[REPLAY] Andrew Golden – Beyond the Long Term (Capital Allocators, EP.13)
Sep 4, 2023
auto_awesome
Andrew Golden, President of Princeton University's Investment Management Company (PRINCO), shares insights from his impressive career managing one of the world’s top endowments. He discusses the transformation of asset allocation strategies over the years and emphasizes the value of team dynamics and collaborative decision-making. Listeners will find his thoughts on talent cultivation, navigating market challenges, and the importance of long-term investment perspectives particularly engaging. Golden’s subtle humor and personal reflections add a delightful touch to the conversation.
Establishing a clear organizational vision and a staff-centric decision model is crucial for successful investment management.
Princeton's unique approach to asset allocation includes a valuation-independent framework and a flexible mid-term target.
Balancing risk and return is paramount in investment decisions, considering factors like market conditions, manager size, and fee scrutiny.
Deep dives
Andy Golden's Path to Endowment Management
Andy Golden, the president of Princeton University's investment management company, shares his journey from being a professional photographer to running the university's endowment. He explains how his background in photography and management led him to develop an interest in organizational issues and eventually pursue a career in investment management.
Transforming Princeton's Endowment
When Andy Golden arrived at Princeton, there was little structure in place for investment management. He highlights the need for a clear organizational vision and discusses the process of establishing a staff-centric decision model. The team emphasizes long-term thinking, leveraging Princeton's advantages as an attractive client and its close-knit network of knowledgeable trustees. They employ a unique approach to asset allocation, with a policy portfolio constructed in a valuation-independent framework and a flexible mid-term target to adapt to changing circumstances.
Gang Tackling Decisions and the Use of Data
Golden describes the team's decision-making process, which involves assigning devil's advocates and conducting bullbear sessions. This approach ensures critical thinking, avoids political biases, and encourages open discussions about investment decisions. While data has become more readily available, Golden emphasizes the importance of qualitative factors in decision making. The team uses data to test arguments made by managers but places greater emphasis on judgment, first-principal thinking, and understanding the unique circumstances of each investment.
Asset Allocation and Investment Strategy
The key takeaway of this podcast episode is the discussion of asset allocation and investment strategy. The speaker mentions the allocation of funds across various asset classes, including domestic equity long-only managers, other developed market managers, emerging market public equity managers, independent return (hedge funds), private equity, and real assets. The conversation touches on intentional allocations based on market dislocations and the need to offset overweight positions. The importance of finding great people and partnering with them is emphasized, suggesting that the focus should be on the quality of investments and relationships rather than solely on asset class selection.
Balancing Risk and Return
Another main idea explored in this podcast episode is the balancing of risk and return in investment decisions. The speaker mentions the challenges and opportunities associated with investments such as US equities, independent return (hedge funds), and private equity. The importance of evaluating manager size, evolving strategies, and the implications of fee scrutiny is discussed. Additionally, the conversation touches on the risks and potential volatility in current market conditions. The speaker highlights the need to be circumspect about top-down predictions but acknowledges the potential impact of specific risks, such as RMB exposure. Overall, the episode emphasizes the dynamic nature of investments and the need to assess and manage risk alongside return expectations.
Andy Golden is the President of Princeton University’s Investment Management Company (PRINCO). Having grown from $3B at the time of his arrival in 1995 to $22.5B today, PRINCO has been among the highest performing endowments in the world. Andy came to PRINCO from Duke Management Company, where he was an Investment Director, and received his formative training in the business working for David Swensen at the Yale University Investments Office. Andy currently serves on the fund Advisory Boards of several well-known private equity and venture capital managers, including Bain Capital, General Catalyst Partners, and Greylock Partners. He was a founding member of the Investors’ Committee of the President’s Working Group on Financial Markets and serves as a Trustee of the Princeton Area Community Foundation and Rutgers Preparatory School. Andy holds a B.A. in Philosophy from Duke University and an M.P.P.M. from the Yale School of Management.
Our conversation discusses Princeton’s endowment two decades ago and today, including its strategic advantages as an institution, shifts in thinking about asset allocation, decision making, team development, and partnership with managers. Andy’s long tenure in his seat, insight, and wisdom provides a treasure trove of information about how a top endowment manager practices his craft, and his subtle wit always keeps things light.
For full show notes, visit the episode webpage here.
