How I Invest with David Weisburd E32: Ashby Monk, Stanford Professor on How to Become a Billionaire in Private Equity
Jan 11, 2024
Ashby Monk, Stanford Professor, discusses the role and operation of asset owners like pension funds and endowments. Topics include compensation in these fields, the state of pension funds in the US, and their impact on private equity. They also explore the challenges faced by institutional asset owners, the importance of governance in institutional investing, and the dynamics between unions, pension funds, and hedge funds in the private equity industry. The significance of transparency in investment portfolios and the crucial role of asset owners in the financial ecosystem are also discussed.
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Institutional Investor Goals
- Pension funds, endowments, and foundations don't operate like businesses, but rather government entities.
- They optimize for social welfare and future liabilities, not shareholder value.
Compensation and Allocation
- Ashby Monk argues that institutional investors underpay their staff compared to their responsibilities.
- This pushes funds to over-allocate to alternatives, creating billionaires in private equity.
Canadian Model
- The Canadian model of internalizing certain asset classes like real estate and infrastructure has proven successful.
- For asset classes requiring personal relationships, like venture capital, they partner with GPs.