Investing Billions - E177:How a Small Endowment Invests like Harvard w/Rip Reeves

Episode Date: June 20, 2025

In this episode, I speak with Rip Reeves, CEO of Institutional Investor and former CIO of AEGIS Insurance Services. Rip brings over four decades of experience across investment management, insurance, and endowments. We discuss his unconventional path from Salomon Brothers to leading one of the most iconic platforms in the investment world, his views on the OCIO model, portfolio construction, the “art” of manager selection, and why he believes building authentic relationships matters more than ever in this industry. We also cover his deep ties to LSU, how he uses qualitative signals (like waiting room conversations) in manager evaluations, and the future of Institutional Investor in a changing GP-LP landscape.

You overlook the LSU university systems and you've decided to go with an OCIO with Cambridge. Why did you make that decision? Uh, the, one of the, one of the reasons to, to, for an endowment to use the OCIO, uh, model and not just an endowment, but any kind of, uh, pool of money. Uh, part of it is size, uh, no disrespect to about a billion dollars, but, uh, when you're running a pool of money,'s about a billion or two billion, you generally don't have the type of funds to attract the type of talent that you would want in order to run the portfolio.

And exacerbating the relative small size of our endowment at the moment is the fact that we're in Baton Rouge, Louisiana. Again, no disrespect to the finance professionals in Baton Rouge, Louisiana, but it's very different from the type of pool of folks that I can work with or attract when I'm in New York City, when I'm in Boston, when I'm in Chicago, when I'm in London, which are the places that I've spent most of the past 40 years. So it really allows us as a relatively small pool of money to get the type of top-notch research and resources

that a Cambridge and Associates can bring to the table. So it basically is a stronger team that I could afford to put in place internally. And I basically rent to them and all the hundreds and thousands of people that work globally for that institution. So you're able to have a world-class team even being in Baton Rouge. Talk to me on the allocation size. Is having a billion dollars an advantage in being able to access more interesting funds or is it also disadvantage? No, I would say another aspect or advantage of the OCIO model, again, for someone, generally

speaking, if you're looking at say, I would say less than $2 billion, the OCIO model, regardless of the type of pool of monies that you're managing, can really, there's a very strong case for it. And again, especially if you're not in a financial hub like a New York or a Boston or London. So what we've basically done is the ability to access various types of investments is a huge advantage by using an OCIO model with Cambridge because we are some of the allocator, some of the allocation sizes that we might end up trying

to invest in, we just be too small. Our bite sizes would be too small. So what Cambridge allows us to do is they'll call and combine several portfolios like ourselves, and then go out and do a bigger chunk, as well as possibly get discount pricing because of volume. So it is a massive, significant advantage from our perspective that we're going to have access to various types of investments, especially in the alternative and private sector that we likely wouldn't have access to on our own. Your portfolio allocation is 40% stock, 30% bonds, 30% alternatives.

It suspiciously feels like very round numbers. How did you come to this? And walk me through the rationale. Those are fairly general allocation guidelines. And it basically stems from what is known as the endowment model, which was the idea that came out of David Swenson, who was the CIO at Yale's endowment. I think he probably started in the mid 80s. And as a fun fact, Dave Swenson is a member of the institutional investor Investor Investment Hall of Fame. The 40% stock, 30% bond, 30% alternative is the general idea for the endowment model that

was I would offer is a bit of an uptick or an evolution from what was called originally the pension model, which was 60% stocks, 40% bonds. Given the excess liquidity that many endowments enjoy relative to other pools of money, such as insurance money, pension plan money, whether you're corporate or public, there is certainly the opportunity, if you think the relative value is there, for an endowment to give up some liquidity

in order to get higher levels of income and higher levels of forecasted return. And that's basically what this model does. One of the things that we've done at LSU endowment is to put very wide guardrails around those 40, 30, 30 type general neutral points. And one of the reasons for that is as a former portfolio manager,

I always wanted more flexibility than less flexibility because that allowed me as the person making the buys and sells in the portfolio, it gave me more flexibility to use all the really great resources of the various companies that I was a portfolio manager at. When you tend to put more restrictions on a portfolio manager, it kind of restrains the ability to bring the best attributes of the company to the market.

So we have put those as very general rules and to your point, very, very suspiciously round numbers. But we've got pretty wide guardrails that Cambridge can play in.