Investing Billions - E111: KFF’s (Kaiser Family Foundation) CIO on their $700 Million Venture Capital Edge

Episode Date: November 12, 2024

Dean Duchak, Chief Investment Officer at KFF sits down with David Weisburd to discuss the lessons learned from 13 years at KFF, how to create a culture of collaboration in endowments, and Dean’s perspective on diversifying investment strategies.

You guys are a $700 million endowment. You mentioned that 100% of your private allocation is into venture capital. Tell me about that. I think it's fairly well known that empirically venture capital is an asset class where there is a persistence of returns, at least more than any other asset class. So, secondly, if you're able to access that right tail of managers, the long term performance is exceptional. What are some skills and some practices that somebody should do

when they're starting out as an institutional investor? The way I did it is I responded to every single email that came into my inbox. I took a lot of meetings. When I was one, two years in, it was meetings all the time, getting those reps and understanding how different people present different strategies,

taking the reps just to understand what to look for, what you like, what you don't. Asking questions, I think that's another thing that, of course, was always an interesting thing is are there no dumb questions? And oftentimes I found in the beginning when I was young, I wouldn't understand a concept or it was being presented a certain way.

And the reality is, is it was being sold, as you asked earlier, in a more complex structure. But at the end of the day, it's a much simple concept. And just asking the question, and I think that helps create dialogues between LPs and GPs, asking questions to teammates, bosses, mentors that are much more experienced. You have to build the confidence to actually ask simple questions over your career. It's a paradox.

Dean, I've been excited to chat. Welcome to the 10xScapable podcast. Thanks, David. It's great to be here. Appreciate you having me on. So tell me about KFF, formerly known as the Kaiser Family Foundation. Yeah, KFF is a wonderful organization and one that I'm really proud to support. The organization is doing really important impactful work, and knowing that and coming to work every day really centers us on the work that we do. KFF is a public charity that is an independent source of health policy research, polling, and journalism.

We have four major program areas at KFF, policy polling, health news, and social impact media. As the CIO, tell me how you've established your asset allocation across different assets. The way I think about it is the asset allocation and the portfolio is always built in service of the organization, putting together a portfolio that furthers our goals and the needs of the organization. With that in mind, I don't think our asset allocation will look very different from a lot of our institutional endowment foundation peers. That is, we have a decent illiquid allocation within the portfolio. We have a healthy allocation to alternative investments that support traditional equities, fixed income and real estate and real asset investments.

And so, you know, the approach we take is, you know, we're not trying to reinvent the wheel here. We're building a diversified portfolio that can generate the type of returns that we need to support our mission and support the goals of the organization. How do you know you're diversified? That's a good question. And I think one that, you know, a lot of people, it's a word, diversification is a word that a lot of people like to use without potentially understanding the impact and actual meaning of what it is.

Having exposure to different asset classes may appear on paper to be diversified. But as we saw even in 2022, when equities and fixed income were both down double digits, people had assumed that maybe they were appropriately diversified or hedged because they had access or exposure to these two different asset classes. But in fact, that was not the case.

And so I think it's one of those things where it's incumbent on us as part of the investment staff to understand and underwrite our investments and build a portfolio such that our exposures, the factor exposures, the geographical sector, asset type exposures, the factor exposures, the geographical sector, you know, asset type exposures all come together to build a portfolio that is more durable and diversified. How do you know you're actually diversified? I think it's one of those where you don't know till you know. And if you think that you are in many cases, you aren't.

That's when there's some real pain in a portfolio. But ultimately, we do our best to make sure that we're building a portfolio that is complimentary to each other. I thought I was diversified in 2022. I was in venture capital, crypto, biotech, even some SPACs and lo and behold, they were all highly correlated. Is that just a blip or is macroeconomics changing in a way that there's much more correlation between assets and how do you actually know, how do you quantify your diversification?

Yeah, it's a good question. And I think it's one of those ones where, you know, if you look back for, you know, a decade plus with with rates anchored to zero, I think a lot of people got a false sense of understanding of what correlations were between different asset classes, when in effect, it was just a, you know, an outcome of rates anchored to zero with no forecast to go up, risk assets all traded together or were able to be much less discerning with their capital in search of growth. And I think that was kind of a factor that defined the last decade, decade and a half.

And as we saw rates rise in a much more, steep and rapid fashion than maybe people had anticipated the reaction of the different asset classes to that environment really changed how people hopefully think about correlation and diversification within their portfolio. The macroeconomic picture is one that's always going to be uncertain. There are lots of people who make lots of different predictions on the path of rates, the state of the economy, geopolitical conflict that catch a lot of people by surprise. And, and so, you know, at the end of the day, you're never going to know that

beforehand and, and, you know, we can just hope that the work we do, uh, helps put a portfolio in place that, that can perform, as I said, during, you know, some of those uncertain macroeconomic. How do you think about macroeconomics in general? There's a lot of LPs that say we're going to invest as of the next 50 years, the same in macroeconomics. There's other ones that try to get directionally correct, thesis driven. How do you look at that?

Yeah, I think there are two different types of investors. There are some people and managers and GPs included that say, look, there's a lot about macroeconomics that we can't control, we don't know, and we can't forecast. So why are we going to spend valuable time and effort trying to predict something that is unpredictable? So we're just gonna focus on the fundamentals of the either stocks, bonds, companies, et cetera, that we can underwrite and we'll let the rest take care of ourselves.

There are some people that obviously say that, if you're not quote unquote macro aware, if you ignore such an impactful part on what generates returns and outcomes for portfolios, you're doing a little bit of a disservice to the investments. I'd say we probably fall in that second bucket, which is trying our best to be macro aware, but understanding the limitations that come with understanding the macroeconomic picture. I think you looked at early August as a prime example of that. There was a week where there

was a chain reaction where markets sold off violently and people were trying to understand what was going on. But you fast forward a couple of weeks later at the end of the month. And if you had guessed where the market was going to be in early August, where it would end up in late August, I don't know that a lot of people would have potentially gotten that right because of the fear and uncertainty at the time. And so I think it always helps to step back and be patient and to not overreact to, you know, individual days or periods in the market. And coming back to your original question, I think it's one of those things where, you know, we know that we're not going to predict or understand the path of rates or the market that's driven by the macroeconomics. But we try to understand what are the underlying forces that are pushing

and pulling on the market and at least, you know, being prepared to understand, you know, what those forces are. In the same vein, do you look at themes, thematic investing like health care or AI as it pertains to your entire portfolio over the long term, or do you just kind of look at them as specific verticals where you try to get diversification? It's a good question. And one of those things where I don't know that there's a right answer, and I'm sure people are able to take both approaches and do so successfully or not. On the healthcare piece, dedicated healthcare investment is something

that we generally avoid, given the mandate of our organization in being a nonpartisan, a political source of information. For a lot of people, we've generally avoided doing dedicated healthcare thematic investing. The second thing you mentioned AI, it was also an interesting topic just because, what we're hearing is that,

every company is going to be an AI company and our public equity managers are investing in stocks that are, public companies are incorporating AI into their workflows and their products, et cetera, et cetera, venture, I think goes without saying. And so in that sense, I think there are some longer secular themes that you want to be aligned with.

This is kind of how we think about it, where if there are some long-term melting ice cubes, maybe there are some incremental returns you can pick up while people have discarded or avoid hated or dying industries. But in general, I think it makes more sense to be aligned with the long-term secular trends that will benefit portfolios.

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abreast in the venture market. What's going on different factors. Do you have those kinds of relationships on the macro side? Do you leverage public managers in a way to try to get macro aware? Absolutely, we do. You know, the roster of managers that we have on the public side or the hedge fund side, you know, are in the portfolio for a reason.

We certainly underwrite, you know, both the strategy, but also the teams pretty intently before we make an allocation. And part of that relationship is, we hope, you know, a two-way relationship, whereby, you know, we're able to pass along some information or intel that we get from some of our other managers that helps them think about the markets that they invest and vice versa. When we talk to them, we try to understand their perspective, their view based on the

markets that they operate or the strategies that they execute. What we try to make sure that we temper is making sure that we don't take every word that one of our managers says as gospel and then we use it as part of a mosaic where we talk to a lot of different people. We try to build a picture from discussions we have across the board. But absolutely, leveraging the relationships with the existing portfolio GPs to get smarter on different themes or things going on in the market is always an important part of the relationship we have with our GPs.

And you mentioned getting a mosaic of information, essentially talking to different parties and getting different opinions. Talk me through the average day. How much of it is done with investing? How much is it as administrative? How much is it gathering information? Break down how you manage your portfolio. No two days are the same, David. You know, that's what makes it exciting and interesting. But, you know, I mean that in that sense in that, you know, look, we're always getting a lot of information

into our inbox from different service providers, banks, managers, you know, prospective managers, et cetera, et cetera. So, you know, reading through letters, tear sheets, research pieces, et cetera, et cetera, you know, making sure we're scheduling updates with the existing portfolio to make sure we understand what our managers are doing, how they're shifting the portfolio, et cetera, et cetera, making sure we're scheduling updates with the existing portfolio to make sure we understand what our managers are doing,

how they're shifting the portfolio, et cetera, et cetera. We have a generalist model. During a given day, we might talk to a long-only equity manager that's focused on international or emerging market stocks while at the same time having a discussion with a core fixed income manager and a real estate manager and a hedge fund at the same time. The risk is that you oversched schedule yourself and you don't allow yourself that

time to reflect and think on what you've heard, what you've learned, what you've read, which can shape the direction of how you want to spend that time moving forward. One thing I've been really thinking about is the difference between a GP that has good performance and that could sell in almost two different groups. And sometimes they have both skills. Sometimes one person has one skill, another person has another skill. Talk to me about really trying to differentiate

between who is really good at selling and who's really good at performance and how do you avoid being sold? Yeah, great question. And something that we think about constantly, I think, you know, one of the lenses or filters as an LP, you know, you develop kind of early is understanding that you're always being sold to.

And that affects the dynamic of every discussion you have, whether the intent is there or not. You know, at the end of the day, the LP is an asset owner, and the GPs are asset managers, and they're looking to manage money on behalf of the LP. And so that comes with every interaction. But you know, one of the things regarding performance that we try to think about is making sure we're not conflating process and outcome. You know, again, this is not something groundbreaking or new. But, you know, there are many instances where firms can have good performance with bad process. And, you know, that's where you can run into mistakes. And so, you know, first and foremost, trying to not take performance on its face as good or bad, because there are a lot of factors that go into that performance.

And the outcome is sometimes not controllable, but the process is. And so making sure that we're consistent and clear on how we think about process and not over focusing on performance, you know, as the only metric that matters. So that's one of the things that we try to focus on. But in terms of selling and what that means, and you know, are we being sold to, I think focus on the former, which is good process, regardless of outcome, allows us to kind of cut through some of that selling stuff, which is where, if we consistently have a framework whereby

which we are evaluating GPs, and that's different across each of the different asset classes that we invest in, but having a clear understanding of that, having a process that is fairly consistent, I think allows us to hopefully cut out some of that noise around being sold to and focus on the things that matter. I think it also depends sometimes being a good salesman is part of the job in venture capital, whereas in hedge funds, you're a passive player and it's about having the high

side cues and the best trade. So sometimes it's, it's literally part of the job qualification. One of the issues I see in GPs pitching LPs is that they really have 30 minutes to very clearly explain a strategy. And I see oftentimes a bias towards very simple sounding strategies and a bias against complex strategies. It depends, right? I think, you know, in many cases, you know, simplicity is celebrated and appreciated by many people.

If you, if you can write your strategy on a napkin and define it, you know, in a 30 second elevator ride, then many people might argue that you'll be more consistent. You know, people can tell if you're straying from your strategy, you're not trying to do too much. You focus on one thing and you do it better than anyone else. Well, I think there is some merit to that. You know, obviously, I think complexity, again, it depends if complexity is trying to be complex as a feature of the strategy, then I'm not necessarily

sure that that adds anything. But if there is an investment opportunity that requires complex understanding of a certain market or structure or asset, and the specific GP has a better knowledge or for whatever reason has a competitive advantage around that specific complexity, one, I would like to believe that if that were the case, they would learn how to explain it in a way that people understand that makes it special for them. And so, in that sense, I think complexity would be an asset because it would create barriers to entry or it would eliminate lots of quote unquote investment tourists coming in trying to access this investment versus someone who is an expert who understands this,

who's been investing in it for a long time. And so again, I think it just depends on the type of asset, the type of strategy and the role that it's looking to be played in a given portfolio. So it would depend, I think. So in the grand scheme of things, you guys are a $700 million endowment, which has on the smaller side. How does that play into your strategy?

Like with anything, there are pros and cons to any feature of an organization, you know, at our size. I think we're large enough to be institutional and to be able to build a portfolio like we talked about earlier that has access and, you know, the capacity to invest in different types of asset classes and build what we think is a diversified institutional portfolio at our size. I think we're big enough to matter for a lot of the well-known institutional funds.

But we're also not so large, whereby capacity or access can be a limiting factor for us. We don't often find that to be the case. At our size, we're able to invest in maybe some new strategies that other larger organizations simply don't have the ability to do so, because the checks they need to write are substantially larger and it wouldn't make sense for what the strategy calls for. In terms of the downsides to it, I think there are really just two. If you look at investment expense and resources as a percent of assets, obviously the math won't add up to some of the larger peers that can spend a lot more money on different resources

as it relates to portfolio building and management, et cetera. And then the other one that some might say is just that at our size, as an investor in some funds, we might not have the leverage or voice to dictate terms, fees, or have a bit more influence in some of those factors. But as with anything, I think we understand what those limitations are with our size, and we try to be creative in working around those on the size in terms of dictating terms and fees. It might be that we're a better thought partner to the GPs and we make our viewpoint heard in other ways that they value our feedback.

Resource-wise it's just being a lot more disciplined on where we're spending our time and how we're focusing leveraging our network to maybe get answers that we didn't have in-house, but we build relationships such that we can work around that. And so, you know, as with anything, there are pluses and minuses and just making sure that, you know, we're looking to optimize what those pluses are and managing around what, what any of those perceived shortcomings might be. Had a lot of institutional LPs tell me off the record that their favorite check size would be 10 to 30 million. I'm not sure how they get to that, but probably, roughly,

be able to invest in sub $300 million funds, but also be able to command enough attention from GPs as well. So when we last chatted, you mentioned that 100% of your private allocation is into venture capital. I had to do a double take, tell me about that. Yeah, so I think it's one of those things that it's a coming together of a few factors.

That wasn't always the case. There was some non-venture private equity in the portfolio a while ago. But as we looked at our portfolio and our private allocation, there were a few things that really came to mind. One is, I think it's fairly well known that empirically, venture capital is an asset class where there is a persistence of returns at least more than any other asset class. So understanding

that there is a persistence of returns in this asset class. Secondly, if you're able to access that right tail of managers, the long term performance is exceptional. And I think that's been proven over time. Again, that that's not beta for an asset class that is, you know, access, you know, identifying an access that that right tail of managers within this asset class. That was combined with the fact on the private equity portfolio. It's a massive market. Obviously, we sit in San Francisco, and you know, we think venture is, you know, an area we spend a lot of time, but the private equity world is just much, much, much larger than

the venture world and, and really understanding that we did not have any type of edge or competitive advantage in, you know, sourcing, accessing, underwriting, allocating to private equity. And there really wasn't a cohesive strategy around how we wanted to execute that. We just didn't have a clear path on how we wanted to do that. At the time we undertook this exercise, our offices were on San Jo road. So locationally, there was some benefit there. You know, Kaiser slash KFF is a name that is well known in the valley, you know, our work and our mission. And so that would help with access. And then, you know, people understanding our mission, you know, we certainly thought was going to be beneficial for accessing some of these managers. And then it just allowed us to concentrate our time and focus on a

smaller subset of the market that we felt if we could, you know, dedicate more time, effort and energy, we could build a better portfolio. And so, you know, the coming together of all those factors, um, you know, has led to this led to this outcome in whereby there is no traditional private equity buyout in the portfolio as it stands. Just to play devil's advocate, I think it's really self aware that you guys focused on venture capital and you realize you didn't have competitive advantage in private equity, but why not access private equity via fund of funds or via OCIO or other

form factors that would allow you to access the asset class? You know, look, you're not wrong. Those are certainly other considerations or ways we could have, you know, going direct was something that's been, that's been core to our strategy for a while. And investing in a fund-to-fund structure for a lot of reasons is not something that we're super interested in. And I think, again, it came back to this belief where venture capital returns for any liquid dollar, if we could maximize our positioning as an LP and access the best of the best, then I think, empirically, would suggest that long term, that's a better place to be than some private equity beta.

And so that's kind of why the decision was made. And that's kind of why we've ended up the way we are. As you played devil advocate, that those are certainly valid questions and options. And not to say that those wouldn't be good outcomes either. We just felt at the time what was optimal or necessary for our organization was this direction. You have a bit of a contrarian view.

You believe that the main issue in venture capital is not timing the market, but stomaching the illiquidity. Tell me about why you believe investing in venture capital in any market. Yeah, so again, I think this comes back to a few things. One, we have the benefits of being an organization that has perpetual capital, that that should be something we lean into

and leverage as a competitive advantage versus a lot of other investors in the market. And again, coming back to this persistence of returns for the asset class and access to the right tail. Again, the biggest issue is not necessarily just making the liquidity because I think the data also would show you that if you have just venture capital beta, there are a lot more issues you're going to have than just

illiquidity because venture capital beta is not necessarily something you want to introduce or have a lot of in the portfolio. The purpose of investing in the asset class is to access those right-tail managers to generate material outperformance over time. In terms of investing through cycles within venture, you can stomach the illiquidity, great companies are being formed at all periods within the venture and startup market. And the structure of these firms is such that,

seed and early stage firms are buying material ownership in these businesses that take a long time to build and compound value. And I think, you always hear stories or anecdotes of generational companies being founded during tough times in the market or during great times in the market. And so that's why we're able to commit and be thoughtful and disciplined around investing through the cycle without trying to time, you know, specific vintages. But again, you know, if you have that perspective, which I just laid out, then, you know, it should

be something that, you know, we continue to do, you know, you know, no matter the market conditions. So the fame famous study, of course, is the University of Chicago study that showed that 52% of the time top quartile persists in venture capital. And it is very statistically significant. So over many decades, what I worry about is that it's backwards looking. And this never, we never had a world 10 years ago where there was $20 billion venture funds, you know, how do you look at that?

And do you believe that that level of persistence will continue over the next 10, 20, 30 years? Yeah, speaks to our favorite disclaimer on every presentation, past performance are not a negative of future results. Obviously, in certain cases, that is not the case, especially as it relates to venture. But yeah, as you look at some of these firms

that have grown and raised significant pools of capital, have added different products to their firm and their lineup. I think what it comes down to is for us to make sure that our expectations in underwriting these managers are lined with, are bucketed properly. A $20 billion fund is not a venture capital firm anymore. It should almost be by definition a different type of firm. And so, as we look at what venture capital is and what the role of venture capital is in a portfolio, you know, a $200 million fund, a $400 million fund are fundamentally different than what a 10 or 20 billion fund do

for a portfolio. And so, you know, do we think that the persistence of returns carries through different AUM levels? I don't know if there's been work done on that. It would be hard to believe that that would be the case. I share some of those same concerns you do. And so I think, you know, at the end of the day, what that means is just making sure that, you know, our expectations are aligned with what a fund, you know, is offering and making sure that there's not a mismatch of expectations there.

I worry that we're not going to see a reversion in asset gathering anytime soon, specifically from a tax policy standpoint. We have people from all sorts of political spectrums, Republicans and Democrats, all pushing to get away with carried interest, which I think will have a lot of unintended consequences when it comes to AUM and asset gathering and everything. Today, smart GPs are able to forego short-term management fees in order to get long-term carry.

There's a tax incentive there. What happens when that tax incentive is taken away? Unlike many of your peers, you demonstrate incredible ability to have what crypto investors would call diamond hands. So to hold through the most difficult market, and you held all held and re-opened through 2018, 2024. Very curious. How did that play out in your portfolio,

continuing to invest throughout the bull market and then into the bear market as well? We were investing through that period, committing to funds, both new and existing GPs within the portfolio. Obviously seeing the value run up within the portfolio across 2020, 2021, there were some really remarkable things happening in the

market at that time, coming back down to earth a little bit across 2022 and 2023 as valuations normalized, GPs took some write downs. There was some rationalization within the portfolio. There was a shifting from the underlying portfolio companies from a growth at all costs to a profitability and focus on cash flow. But at the end of the day, we had a very mature portfolio. We've been investing in the asset class since the 1990s. And the result of that, I think we talked about this last time, was net distributions back to our portfolio in excess of capital calls for every year since 2019. And so some of the liquidity issues that some of other investors

have talked about in terms of lack of liquidity, yes, it's certainly not been as robust as it was during 2020 and 2021. And that's allowed us to be consistent with our pacing and allocating to different managers during that time period. I still think there's a long way to go with the effects of that time period. But I think there are some things happening right now in venture, specifically around AI that are potentially waking the space back up, which I think would be welcome for GPs and LPs alike. We talked about macro factors and whether you want to play a macro investor. I think it's very foolish to try to time the venture market for a couple of reasons.

One is you've looked historically at returns, a lot of the returns actually come in the last three, four years of the bull market. So the question is not whether the market will go down. It's always going to go up and go down. The question is, can you time it in the exact way? And if you sold it in 2016 and then bought in 2023, you'd be worse off than if you just held it to that. So I think that's a perilous activity. 2016 and then bought in 2023, you'd be worse off than if you just held it to that.

So I think that's a perilous activity. The other thing is I think a lot of venture investors did not realize they were macro investors that no matter what companies they were picking, they were all either going to be down or up based on macro conditions. And I think it's always foolish to try to major in something that you're not studying and you're not really keeping up with the public market. So I think the prudent and the wise thing in venture is to continue to deploy. Venture is one of those asset classes that has such a high return on average historically,

that if you just don't try to tie in the market, you're going to do quite well, especially as an institutional investor. Yeah, I agree with that. I was both very impressed and very scared for you to have all your assets, all your private assets in venture. And we discussed whether you had any plans to diversify your liquid portfolio. Have you given thought to that? Yeah, we did talk about that.

And I think it's a natural question and one that we constantly evaluate. When I mentioned that the shift to this current structure was made, there was a lot of thought at the time given into the potential impacts of pursuing such a setup. Look at the end of the day, I alluded to this earlier, and it's something that's very important for us is that any decision we make strategically around the portfolio is always done again in mind with the organization as a whole, first and foremost, will this benefit and is this better for the mission of KFF as a whole? And I think one of the things that we've learned over the past six years, this period that we just talked about with some of the ups and downs is that while we do have patient

capital and have the ability to see some of this through, there's potentially the ability to add incremental value to our own portfolio by diversifying within the specific asset class. You asked a very pressing question earlier about how do you know you're actually diversified? And I think having such a large allocation to venture, a lot of them trade on very similar factors, I think the understanding is that there's potentially a way for us to incrementally improve the risk adjusted return of our private portfolio by introducing some different types of exposure. And so that's something we are considering.

You know, earlier I talked about when the decision was made to move away from that, a lot of the reasons why, you know, we felt it was the right reason. And those things haven't simply disappeared, especially, you know, not having spent time in these markets for a long period of time. You know, our competitive advantage or our edge

in understanding, accessing, sourcing some of these managers is even worse than it was. We do have the benefit of having a quote unquote blank slate within this small area of the portfolio. We also have the ability to understand the existing structure of our portfolio and what types of exposures or investments would be value additive. And so we can be much more intentional about where we spend our time, the types of managers that we evaluate. Again, we're not trying to meet with anyone and everyone as it relates to potentially adding

this new sleeve within the portfolio. Importantly again, though, this wouldn't be a massive overhaul. As I said, this is incrementally making adjustments to the portfolio in service of the organization that will suit us better in the long run. How does an endowment like a KFF start investing into a new asset class like buyout?

Walk me through the process of investing into a new asset class. This is something that we've not done a lot of in the past. And, you know, again, I don't know that there's a right way or a wrong way. Well, there probably is a wrong way to do it actually. But in terms of the right way- Just start investing.

Yeah, exactly. Just a fire away and learn a new job. Throw in darts. No, that's not what way to think, yeah, exactly. Just throw in darts. No, that's not what we're doing. But much like anything, we talked about this earlier. It's leveraging the network we have both GPs and different asset classes within the portfolio, LPs, service providers, vendors, et cetera, et cetera. People in our network, we're able to talk, thoughtfully evaluate, spend the time, take some meetings, figure out what is of interest, what is not, understand why, understand some of the driving factors behind that.

And then again, it's a word I've used a lot, be very intentional about how we're evaluating and underwriting these specific investments. Have a pretty tight, tight circle around what we're looking for and what we need, not compromising on what that looks like, you know, be it size, team, strategy, etc, etc. And then start to tow our way in, you know, to make sure that we make an investment, make another investment, you know, not put all our eggs in one basket, but be thoughtful about building some of that exposure. And then, you know, again, being very, you know, disciplined around evaluate self evaluation of what that looks like, is it performing as we hope, is it delivering what we hope, it's not out of this question that, you know, there around self-evaluation of what that looks like. Is it performing as we hope? Is it delivering what we hope?

It's not out of this question that, you know, there's a world in which we evaluate this and it's performing as maybe we hoped, but you know, it's not doing what we wanted it to do. And so in that sense, we, you know, we'd have to make a, you know, another decision. But you know, at the end of the day, you know, the answer is, is we're just deliberate and thoughtful

about doing so and being really intentional about how we spend our time, what we're looking for, and being disciplined around, you disciplined around making those decisions. You've been at KFF for 13 years. What do you wish you knew when you started? That's actually a really good question. One thing. Yeah, yeah, yeah.

As many as you'd like to add. Yeah, jokingly, I'd say the price of Bitcoin in 2024. I don't know if that was the right answer. You said there's no right answer. That is the right answer. I think it's one of those things where I feel so fortunate to be in this role, you know, at this organization. I think the benefits are immense.

The ability to interact with incredibly smart people across a wide range of both asset classes and disciplines has been really instrumental on me as an investor. I think some of the lessons, there are lessons learned from mistakes made over the past, but you know, as some people would say, is that those mistakes and learning those lessons are crucial and vital in terms of being a better investor today. And so one answer might've been, hey, I would've, you know,

loved to avoid making mistake A, B or C, but if I didn't avoid making this mistake A, B or C, then I wouldn't have learned from those mistakes and helped shape how I think about the portfolio and investing today. And so, you know, there were a lot of lessons learned over that period of time. You know, I feel like I've grown a ton. Just understanding that this is, you know, not an easy thing to do and, you know, making sure that your patient making decisions clear head with a consistent framework is the most important thing. As I alluded to,

focusing on process over outcome for GPS is something we can do for ourselves to making sure that the process is done well, is done right. And, you know, the outcomes will take care of themselves. For somebody that's breaking into endowments and not literally, but figured out for somebody that's starting, starting to work at endowments and first couple of years, what are some meta skills? What are some skills and some practices that somebody should do

when they're starting out as an institutional investor? Yeah, a really good question. Again, I think each individual organization is different in what it can provide. For me, the way I did it is I responded to every single email that came into my inbox. I took a lot of meetings. You asked the question about spending time.

When I was one, two years in, it was meetings all the time, getting those reps and understanding how different people present different strategies, taking the reps just to understand what to look for, what you like, what you don't. Asking questions, I think that's another thing that of course is always an interesting thing is, are there no dumb questions? And oftentimes I found in the beginning when I was young, I wouldn't understand a concept or it was being presented a certain way. And the reality is, is it was being sold, you know, as you asked earlier, in a more

complex structure. But at the end of the day, it's a much simple concept and just asking the question. And I think that helps, you know, create dialogues between LPs and GPs, you know, asking questions to teammates, bosses, mentors that are, you know, much more experienced, longer time in the role. And then access. I think, again, this is one of the underrated benefits of a seat at an endowment or a foundation or a nonprofit institution is access to different banks, vendors, funds. Being an asset owner opens a lot of doors. In the beginning, I was not naive enough to

the fact that people didn't want to talk to me. They like talking to the name on the door and that's okay. And I was fine with that. And understanding that that is something that should not be looked upon poorly, right? I think taking advantage of that to ask questions, get smarter, meet really interesting people, develop relationships that will serve you later on down the line. One of the other things is that it's a pretty small industry. And often there's one or two or three degrees of separation. It's also, I find an area where a lot of people spend long periods of time in their career. And so point being is that a relationship developed in year one, two, three, you never know where that leads. And it's amazing how people end up at different places. There's

different paths crossed at different times. And so working on networking, building relationships, maintaining relationships, being authentic, all of that is something that I would, you know, encourage, you know, a younger person to do, you know, take advantage of what these seats provide. And also, you know, maybe lastly, just don't lose focus of the work you're doing on behalf of the organization that you're working for, which is oftentimes really impactful and important. And you know, again, should not be taken for granted. You mentioned asking questions. Unfortunately, I think this is a big liability of the Western, Western

education system is the punishing of asking questions, the punishing of not knowing the right answers, the entire concept of a right answer in these highly evolving industries is a very dangerous, uh, very dangerous concept in general, because the right answer today might be completely wrong answer next quarter. You have to build the confidence to actually ask simple questions over your career. It's a paradox of sorts.

You mentioned building your network and being an investor. To me, it feels like being an LP could oftentimes be a siloed position. How do you get out of kind of this siloed positions and network with your peers and network with other people? It just takes a little bit of work, going to conferences, annual meetings for existing or prospective managers,

introducing yourselves to LPs. What I found, and again, this comes back to that last point is that oftentimes a lot of LPs have similar questions or have similar perspectives. And people are hesitant to share and that creates kind of a gap between people. And I found that one of the best recipes for doing that is being open, being willing to have discussions, identify issues, right? Everyone, sometimes, everyone says everything's going great and sitting in the same seat on

a different organization, opening up about things that are challenging, I think just builds a natural rapport with people. But yeah, I think like anything, it's something you have to put the work into. Absolutely. Well, thanks so much for taking the time to jump on the podcast. Look forward to seeing you soon.

Great, David, thanks. This was a lot of fun and I look forward to keeping in touch. Thanks, Dean. Thank you for listening. The 10xCapital podcast now receives more than 170,000 downloads per month. If you are interested in sponsoring, please email me at david at 10xcapital.com.