The Derivative

The Endowment Playbook: Balancing Long-Term Goals with Current Market Volatility

Apr 17, 2025

Join Dave Morehead, CIO of Baylor University's $2.2 billion endowment, as he shares his insights on institutional investing. He discusses innovative portfolio strategies, successfully deploying volatility tactics during the 2020 crash. Morehead emphasizes a cautious approach to equity exposure while focusing on secular growth in healthcare and technology. He also dives into the dynamics of bond markets, trade policies, and how institutional funds navigate market volatility while supporting education. A captivating blend of finance and personal stories awaits!

01:09:39

Creator website

Episode guests

David Morehead

AI Summary

AI Chapters

Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Baylor's endowment emphasizes risk management and long-term goals by shifting focus away from cyclical investments towards secular growth sectors like healthcare and technology.

The strategy of diversifying investments across public and private markets mitigates risks and safeguards ongoing funding for the university's programs and scholarships.

Private investments pose challenges regarding capital allocation and liquidity, necessitating a thoughtful and transparent approach to navigate complexities in today's market environment.

Deep dives

Endowment Strategy and Risk Management

The focus of an endowment like Baylor's is primarily on risk management, operating under the principle of 'do no harm' while aiming for returns. The strategy entails balancing investments between public and private markets, with an emphasis on understanding the potential drawbacks of each. Investments in private equity, while potentially lucrative, also involve long-term commitments that can entail loss of liquidity and reduced flexibility in capital allocation. This prudent approach also safeguards the university's future by ensuring stable funding for scholarships and essential programs.

Intro

2min

Navigating Finance and Family

15min

Navigating University Endowments

17min

Navigating Market Opportunities Through Resource Shortages

2min

Navigating Portfolio Dynamics in Volatile Markets

17min

Navigating Investment Challenges

13min

Nostalgic Band Favorites and Financial Insights

3min

In this wide-ranging conversation, Jeff Malec sits down with Dave Morehead, CIO of Baylor University's $2.2 billion endowment, to explore the unique challenges and strategies of institutional portfolio management.

The discussion covers Baylor's innovative approach to portfolio construction, including their successful deployment of volatility strategies during the 2020 market crash, their current cautious stance on equity exposure, and their philosophy on private investments. Morehead explains why they're shifting away from cyclical assets in private markets and focusing on secular growth trends in healthcare, technology, and consumer sectors.

Particularly timely is their analysis of recent market volatility, bond market dynamics, and the broader implications of trade policies on institutional investment strategies. The conversation provides a rare glimpse into how a major university endowment navigates market uncertainty while maintaining its core mission of supporting education and student scholarships.

Whether you're an institutional investor, family office manager, or investment professional, this episode offers valuable perspectives on long-term portfolio management and the evolving landscape of institutional investing. Learn how one of the industry's thoughtful practitioners approaches risk and return in today's complex markets.

You want to learn how institutional portfolios really work? You want to understand how endowments think about risk? You want to hear from someone who's traded it all and now manages billions? SEND IT!

Chapters:

00:00-00:55 = Intro

00:56-09:33 = Hedge Fund Executive Transitions to Higher Education: Exploring Dave Morehead's Career Pivot09:34-26:18 = Baylor University's Strategic Endowment Investment Philosophy Revealed26:19-36:20 = Beyond the S&P 500: Discovering Unique Investment Opportunities in Helium and Niche Markets36:21-46:30 = Hedging Strategies and Volatility Management: Navigating Market Uncertainty with Strategic Risk Mitigation46:29-53:51 = Trust Issues and Geopolitical Challenges: Overcoming Uncertainty in Modern Investing53:52-01:00:32 = The Long-Term Perspective: Endowment Investing Beyond Quarterly Returns

01:00:33-01:09:39 = An 80s Rock Music Nostalgia Trip: Revisiting the Iconic Sounds of the Decade
Follow along with Dave on LinkedIn and X and also be sure to check out Baylor's endowment for more information!

Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠