How I Invest with David Weisburd - E424: 32-Year Notre Dame CIO on Sequoia, Venture Capital & Concentration

Episode Date: September 2, 2026

What can 32 years as a university CIO teach you about identifying exceptional investors before everyone else does? David sits down with Scott Malpass, Co-Founder and Managing Partner of Grafton Street Partners and former Chief Investment Officer of the University of Notre Dame, to discuss the patterns he learned from evaluating thousands of investment firms and building decades-long relationships with some of the world’s leading managers.

So, Scott, you're considered one of the very top CIOs of the last generation, having been CIO for 32 years at Notre Dame. Let's start with a simple one. What is the number one lesson that you learned while being CIO at Notre Dame? With David, I was very fortunate to come back to a place where I had gone to school. So I was an alum. I knew the culture. I knew the campus. I knew the values as a Catholic university.

And so very early on, it was sort of easy for me to fold in when there was such a lot of alignment of the purpose of the place between the board, the administration, students and faculty, alumni, all the different constituencies of university, each of whom, by the way, thinks they run it, right? But we're so tied together there by this common sense of purpose. And the alignment we had in establishing our investment goals, we had such strong alignment with our entire governance structure. I have realized over that time, just anything is possible. We have that kind of commitment, in alignment on any investment approach. So I was very fortunate to have that.

I would hear stories all the time from my peers about their, they hated their board or their investment committee, and they're interfering, and the president would offer stock advice. And it was just, I didn't have any of that. It was incredibly clean. So I was very fortunate that way. John Austin, founding CIA at Berkeley, asked me to ask you, how long was your IC chair, the chair on your investment committee? I was fortunate.

I worked for two gentlemen, Bob Wilmuth from First National Bank of Chicago, who basically brought me in. And then Jay Jordan, who's sort of a private equity icon, was chair really most of the rest of that period. That continuity is very unusual. Certainly he was one of the top, I think, private equity guys of his generation as well. He was, and his judgment on even beyond private equity about people and about markets and everything was extraordinary. He really an extraordinary man. Last time we chatted you said, investing is ultimately a people business. That sounds intuitive.

But what do you mean exactly by that? I learned early on it was a people business by watching some of the mistakes people made. They would make terrible decisions about their firm, their asset growth, the terms and alignment. And so these are decisions made by people. But ultimately, I observed more over time really strong examples of how people influence organizations and really instill a culture, really establish. the true north, if you will, for the organization, which is really important. It's easier in a school, like a Catholic school, would have a strong sense of what your true north is. I think it's

very hard in a secular institution to try to figure that out and then rally people around a certain culture. It takes a lot of leadership to do that. And so I admired firms where you've had that's kind of strong leadership that was able to establish really strong cultures and allow people to excel at the highest at every level of the organization. What does that mean when you pick GPs? When I first would meet a firm, I could tell right away if they really, you know, had their investment philosophy and strategy. How coherent was it?

Right away, they tell you what they do, what they don't do, what they're good at, what they're bad at. They don't hide things. They're very transparent. They have a strong confidence but not arrogance. It's not helpful in managing money because it's a tough game. But you have to have confidence and you have to. be professional. So right away, there was just a certain approach that the top managers had in

describing their firms, their vision. They're very transparent about mistakes they've made. They don't hide those kind of things. I probably met a couple thousand investment firms in my career. I probably hired and fired over 400. And there was sort of that common thread between the best GPs and really understanding what they do, what they don't do, what they're never going to do. and just the kind of people they want to hire, the talent they can attract, and then the consistency of leadership. That's critical. A lot of firms have a lot of turnover, partners come and go. You get different approaches, different priorities. But the best firms didn't really have that. They're long-serving partners who brought in the next generation of really talented people as well to extend the culture and extend their firm into decades of our performance, not just a few years. Is that also the case for the managers that grew their assets considerably, or is this particularly only possible when funds stay small?

There have been firms that have grown their assets, but they tended to do it evolving with sort of the global capital markets, with the growth in private markets. There's certainly a lot more opportunity in the world going to pickle back 30 years. when there was a lot, protectionism was not the norm. It was very much open. Economic liberalization, more free trade, more cooperation, more trading zones, where there was less tariffs. So there was a lot of interesting things happening. And so that was evolving pretty rapidly.

And then, of course, the advent of private markets and the explosion of private markets create a lot of opportunities. So there were definitely growth in assets, but a lot of times it was different products to take advantage of the opportunity set, different geographies, different stages of investing, all while keeping sort of their core funds very small. So it varied by asset class, but those are some of the common things that we used to see. There's almost a subtlety between being pulled by the market, pulled by your LPs, and pushing AUM growth onto the market and onto your LPs. It's been pretty much the norm for firms to raise a lot of money, start a lot of different

products. Founders tended to be more disciplined. New generations of partners were more commercial, if you will, transactional. We're more focused on their incomes, how they compare to their peers. And I think that's just dangerous. There's enough for everybody. Most of the money being managed is for all the most of the money being managed is for all the most of the profits, whether it's pension funds, endowments, foundations, and they have good purposes. They're doing good works. So I think you want to make sure that you're maximizing returns you create for them and doing it in a way that has balanced terms. And really thinking about the whole pie, not just your own salary and bonus.

What do you think behind the founders being more disciplined and the non-founders, for lack of a better term, pushing for bigger and bigger funds all the time? A lot of it's the way society's evolved. and incentives. We have more transparent information flow. You have the internet. You have social media. Just people think differently. Founders going back 30, 20, 30 years. It was more about relationships, building relationships and sharing ideas with people you've met, colleagues, friends, professional relationships. It was about the priorities they had. Founders generally led more by example. It's not one thing, but I think it's just how society's evolved and incentives.

have evolved the last 20 years. It's hard to fight that. I see it in young people today. That's just, that's just how they're trained. And that's not all bad. I mean, they're very talented. They're very smart. They've well educated. They've done a lot of things. I mean, they've traveled. I mean, when I was coming out of high school and college, I had done nothing. I barely traveled. I'd hardly been anywhere. I had a couple hobbies, but younger folks today have been all over the world. They've had a chance to do things and meet people that we never did. So it's not all negative. It's just really value relationships and relationship building. That adds more value and it's more fulfilling by frankly over time. If you had to summarize your investment philosophy while you were the CIA

at Notre Dame, how would you summarize it? That's hard. I guess I was always trying to partner with world class managers and companies slash founders who were aligned with our core belief that outsized returns would be achieved by taking a long-term view and investing behind strong management teams and growing businesses on the right side of change. I've lived through five sort of super cycles in technology going back to the mainframe and the PC and so forth. And these are massive cycles. And I always believed if we were vigilant and really engaged in talking to people and networking, we would learn about some of these technologies as they evolved through our partners, particular our venture partners, we'd have a chance to participate in a lot of that growth.

At Notre Dame, we built close to 35% of NASDAQ stock exchange through our venture partners. We had a lot of exposure to some of the great companies that emerged over the last 30 years. So innovation was always a constant theme. One of the things I've been reflecting on is that status oftentimes follows returns, but returns do not follow status. In other words, status is a lagging indicator of returns. Did you find that some of your best managers, when they came to you, they were a little bit weird or really thought differently than the rest of the market? They definitely had more of a contrarian mindset about things.

I wouldn't call it weird. I would just say that they were able to see things in markets and trends that not every, the average person didn't see. And just as importantly, they were able to articulate what that was and could be. But yeah, I think being an independent thinker, thinking in a contrarian way, is a very important investment skill. That doesn't mean you're always right, but it does ensure you're going to think about a variety of things others aren't necessarily thinking about. But it is in many ways, lowercase contrarian. In other words, truly contrarian, not something that everyone believes that sounds contrarian, but something that's truly contrarian versus your peers. Yes, exactly.

Those people stood out. And sometimes it took a while to fully appreciate what they were trying to tell you. But the best ones usually were onto something that became something very important in the capital markets. Could you tell early on that they were onto something? Or is it something that took five, ten, fifteen years to play out typically? Well, it usually took several meetings. Those meetings could have been over a few months or two or three years. But it definitely took several meetings.

There was a way they could describe things that was unique. I mean, they were smart. They had a strong sense of what they knew and didn't know. They had a lot of experience. A lot of my best managers had operating backgrounds. So they had worked in industry. They understood the challenges of running businesses and companies. They had some domain knowledge of certain sectors.

When you work in industry or in the corporate world, doing operations, sometimes you're more aware of things as they evolve in innovation and trends. Because you're right in the manufacturing space. space and technology space where people are talking about these things. You're not sitting on a campus somewhere overseeing managers. You know, you're right in the middle of it. So a lot of my best partners over the years had more of those operating backgrounds, which gave them a lens into evolving technologies and opportunities that not everybody would

see. I've still been thinking about since the beginning of the interview you mentioned that you knew what to look for in the right manager. What would be some early signs that this is really somebody to partner with for the next 20 years? Number one, they had an affability about them, a personal style that was compelling. They understood we were the client, that we were representing a large institution that had its own priorities, that we were good long-term capital, being a long-term endowment fund investor.

So they showed that kind of respect. They acknowledged that we would be terrific investors because of those characteristics. But they also had a very strong, coherent investment philosophy. they were able to talk about their sectors thoroughly. They could tell they were real experts in their areas that they knew well. Transparency, openness. I remember one time interviewing a small cap manager in Houston, and they had a good record, but they had a couple bad years.

So I asked the founder, founder of the firm, what would he attribute those years to? And he said, ah, the numbers are the numbers. He was very defensive. He didn't really want to talk about it. I'm sure he'd been asked about it a lot. But that's not the kind of response you want. It's certainly acceptable for potential clients

to want to understand what went wrong in some years. That doesn't mean it's fatal for them, but I just want to understand it. And what did they change in their process that might alleviate that in the future? And he didn't want to talk about it. So that was a quick no, one meeting, and you move on. The best managers, the best people don't do that.

They just don't do that. They're very happy to talk about their mistakes and what happened. And what they learned from it, most importantly, and what they've done about it going forward. Is there also a greater sense of vulnerability in the top managers and they're able to talk about things like values and what they stand for, knowing that some percentage of people will not align with them, but some percentage will and will be natural long-term partners?

100%. 100%. Definitely. I used to ask questions, David, about I wanted to understand the people and their personalities, how enduring their personalities were to creating excellence over. world multiple cycles. And I would ask them, what are your hobbies outside of work? Do you have a family? What do you like to do outside of work? We all have to have something outside of work, right? And literally in the late 80s, a couple of guys said, well, that's none of your business.

I think, well, I got it. I was asking about their hobbies. I was trying to get to know them. And so that, I learned a lot from, I was just being naive. I was a 26-year-old CIA. I was just asking, I thought, normal questions to get to know someone. Some might ask almost anyone. And they were, not everybody, but early on, some of the older school guys at the time were kind of defensive. And that just told me a lot. I just processed that in a way that said,

eh, maybe this is the right partner for us long term. Everyone I talked to on the show is chasing the same thing, an edge. And more and more, the edge comes down to your information, not just having it, but being able to trust it when the stakes are highest. AI is doing more of the information gathering for you every day, and most tools are very good at sounding right. The summary reads clean, but can you trace it back to the filing, the transcript, the specific passage that drove the answer? Or are you just trusting the confidence of the output? For investors, that's not a minor concern.

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The edge goes to whoever could trust their information and prove it. See it for yourself. Start your free trial at Alpha-sense.com slash how I invest. that's alpha dash sense.com how I invest. Speaking of partnership, when you look at a fund management team, not just one manager or two managers, but holistically,

what are you looking for from the entire team? Definitely a cohesion and sense of common values, common philosophy, what they all understand what they're really doing and how they're doing it. We would be with analysts. I would always want to meet select analysts or associate at a firm.

Of course, I'd meet all the partners thoroughly and the vice presidents and so forth, but at least one meeting, I would ask for a group of associates and analysts, maybe three or four, come in just by themselves and just talk about the firm, and what they're learning, the culture.

So, yeah, I learned a lot talking to all levels of people at these firms. My philosophy was I want to be with them for a long time. I want to grow with them. I want to be decades-long partners. some of these younger people are going to be running the firm someday or have more prominent roles over time. So just getting a sense of what kind of cohesion they have. They all understand what they're doing and why and how they do it. And so I enjoyed that. I really enjoyed the people part of it and getting to know people through the business. That for me was probably for the most

fun of it, honestly, just having a chance to visit with smart people all over the world and in all asset classes. The time spent in their offices, to me, I loved that. I love that. I love that. I love I love meeting really smart people. I met so many talented and interesting people in my career. It's just fascinating. That was a lot of the fun of the work for me. It's a very common cross-interrogation technique that LPs have taken from FBI and counterterrorism agents, which is you take, it's basically the prisoner's dilemma.

You put the prisoners into different rooms, ask them the questions, figure out where there's consistency and where there's inconsistencies around the story. Yeah, I guess you could look at it that way. I wasn't thinking of that specifically, but I guess we did some of that just intuitively. By the way, most of the best firms, the partners would offer that. It's like you should visit with some of our analysts without us here or some of our associates. I think that's how it started for me. And then over time, I would ask for that, but the best firms would always offer that.

They were not afraid of it. It's like the best bluff is no bluff. The best way to have transparency and all these things that you want in a firm is to actually behave in that way. day in and day out, whether there's an LP in the room or not. 100%. 100%. That is how it started for me. And I like that.

I was impressed that they offered that. At the time, I probably wasn't doing that as much. But we, over time, we did build that into our process for sure. Ties back to what you were saying before, this confidence versus arrogance, this knowing your story in and out, knowing where you win, where you don't win, what your strategy is, what's your strategy? This isn't something that just should be in the, the mind of one manager or the two managers, this should be a cultural-wide phenomenon.

It should be very intuitive and spontaneous for them to talk about it, right? It should be something to have to prepare for it overly think about. It should be so much a part of their culture and ethos and their day-to-day experience that it's easy for them to articulate that in a common way to their potential LPs. By the way, I've tracked some of those younger people have kept in touch, and they are running firms, many of them have their own firms. and you could kind of see it in them back 20, 30 years ago. You can see the beginnings of that in their young professional lives.

And so it's been impressive for me to see younger people like that become so successful. You could tell they had that in them, that they had that strong core and purpose and the sense of who they are. That translated into successful career. said another way those things that you looked for in the beginning of your career as they played out they were actually representative of a successful firm 100% absolutely strong correlation you mentioned this coherency of their strategy there's a famous Einstein quote if you can't explain something you don't understand it is there truth to that when it comes to great managers there is to a point yes I mean if you're

managing people's money and you're asking people to give you money to manage you had to be articulate what your edge is what's unique about you what's enduring about your work that you can add value over time it's not just one good year or a couple good years what about your approach and leadership uh personality allows you to bring that all together to create excellence over decades that's hard. As you well know, David, there's not a lot of people have done that over decades. There's a lot of good firms. But to do that consistently and transition to new generations of parties that carry that on, that's very unusual, very hard. So there's a handful or more, but not many. I had previously on the podcast, Eric Becker, who co-founded Crescent in Chicago,

and they've gone to $250 billion AUM. But between his entrepreneurial career and founding Crescent, he went out and he interviewed the firms and the companies that have been around for hundreds of years, trying to figure out what's the through line in these companies that survive five, 10 generations. And basically he came to the conclusion that the only thing that could really survive for that long

is values and culture. There's nothing else that was sustainable over more than 20, 30 years. Based on what you and I've talked about so far, you can see that I would completely agree with that. That would be the common thing I saw as well. Diet and culture, that's a good way to summarize it. It's also interesting because in many ways, the exceptions actually prove the rule. So everyone talks about Renaissance technology, this firm that returned, I think, 40% over 30 years.

And a lot of people think there was some secret algorithm that they kept almost like the Coca-Cola recipe. But really, that's not it. It was really the recruiting of PhDs. It was the machine that built the algorithm. that's sustainable competitive advantage. If you ask Ken Griffin, it's not their algorithms, it's not even their execution, it's the culture, it's the recruiting. And the day that they stop recruiting these great firms,

there's a half-life to how long they could continue to sustain. And particularly those kind of firms, I always found it hard to, they both were extremely successful, but I always found it hard to understand what they needed to do long term to stay so successful. When they did well, why exactly? They did poorly, why exactly? It was hard to sometimes put a finger on what really made them tick. Those two in particular, despite them being incredibly successful.

We didn't partner with either of them, but I've certainly admired their work and their success. I broke the Einstein thing that we were just talking about. It was very difficult to simply explain. You were famous for having these decades-long relationships with managers. How did those evolve over 20-plus years? natural life cycle there. I'll give me an example. When I was a new CIO, Notre Dame had one small venture relationship in Boston. It was like a million dollars out of 400 million, very small. But I did go visit that firm. And I thought, okay, this is a new area. I don't know venture.

That was not my background. I was still pretty young. Certainly was aware of some companies that had evolved in the 70s and 80s from venture money, but it was a new area for me. And I had to be in Sanpren Francisco talking to Dick Barker who at the time was president of the Capital Guardian Trust Company, which was headquarter in LA, but the head of San Francisco. He was president. And I asked him, I said, I'm up here in San Francisco. I know Stanford University is just down the road in Menlo Park. And I'm hearing a lot about his venture funds. And should I explore that? And he said, well, you've got to meet Don Valentine. And I didn't know who Don was at the time. I should have, but I didn't. And I said, well, I'd love to. He goes, he starts

Sequoia. We back to. him. The capital partners' money was some of the early money that they used to start companies before they started funds. So they knew them well. So he calls Don. This has come down tomorrow morning at 9 o'clock. I go in and meet with Don Valentine and Sequoia. We have a nice conversation. He calls Mike Moritzin to meet me. I let them know that we're doing some new things at Notre Dame. We want to invest in private markets and venture capital. And I would love for them to consider us when they raised their next fund. They both said, well, when we raise our next fund, we would love to have another name as a partner.

And so we started in their early stage venture fund. And then again, as markets evolve, things became more global, private markets exploded. They went into China. They did China, by the way, extremely well at the time. And continue. They've separated companies now. But other, I won't mention names, but there are the venture funds, top-tier venture funds who try to do China, and they did fail miserably. So a lot of success they have is they put the right people, Mike Moritz, led that.

He was over there. They put the right resources on it. They recruit the right people. They started a Chinese venture operation, which was very successful. So, yes, when they added new products in capital, but it's been very specific reasons to take advantage of very specific trends. And we evolved with them. We invested in all of those products over time.

But their early stage venture fund is still very small. It's still about 500 million or so, 500, 600 million. It's still small. And that's been the case for decades now. That's good discipline. That's unusual. So, yeah, we evolved with them. We learned from them.

We're with them in assets. When I started with them, we had $400 million in an endowment, $400 million. Now the NERDenownments over $20 billion. And they were extremely small. But we both evolved. And they would call me. They would ask me my thoughts on LP issues. I would call them and ask them for advice on other venture funds and people we were meeting.

It was a really collaborative, really wonderful. relationship. And despite their incredible success, I never had trouble getting to see them, talk to them. I never had any problem. They didn't treat me any differently from day one to 30 years later. I just felt a common bond in the sense of we've done this together, and this is really great. We've created some great companies. We've traded massive wealth for a lot of nonprofit institutions, and there was just a common sense of fulfillment, and we had fun doing it. That's a good one. And there's a few of this, but that's a, It's kind of unique.

There's not many like that. Outside of investing and putting capital into subsequent funds, which obviously is very critical, how can LPs be better partners to GPs and how could GPs be better partners to LPs? Sometimes GPs can underestimate the complexity of the LPs portfolio and decision-making. Institutions sometimes have a lot of hoops to jump through

in investment committee meetings, and their fund is only one part. of the overall equation for an LP. It can be a small part even, but it's only one part. LPs also have to consider liquidity. Most of their LPs of venture funds are spending institutions. They spend 4 to 5% a year. So the liquidity requirements, the pacing of commitments is important. Over time, how much are they committing and when? The vintage year thing and then stacking those with all your other partners. So LPs have a number of their governance structures. It's not just about one manager in isolation or one LP in isolation, they have to understand that LPs have a

variety of challenges they're dealing with. And I think as a GP now, it's easy to underestimate the amount of time it takes on the non-investment work, the capital formation, the compliance, the staff office, audits, all that, and the operations. That's a lot of time. And then probably as an LP, we didn't appreciate how much of our GPs are studying on that too, especially early on. When you're on both sides of the table, you do learn different things about each other that are helpful to the relationship over time. You developed a reputation at Notre Dame for not having sharp elbows. What does that mean exactly?

And how did that turn into an edge as an investor? It wasn't really in our culture to have sharp elbows. I mean, we always thought the best in people. we were naive, but we thought the best of people. We wanted to get to know them. We felt if we treated people well and were consistent in our relationship, they would treat us well. We would get more and more allocation. We certainly were not afraid to speak up for ourselves.

But we also, look, at the end of the day, we don't run those firms. So they're going to decide allocations. They're going to decide, make those kind of decisions. But I found it more helpful to really build relationships, try to really get to know people, make our case and then make our asks and then trust them to do the right thing. And honestly, our best partners always do the right thing. I never ever surprised. And I was usually pleasantly surprised.

But I was never negatively surprised. I always thought it was a fair decision. And I could trust them. And trust is really important, right? In any relationship. Some of the Aggaly schools had sharp elbows. They sort of out for themselves in some ways. We just had a broader sense of the world and humanity and our place in the world.

I think it just came from our religious heritage, if you will. It's a different mindset. Whatever religion you are, it's just a different mindset. And that was our founding. So we just thought differently about things like that. It wasn't fun for me to have sharp elbows. I could do it if I had to, but that wasn't my first thing I thought of. It reminds me a little bit of David Swenson's strategy, which is somewhat paradoxical.

He wanted to do the right thing for Yale. He wanted to do the right thing for other LPs, and he also wanted to do the right thing for the GPs. And you might think, well, how is that? How could you do the right thing for all the parties? But if you structure things in such a way, it could actually be a win, win, win for all parties. We certainly tried to find the optimal balance of that.

I'm sure we missed some opportunities, good and bad, but if we missed enough of the bad ones and got enough of the good ones, we were going to have a pretty nice portfolio. That was something I would preach to my team. Let's make sure we've made the really bad ones. The ones that blow up, just they do not fit our criteria. We might miss a good one here and there, but that's okay. We're not going to get everybody.

But we got our share. We definitely got our share. Oftentimes, the Notre Dame endowment was early in a manager, and you provided that signal that GP so desperately needed. And you chose not to hammer people on the terms. Why? We would talk about terms, but we weren't overly obsessed with changing them just for our benefit. We had a broader sense of the partnership, their challenges.

We just wanted something fair, that we thought was fair. We had no problem paying up for excellence. I did not mind paying premium carries over certain IRA thresholds, if you will. I'm happy to pay up for excellence. As long as there's a balanced, the terms are balanced in that sense. We would actually encourage that sometimes, rather than go to just a, flat, let's say 30% on a private fund, we'd say, well, you start at 20 and go to 30, or maybe higher than 30, if you're earning over four or five X for the fund, and I'm happy

to pay people more for that kind of work. It's buried by firm and situation, but we very much we'd talk about terms, but we were just more balanced about it and not trying to get every penny. And I think we just felt if this was a long-term relationship, we would say what we thought was important and they would take care of us over time. And they did. And they did. And they They treat their LPs very well. Reflecting back on premium carry, obviously at the time you had no issues paying it. But looking back, did those investments end up on that basis in a better situation than the non-premium carry? And in retrospect, was that maybe the wrong decision with a perfect hindsight?

The ones we did premium carry for did very well. It wasn't everybody, right? But the ones we had, the we selected did extremely well. So that worked out very well for us. No question. And rather than negotiating fees in a lot of these situations, you negotiated capacity rights. Tell me about that. As we moved along, especially in some of our public portfolios, actually, public equities.

We were very pleased to see sort of a younger generation of emerging talent come in in the stock picking world kind of globally in different niches, different sub-sectors or different niches. but the only way they were going to be successful, David, was if they stayed small. They couldn't raise billions and billions. They had to stay relatively small. And we were happy to fund them early with the understanding that they would grow at a more measured pace, mostly organically. And that if they ever did raise money, we would have certain capacity rights. And in some cases, they had to get our approval. We didn't always ask for that.

It wasn't always necessary. Sometimes they didn't want to do that. That's fine. But we did get a little more aggressive in that. with some of these public managers because it's a lot harder game. It's tough. We all know how hardest to beat the market consistently over time, the stock market. So yeah, we did. We did negotiate some capacity rights that if they ultimately were going to raise money, we would have the right to take whatever, 50% of the new money they raised or 25% or something like that. It'd get a very best

situation. And it helped them understand how being smaller to medium size was better for them, too a long term. And those worked out pretty well overall. Not everyone was super successful, but overall they worked out pretty well. They stayed small and nimble. They had good returns. We got good public exposure. That approach was very successful for us. Is there an economic rationale for staying small? In other words, there's more durability in that kind of business, or is it purely doing right for investors? I just think, if I write a book someday on the 10 most important investment principles and what ruins a firm size is number one. Absolutely no question. They just get too big for their strategy. They get sloppy. They get greedy.

They start living off management fee. The incentives are not aligned. And I watched this movie play out over time. When I first started, all the management fees were budget-based. They would show you the budget. They set the management fee based on the budget. And the only way they really made money was through incentive comp to the carry. And that was pretty standard in the business. And then you started getting these large buyout funds, raising billions of dollars, charging higher management fees. And, you know, that changed the game a bit. And then that became more common. But to this day, we did a lot of venture, we did a lot of lower middle market, a lot of microcap. And now at Grafton, we're doing the same thing, the send of those same areas. And the

managing fees are still, with those firms, are pretty much budget-based. They're not making profit on the management fees, the ones we're working with. They might have a little bit here and there. They might be putting money away for the future or whatever, and that's nothing wrong with that. But they're not getting rich up management fees, the people I work with. That's changed a lot, obviously. As private markets have exploded and institutions want to put more money in privates,

just the capital flows, the growth and assets under management and private equity funds, it's just absolutely exploded. And I don't have the numbers in front of me, but I think late 80s, the entire amount of money raised in private equity vehicles was just a few billion dollars globally. Now it's hundreds of billions every year. It's completely changed. So it's important to sort of pick and choose what's important in what you believe will add value over the long term. Actually, I once saw a graphic on management fees in venture specifically, and the small funds had two and a half percent and then the very large funds had two and a half percent. Everybody in the middle was like two percent and some were like one and a half percent

with concessions, meaning either management fees were literally just to keep the lights on. They just couldn't be negotiated because it was existential or management fees were just, we have such a market position you want to get into these top quartile funds, so you're going to pay the two and a half. It was kind of like almost a form of carry. Yeah, exactly. I observed that as well. I want to go back to 1988 when you just become CIO at Notre Dame.

Tell me about how you went about building out your strategy at the investment office. We needed to change the whole approach, honestly. And thank God I had the strong investment committee chairs we talked about earlier in Bob and Jay. I basically laid out a blueprint for what I thought was going to be critical. And it started very simple. I needed more of a budget to hire talent and build a team. and for travel. I remember that the budget for the office then was so small

I could barely even travel much, much less higher talented investment professionals. I was very fortunate the board really helped kind of educate the administration, if you will, more about how this has to work, what we need to do here. And people bought into that. We never really had any resistance.

The expenses were paid out of the endowment income, like a mutual fund as well. So that helped. didn't put a lot of pressure on the operating budget of the university because it was paid proud of the down and pool, which is standard procedure. And so we just, over time, we're able to build that. So for me, it was basics. I'm getting a team to help me, having enough money to do the, by research, traveled in New

York, San Francisco, London a few times, eventually China. We started going to China a lot. Well, we started in early 90s, but really picked that up in the late 90s. Yeah. So that was critical. And then over time, just getting, okay, when I first started, David, we didn't have that many managers, but they all came through campus at least once a year to present to the committee. Well, that was a waste of time.

There was no reason to do that. That was my job. I mean, I wanted the committee to focus on other things, a higher level things. And they got it. Luckily, they said, you're right. You do that. The chairman of the committee used to deliver the performance report at committee meetings, as opposed to the CIA

and I said Bob I can do that I guess yeah you should do that I mean they were just very happy to just let me do it I just needed to ask them or tell them or say

this should be this something I should do they never said oh no I got to do this they never said that they knew they just wanted to make sure I was young

they wanted to make sure I was ready that I had the credibility that they wanted me to succeed so they don't want to do everything too quickly but as soon as I would bring something up

they say, yeah, that's something you should do. You and the team should do that. And so just over time, we evolved to where we had the delegation of authority and investment authority to run with everything, report appropriately back in line with common standards of large investors. But the staff was really running things. Eventually, I would say the two things, the investing committee really focused on, which they should, was risk and liquidity.

What kind of risk are we taking and what kind of liquidity do we have? especially in the time of emergencies, which we had, by the way, in the global financial crisis, right? Ultimately, everybody survived partly because everybody got bailed out. If that hadn't happened, who knows what it would happen. But that did reinforce the importance of liquidity for spending institutions who are spending 45% a year. The operations depend on it. I kind of remember when I started in 1988, endowment spending as a percentage, of the total budget was probably under 10%, probably like 5%, and now it's probably close to 40,

in mid-30s at least. That's a big difference. In some ways, it's really good, but in some ways it's a challenge, right? Because markets are variable. So you have to build in protection, you have to build in cushions, you know, you can't overspend. But this is a lot of decisions to made life. The committee had, those are the things I wanted to committee spending. time on, not evaluating some stock manager.

I never don't know anything about. So we got to a good point with that. But those are basic fundamental things that I had to work with, I'd work on every time. We got it all done without any angst, really, which is very unusual. You were 26 when you became a CIO. In hindsight, was it crazy for them to make you a CIO at that age? At that time, no, today it would be. We had such a basic portfolio.

I had an MBA. I'd been on Wall Street a couple of years with the Irving Trust Company. I had done work with some pension funds and their allocations at Irving. So I had just enough experience to deal with the kind of portfolio we had at the time. And then with their leadership and support and confidence I grew from their support over time. And the bad did a lot of benchmarking. One nice trade is I had been a science major undergrad. I was a biology major.

I graduated a biology degree, and then went to business school. So I knew I didn't know a lot of things. I was not a know at all. I knew what I didn't know. I was not afraid to ask people's stuff because I wanted to get it right. It was my school, my alma mater. I was newer. I wanted to get it right.

So I didn't mind asking questions. I didn't mind going visiting other schools. People like Cambridge Associates were very prominent, working with endowments, particularly the big endowments at the time. They had great data on how schools were. investing and asset allocation and all that, Nkubo, all those resources. And I really dug into those and was really trying to learn what was happening out there and why. I was very, intellectually, I just knew that there's a lot I didn't know. And I had to learn this on the job. But I had

the support of the institution, the long-term support, to do this and do it right. And that's a difference. You don't always get that. We've got a lot of change early. But I did the pace that they could stay with me. I communicated well, maybe over-communicated sometimes, but I felt that was really important to gaining their confidence on what we're doing. So it was a lot of work, but it was fun. Because I knew we were all in it together, which is, again, very unusual. We were very lucky. Fast forward to today, you started Grafton Street Partners. Tell me about Grafton. So when I stepped into my rule in Notre Dame, it was now we're in COVID, which I don't recommend doing that.

That's how it worked. But a year and a half later, I got approached by a couple large family groups that I've known over the years, and they wondered if I would have any interest in helping them with their investments,

and I thought it was very interesting. I ultimately decided, well, let's actually raise a small fund, all equity, public and private, half managers, half directs, and really build some long-term compounding vehicle and long equities. using my Rolodex

of relationships plus my two very talented investment partners and Andrew and Steven who I taught at Notre Dame and who I, two of the best students I ever had.

I taught over a thousand students. They were my first two phone calls so you can tell how highly I thought of them. And I knew Andrew Tarneski had more of a background in the private side. Steve Sandrack had more

background. He had some private background but more in the public side. It ultimately ended up at Viking and then Tiger Global and he's a terrific stock analyst. We have an in-house stock portfolio that's absolutely killed the market over the last four and a half years. Very concentrated, but some very long-term companies.

I knew I couldn't do this alone. I'd rather raise up fun than just do it for one or two families. And so we ended up just reaching out to a number of high-network people that I knew and they knew in family groups. And to this day, all of our clients except for one are family office groups. and we're like you said, we're about a billion three now. We've almost doubled their money in the four and a half years, four years. We've been in existence. But I love the vehicle.

I love the long-term nature of it. I love the compounding. I love the public and private aspects. It does so you have liquidity. You can reinvest realizations back into the market, back into new deals. And it's sort of, it's achieving what I'd hope they would achieve. It's just a great kind of high teams net returner for some of the new deals. who wants a long-term aspect of the portfolio.

And not a hedge fund. It's a long, pretty much long-only. Great people in stocks in the public markets and the private markets who are really skilled and talented of what they do. That's how it started. And we're having a great time. I love investing. That's why I was even intrigued to begin with.

I just love investing. And I love doing with really great people as I did in Notre Dame. And now I have the same dynamic here at draft. And by the way, of our all, All of our investment team, I taught at Notre Dame except for one. So I've known these young people, a lot of their adult lives. And I've seen them as students. I've seen them, their values and their integrity and their work ethic.

That's a real advantage. So I've been able to continue a lot of the same things I did in Notre Dame here at Grafton. We don't have some of the institutional requirements. I had at Notre Dame, right, as an officer of the school. And very involved in a number of initiatives, and a lot of initiatives. So it's a little more focused on investing, which is nice. At this point in my career, it's something I'm really enjoying. I'm so curious with your experience.

How did you build out the private books? What were your first principles? We knew that we were only going to do venture capital in its various stages. And microcap, PE, buy and build stuff, lower middle market. I never did the big bot funds. Never did. And this was both Notre Dame and at Grafton. And Grafton, both.

Although at Grafton, because we're smaller, we're actually to do much smaller opportunities. And more real microcaps, real buy and build stuff. putting much smaller dollars to work. Just something a billion dollar fund can do that a $25 billion fund just can't do. Plus, Andrew and Stephen have a lot of direct investing experience. At Notre Dame, we were institutions, hire managers. We're doing that plus direct investing.

And we've been able to add a lot of value in that as well. I think I have good judgment on people and opportunities and, like, I read the memos, I meet with the founders, but they're doing the deal execution and they do diligence on those. So it's a nice synergy. And then the managers, that's where I have most of the expertise and where I spend a lot of my time is developing manager relationships, meeting with new managers, potentially new managers, emerging talent.

I love meeting with emerging talent. So it's a nice combination of skills that's come together to form a really good long-term compounding vehicle. How did you go about building out your venture strategy? I started with a couple of names that I've known over the year. I worked with over the years, three or four names there. and then we started meeting with a lot of new emerging town and venture space. So we have a number of seed funds where we really like the principles. In some cases, this might be their first institutional fund, but they have a deal record.

They've done one-offs here and there. Some of them worked at other large firms and then now are on their own. So they had to have some deal experience, some record of some sort. But in some cases, their first really broader institutional fund. fund. And we have a number of those. So it's a combination of that. And then for the rest of the private book is, like I said, the lower middle market, microcap PE, and then the direct stuff we're doing. That's about half and half. What's the hardest thing about building out a venture book?

We started in 22. Of course, that was a different time. And as you have an evergreen fund, it's a new fund. So you're getting and making commitments. There's no realizations for a while, right? So you're going through the J curve, you're not getting a lot of value yet. Luckily, public markets did exceptionally well in 23, 24, 25. So we rode that heavily, and that's why we've generated almost a 20% return combined over that period. And now we are starting to get a lot more markups, new rounds of financing in our private book, the manager portfolios are starting to mature now.

It just takes time, people who do private investing now. And we were a real startup. I mean, this was a real startup. So now we're at a point where we're getting a little more equilibrium between the two, public and private and getting more contribution to privates and eventually more liquidity. We've had a couple IPOs recently. We've had some nice markups. We think there'll be a lot more realizations over the next 12 to 18 months.

And then we'll plow that back into new opportunities in the fund. So it's starting to get a little more of a steady state, equilibrium in terms of the cycle, which will be helpful. How did you think about your deployment schedule, whether it's private equity or venture? It is more opportunistic. We had a group of firms we wanted to work with as they were raising money. We invested. We didn't feel any need to do anything.

We didn't feel a need to do this quickly or all at once or anything like that. We were taking a long view. We had a target list of groups. We were meeting some new people. people like Dave Thomas at Riverspan partners came out of Golden Gate, lower middle market industrial. I knew Dave from Notre Dame.

I had actually worked. Notre Dame had invested with him at Golden Gate, so I knew the kind of person he was and the skill he had. Now he's raising his own thing. Smaller at first funds like $300 million. They've done four deals so far. They're doing really well. That's the kind of firm we like.

Real strong principles, great integrity, long-term view, good values. We have a real deep expertise in some sector. They're hard to find, but we don't need very many. We're just a handful of those, and we're going to earn some pretty good returns for our clients. So it's just, it was opportunistic and then just kind of leaning on some people that I've known, my network, and then also adding new emerging talent as it's evolved. Goes back to this information of symmetry.

The best venture returns, some of the best returning funds were not actually funds, was David Sacks' angel portfolio, Mark Andreessen's angel portfolio. And the reason for that is they knew these people personally. This was not them hiring managers to go find the next slew of talent. Mark Andreessen knew these people. He had work with these people. And that information asymmetry you mentioned with your students. It's just such an underrated thing.

When you know the person, you know exactly how they're going to act. Couldn't have said it better. That's exactly right. You had to play your strengths. And that's just something. I know this network of people that I was involved with. at the school and they're extremely talented. And I met a lot of others, other places as well, over almost 40 years now, I guess,

38 years. And so it's nice to be able to continue to work with a lot of those people. It's a lot of fun for me. And you mentioned you weren't too concerned with getting into too many funds. Obviously at Notre Dame, you had certain constraints in terms of number of funds yet to be diversified to a certain extent. I've had people from formerly Ivy League endowments talking about there's just too much diversification from LPs today that you don't need 50 funds with 20 positions and over 1,000 positions. Where do you stand in terms of diversification and how necessary is it and is it overblown today? I do agree with that sentiment.

I think the big endowments had way too many managers, too many buckets, in some ways too risk averse. that some ways they should be leaning in more and taking more volatility. They also raise a ton of money. And so that gives you a cash flow. I mean, cash is fungible, right? I mean, it gives you a cash flow that a lot of institutions don't have. So I do think that people have too many managers still do. Generally, it's got a little better at some of the big endowments,

but I had to do it over. I would try to be a little more concentrated. It's hard. incentives are to have more managers, more diversification, kind of CYA a little bit. We got a lot of diversification. It's a lot of equity beta, but we have a lot of different styles, you know, and it worked, but I mean, grafted, I don't have that same dynamic, right? So we're much more concentrated.

We're going to have more volatility, but I'm just really looking more at the endgame here. How much, what can I do for my clients over a 10-year period? The interim doesn't bother me as much, and it doesn't bother them that they know what they invested in. And we're not spending. We're reinvesting realization back in the fund. There's a three-year-a-lot. They can ask for liquidity after the three years at a certain pace so they can get liquidity. That's no problem.

But we're not spending like an endowment every year. So we have learned from that in this format and been more concentrated. And we're not doing real estate. We're not doing private credit. We're not doing any bond fixed income. We're not trying to diversify that way. It's not an endowment model. It's pure equities, long equities,

about 60% private, 40% public. What learnings have you brought from the LP position into what it takes to be a great GP? As an LP, you don't fully have a window into how much energy goes into the business part of the GP and on all the compliance. The bank office, capital formation, communications with your LP.

There's a lot to that. I mean, just writing letters. And that's a lot of time. Most letters are terrible, by the way, right? So if you want to have something that people are going to read, you want to give a lot of thought to us. And I think we've done a nice job with that. We're doing semi-annual letters. So twice a year, we do a longer one.

And then the intermediating, the two other cores, we do something a little more streamlined. But we try to make those two bigger ones really interesting and more meaningful and more content that could be useful to people. But that takes time. My partners and I do that. All three of us are involved. what's a fair amount of time, which probably is an LP you don't think about as much. You get the letters, you kind of assume they have some template, some junior analyst fills in most of it, and then the principals add a nice intro in closing or something.

And that's probably not, was true. But now I know how hard that is. So yeah, you learn a lot about the time involved in those kind of activities that you didn't maybe focus on as an LP. As an LP, you're thinking about them, mostly about their investment selections and, and what they're doing with their companies. And you're forgetting they're spending a lot of time on all that other stuff too. Do you have this theory of mind of the LP, of the customer,

on a deeper level than probably 99.9% of GPs. What are you able to understand about LPs that most GPs are not able to understand? I know that LPs, we were talking a little bit earlier, about all the challenges they have and some of the unique dynamics they have institutionally. And so I'm aware of that, right? I'm aware of they have boards.

I'm aware they have a governance structure, they have liquidity needs. They compete with each other. They won't say that, but they do. And returns. So I'm just aware of the cultures of those places and how they think about stock. We haven't presented to a lot of institutions because of the time involved. We really want to invest. Family office groups are better at making decisions faster.

We found... I just can't do 10 meetings with one potential LP and then three investment community meetings. It's just not of interest to me. We didn't start the firm to do that. We've done some and we'll continue to do some and we'd like to have more institutions, maybe more mid-sized, small institutions, you know. But yeah, they have a process that a lot of it's just they got to check a lot of boxes. And I get it.

I get it. I was in that seat. So I do appreciate what they have to go through. And it's not easy. But they're not, a lot of them aren't very good at fallout. They're just kind of sometimes arrogant about feeding GPs, you know, professionally. I would never do that. So, yeah, but I guess to answer your question, just being more aware of all the challenges they have and being understanding of a lot of that.

Sometimes even if the behavior is the same, understanding what's causing it could make it easier. And when I've advised some funds that are raising from institutional investors, I was like a senior advisor. And so I would tell them, these are some things you're going to run into. Don't let it deter you too much. You know, stay positive, just work with it. It's going to take time. That's just the nature of it and just be available to them. And over time, that works.

I have used that experience more to advise. So if you were raising funds as our senior advisor, if you will, more than a Grafton, I guess. And the flip side of that is once they're in, they're in. A lot of these institutions are in for three, four funds. So it might be painful on the front end, but it's long-term capital. If you do well, they're typically going to stay with you. 100%. Looking back at your career, what decision or decisions are you most proud of?

I am most proud of building really a first-class organization for Notre Dame with a lot of talent. something reflects the school and its values and its ambitions. I was proud of the team culture we had, the impact we had on students and faculty, particularly like financial aid. We grew the financial aid endowments tremendously. And we weren't even meeting full need when I first came back to be CIO. We were not meeting full need. And now we have some of the most attractive financial aid packages in the country.

We're below a certain household income. There's no, you don't pay anything. and the loan component has come way down. I think we're at a point now where our average student has less than 10% of cost as debt, even lower than 85% as debt. That's way, I'm in my finances over half my expenses another day with long-term debt, your student debt. So our kids are not leaving a lot of debt, very little debt, most of none.

That's a big change. So I'm very proud of that. Now they're getting more of a kickstart when they go out there. They're not writing checks every quarter of the student loan funds that they have to pay back. I think having some skin in the game is good, but I think too heavy a burden is tough. You've got five, seven, ten years there. It just makes it tough if you're writing those kind of big student loan debt checks. I had that, but, you know, I didn't mind it.

I did it because you just do it. But it sure feels nice to be able to have kids start off a little better financial position than we had back 30, 40, years ago. So I'm very, those are things I'm really proud of. What's your biggest regret or the biggest mistake that you made as CIA? As a younger CEO, you focus on returns a lot more than you do risk. And I think the telecom bust and bubble in 99, 2000, I learned a lot about risk. We did really well through there, but it was volatile. We had a fiscal 2000, which was June to June, we had a fiscal 2000, which was June, we had about a 62% return, I think it was the highest in the country, the time. And then the next two years, we were down seven and then six, I think, seven or eight.

So the pattern was a little ball. So the combination of three years was really good. But it did occur to me that when the NASDAQ was hit those levels, I might have put a little hedge on. We might have sort of obvious today, right? But I wasn't thinking about that as much. So I learned from that. But luckily, it was not a painful lesson because we did well, but I did feel we could have done some things that could have added more value than we did.

A little more attention to the risk and liquidity. I learned throughout my career, particularly those middle years, that I now focus on a lot more. So that was probably just wasn't a big mistake because nothing really happened. I did learn a lot from that. And the global financial crisis, too, in some ways, just. how much capital can you really lock up? I mean, we have the private book, plus public managers have lockups,

hedge funds have lockups. All of a sudden, now you've got a lot more of your fund locked up than you thought, and the market's, you're marking things way down. And so when it comes time to spend, where are you going to get the money from?

So just being more conscious of that and having a liquidity policy that make sure the institution's never at risk that way. Just tightening that up. I think we did a good job of that, but something we had to learn. Nothing happened. We had no problems, but it was a good learning at the time.

What about the speed of your decisions? Did they become slower or faster? Fast. Much faster. Yeah. As we got confidence and experience and delegation of authority, we didn't have a bureaucracy. We had to be weighed down, but we can make very quick decisions. Ultimately, if I need to make something really quick that normally would have required some sort of review, I could call the chair of the committee, and he had the authority to give me permission

on just about anything. If I really had to do it, like, right away. There was an opportunity that came up or just something, maybe we heard about something late, and we had a chance to get in a fund, but we had to tell him, like, the next week, and maybe it was a bigger number. You know, they were, it varied by situation,

but we set it up that ultimately the chair and I could make those decisions if we had to, and then we could report back to the committee appropriately. And we didn't have to use that very often. I had most of the authorities to do what I needed to do. But you have to be quick sometimes. You just have to. That's the markets.

That's life. I mean, you can't take months to review something and then let's get back to them. I mean, so you got a lot quicker, a lot faster. To be honest, I thought you were going to say slower because there's value in seeing more cars and getting to know a manager more over time. Well, we got better at it. Yeah, we got better evaluating the managers. We asked better questions.

We were more efficient on our time and how we use their time. The quality of the review was just better and better. So, yeah, no, it definitely was quicker. It's definitely quicker. Is that just good advice for somebody building their career as investor as to go slower in the beginning and as you get better to increase your speed? We all learn our jobs better over time, right? I mean, I was at 32 years.

I was a much better CIO at the end than I was at the beginning. I had good instincts, but you just get better. You recognize patterns quicker, these patterns of excellence in people. That may come from my science training, by the way. That might have been where I had a value with the team even being the sole sort of science. I haven't been a science major. I recognize systems and patterns, maybe faster, and saw things in people that led to excellence over time. It wasn't just the numbers or I really could see that.

So I think over time we got better at it, not just me, but the whole team. got better recognizing patterns of excellence in people and what was the perfect template for us with the manager. We just got better at that. And we could make better decisions that way, and faster decisions. And we got to more people. We could interview more firms, meet more people. We weren't bogged down as long as some of these decisions. We had, honestly, in a typical year, we would have interviews with 500 or 600 investment firms. And maybe include that might include some current partners, but we've been a lot of people all over the world. So we had a big network.

And you had to make a lot of decisions quickly. Is it true? A lot of LPs will say that there's a huge incentive to meet a manager once, but who we have a second meeting with is very selective. That's fair, and I don't think that's all bad. You get more reps that way. I know I took a lot of meetings early on. I probably wouldn't have taken 15 years later, but those reps were good because you also

had to understand bad patterns. you know, what's not good. I remember meeting with the CFO of Enron when they were raising those private partnerships. Before we knew about the fraud, they were still riding high. The CFO came out to Notre Dame campus, met with me and some of my team. They were raising those private funds. And I asked a very simple question. I said, how do you determine a CFO, what goes on the balance sheet of the company,

and what goes into funds? And he pulled out of the pitch book, literally, and had a little. line on it, the board of directors has waived all conflict of interest policies. It was in the pitch book. And I'm like, this is a problem. This is, I've never seen that one. So, yeah, I mean, something stand out pretty bad quickly. And then probably 30 days later that they got invited.

That's an unusual situation, obviously. What do you hope 50 years from now people will remember about your career? That I helped build Notre Dame into a world-class institution. I did it while teaching and supporting students. Like I said, I taught over a thousand students. I've helped hundreds of them with job advice, networking. I still hear from students and former students all the time through LinkedIn and emails, just asking, hey, can I get I got 10 minutes?

When you spend a few minutes with me, I'm looking at this, I always do. I don't think I've never said no to any of those. I always try to make time. It may take me a few weeks to get to them, but I'll get there. I just, that was part of my vocation, honestly, was giving back and helping the school and helping these students. been young people, we've all been 20s and late teens, and we know how health way it is when somebody takes an interest and really gives us good advice and is available as a sounding board

to us as we move along. You can't have enough people like that in your life. Venters and people who are interested in helping you. That's a wonderful thing to have. And I think it's a young person knowing that and taking advantage of that is a real advantage. And I'm happy to do that. So that ethos and those kinds of things are really what I hope you remember. Scott, I think this has been a three or four year process to get you on the podcast. So it's really great to have you on. Thanks so much for sharing your wisdom. And looking forward to doing this in person soon.

Thank you, Dave. I really enjoyed it. Thanks so much for having me.