their concerns and needs. He also focused on getting to know his staff of seven, understanding their roles, and identifying areas for growth and improvement. Additionally, he reviewed asset allocation studies for the five different portfolios managed by the foundation to identify gaps in the manager lineup and allocate capital effectively.
What Jim is looking for in new hires [9:31]
Jim emphasizes that the most important characteristic he looks for in new hires is a growth mindset. He values candidates who are constantly learning, questioning decisions, and adapting to market changes. He notes that studying for the CFA exam is a good foundation, but continuous learning is essential throughout one's career.
What Craig looks for in new hires [10:54]
Craig emphasizes the importance of "fit" within an organization, including character and personality. He also looks for a demonstrated focus on the investment industry, preparation, and a proactive approach to career development. He highlights Luke George as an example of a successful hire who showed early interest, progressed through necessary steps, and came prepared for his interview.
Responsibilities of managing public pension capital [12:14]
Craig defines a fiduciary as someone acting on behalf of another party, subverting their own goals to the needs of others, which is a high duty in law. He explains that the Investment Management Board manages assets for defined benefit pension plans, serving beneficiaries like teachers and public employees. Their duty is to ensure the fund has assets to pay benefits when the time comes.
What does a CIO do? [13:48]
Craig describes his typical day as varied, involving managing relationships with the board, stakeholders, legislators, beneficiaries, and taxpayers. He also oversees a seasoned investment staff, allowing them autonomy. He communicates with various stakeholders and relies on his experienced team to manage investments effectively.
Real world investing for students [14:58]
Josh emphasizes the importance of exposing students to real-world investing to prepare them for internships and jobs. He believes that providing opportunities for students to demonstrate their abilities makes them feel like they are already part of the staff.
Experiential investing [16:01]
Josh discusses the student-managed investment fund, which is both a class and a paid job. Students are hired as analysts and receive performance bonuses, mimicking a real job. They present to the original investors annually and defend their decisions, fostering critical thinking.
Governance structure [17:10]
Jim emphasizes the importance of governance structure, stating that endowment CIOs often discuss governance and staffing. He explains that management is responsible for the investment side, while the board guides and governs but does not dictate specific investments. He warns against "governance alpha," where boards interfere with staff decisions, potentially leading to friction and CIO departures.
Short vs long term [19:15]
Craig stresses the importance of isolating political pressures to make long-term decisions for a state pension fund. He notes that good governance is key to long-term success, especially in the public fund space where politics can create a time horizon mismatch. Politicians often focus on short-term gains due to election cycles, while pension plans require infinite time horizons.
Balancing consistency in an evolving world [22:11]
Craig discusses balancing consistency with evolution in investment philosophy. He explains that consistency refers to the general approach to issues, asset allocation, and decision-making processes. Within this framework, innovation and changes in capital markets can be used to reduce or enhance risk and return, depending on the portfolio's focus.
What innovation looks like at WVU [23:52]
Josh explains that innovation at the university includes the entrepreneurship program and incubator. The university focuses on retooling and adapting to changes, with faculty members engaging with firms to understand industry shifts. The goal is to help students secure jobs by staying one step behind the cutting edge.
Partner characteristics [25:14]
Jim discusses the characteristics he looks for in investment partners. He emphasizes the importance of information flow and how partners can help the organization gain insights into the market. He also notes the need for a fit between the partner and the organization's strengths, as well as the importance of risk tolerance.
Jim's process [28:32]
Jim describes the process of evaluating managers, starting with identifying two or three top candidates. This involves consulting databases and peers. He emphasizes the importance of understanding a manager's process, repeatability, and value addition. He acknowledges the difficulty in determining skill versus luck, especially with limited data points.
Craig on designing a portfolio [31:54]
Craig argues that their size, around $30 billion, is ideal for accessing a wide range of managers. He mentions that they like small managers and prefer to get them when they're young and small and then grow with them because they're usually very focused when they're young and small.
How many emails did you receive today? [33:56]
Jim estimates receiving around 100 emails per day, while Craig receives slightly fewer due to a robust spam filter.
Drinking water from a fire hose [34:26]
Craig shares that he picks and chooses information sources, trusting a few reliable sources and ignoring the rest. He reads the New York Times and Wall Street Journal to get a balanced view of world events. Jim mentions receiving 200-250 emails daily, but many are for awareness purposes.
What type of student is WVU producing? [35:50]
Josh emphasizes that WVU aims to produce students who know themselves, their purpose, and their strengths. He highlights the importance of experiential learning and encourages students to gain experience early to become comfortable in their roles.
Asset allocation midst world events [37:27]
Jim explains that asset allocation is guided by the goals of the five different pools they manage, ranging from 4% absolute return to 7-8% endowment returns. He views some world events as noise and focuses on long-term goals. He emphasizes the importance of educating constituents and maintaining a consistent approach.
Private markets or public markets [39:55]
Jim notes that the expected return from private markets has not changed, but what you're going to get probably has. He observes that as an asset class grows exponentially, returns tend to decrease. He also argues that active management wins on the downside and that it's important to have the wherewithal to step back out of active management at some point. Craig believes that it's just going to be more important that you do a really really good job of selecting those excellent managers.
Are things changing at a university level? [43:45]
Josh acknowledges that things are changing at the university level, with challenges such as the difficulty of being a university president and public questioning of the value of higher education. However, he emphasizes the value of engaged faculty and students and the importance of philanthropic support for strategic planning.
Lightning round [45:12]
In a lightning round, Jim recommends Cooper Rock, Craig suggests reading about any hollow to understand West Virginia's economy, and Josh recommends Mario's Fishbowl for dinner. Craig reads the Charleston Gazette in the morning, while Jim finds running an endowment portfolio harder than a 50-mile ultramarathon in the long term. Jim's "ick" is when managers talk about something being correlated or uncorrelated with an undefined time horizon. Josh wishes the word "interdisciplinary" could be removed.
Advice for students [49:00]
Jim advises students to take risks and be open to change. Craig advises students to be honest with themselves and know the difference between luck and skill. Josh advises students to work more than others with a purpose.
Student question #1: Active management & Oil [52:37]
A student asks about active management and oil investments. Jim responds that it's difficult to know if something will be a short-term or long-term change. He explains that oil prices are a supply and demand issue and that market participants will eventually oversupply, bringing prices back into equilibrium. He also notes that active management is about changing the portfolio on the edges, not making binary changes.
Student question #2: Entry level positions [56:18]
A student asks about the biggest difference between an entry-level analyst working for an endowment versus a pension fund. Craig responds that it depends on the endowment or pension plan. He explains that some manage money in-house, while others hire money managers. He notes that analysts often shadow investment officers and participate in meetings.
Student question #3: Endowment modeling [59:18]
A student asks who they are modeling their game after. Jim responds that they are not modeling after Stanford or Yale because they don't have the same resources or alumni networks. He emphasizes the importance of building the best portfolio for their constituents with the resources and team they have.
Guest feature with Luke George [1:01:26]
Luke George shares that he prepared for his interview by researching the organization and its investment program. He also came with questions to better understand the role and if he fit into it.
Unexpected travel [1:02:21]
Luke George shares that he never thought about the travel involved. He is planning a trip to London to do due diligence on hedge funds.
Guest feature with Ann Marie Hibbert [1:03:02]
Professor Anarie Hibbert stresses the importance of fit, growth mindset, and putting in the work.
Advice for growth mindset [1:04:05]
Professor Anarie Hibbert advises students to start organizations and reach out to alumni to grow their muscles.
Guest feature with Brant Hammer [1:05:35]
Bran Hammer discusses the student-managed investment fund, which is designed as a job. Students are split into sector teams and manage capital in that part of the portfolio.
Student fund hiring [1:07:52]
Jim and Craig share that a student fund is attractive to them as employers. Jim notes that it's the most real-world experience you can get.
Outro [1:08:44]
Robert Morier thanks the audience, students, Josh, Craig, and Jim for being part of the experience. He highlights the state of West Virginia and encourages students to take the advice they heard today.
