“Moving to a broader asset allocation structure/model is probably one of the most significant shifts over the last 15 years. The other shift is in our mindset and focus on making sure we are allocating capital to our highest conviction managers and eliminating marginal portfolios. One of the things we like about the managers that we work with is that they tend to be active, highly concentrated, ‘put your money where your mouth is’ type of managers – high in the ‘Active Share’ category. When I joined the college, we had an excess of 100 managers. That was a lot of managers for a portfolio that was under $1 billion, and clearly had a fair amount of redundancy.
We’re at $3 billion AUM today, and we work with 63 sustaining managers across the entire portfolio. We looked in the mirror and said, ‘Are we executing in the same way we’re asking our managers to execute?’ If we have high-conviction managers, are we allocating enough capital to them to have a material impact on results? If they’re not of high-conviction, and we don’t see them as long-term sustaining relationships, why do we have them in the portfolio?”
Subtracting will add to portfolio performance (and volatility).
Post by Marcelino Pantoja