[REPLAY] Collette Chilton - Humility and Loyalty at Williams College (EP.174)

Speaker A: Capital Allocators is brought to you by AlphaSense. Expert calls have always been one of the most powerful ways to build conviction, but today investors are asked to cover more companies and move faster with leaner teams. With AlphaSense's AI LED expert calls, their Tigus call service team sources experts based on your research criteria and lets the AI interviewer get to work. Then they take it one step further. Your call transcripts flow natively into your AlphaSense experience and become searchable and comparable, so your primary insights plug directly into your earnings diligence and pitchbook workflows with no tool switching AI for coverage and efficiency, humans for complexity and conviction. Sounds like just the right mix to create a scalable institutional edge without growing headcount. For hedge funds, this means validating thesis assumptions before earnings across dozens of experts instead of a handful. For private equity, it means faster pre IOI scans and deeper commercial diligence. And for asset managers, it means pulling real operators perspectives straight into models without disconnected tools or manual handoffs. All of this lives inside the AlphaSense platform, turning raw conversations into comparable auditable insight. The first to see wins. The rest Follow Learn more at alpha-sense.com Capital Capital Allocators is also brought to you by Long Angle. I spend my days talking with people allocating serious capital. What I found is that even the most sophisticated investors want a place to compare notes privately with peers at the same stage. That's Long Angle, a vetted community of 8,000 high net worth individuals. Members have committed over $420 million across private equity, venture, real estate, energy search funds and litigation finance institutional offerings with full diligence materials on every opportunity. No membership fees, and you can apply@longangle.com capital. Hello, I'm um, Ted Seides and this is Capital Allocators. This show is an open exploration of the people and processes behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can keep up to date by visiting capitalallocatorspodcast.com My guest on today's show is Colette Chilton, the Chief Investment Officer of Williams College, where she's overseen its $3 billion portfolio since 2006. Colette is nothing short of a legend in the business. She sat in a CIO seat since the early 1990s at the helm of Public Pension, Mass Prim and Corporate pension. Lucent before joining Williams Institutional Investor bestowed its Lifetime Achievement Award on Colette in 2019 and Behrens named her one of the 100 most influential women in finance in 2020. Our conversation covers Colette's career path and lessons learned before joining William. We then turn to her arrival at Williams in 2006 to a phone, a computer and a legacy portfolio. Williams governance structure, leveraging alumni advisors, Asset allocation manager, selection manager, monitoring hedge funds, venture capital and navigating around popular managers. Please enjoy my conversation with Colette Chilton. Colette, thank you so much for doing this.

Speaker B: Thank you for asking me.

Speaker A: You've been at this in the seat for a long time. And I mean, I guess it makes sense to go back and ask how you first got interested in investing.

Speaker B: It was purely out of necessity. I was working in investment banking. I was nine months and two weeks pregnant with my second daughter. And this was during banking crisis in 1993. And, um, the bank eliminated the group I was in and I was the first person they walked into HR because I live, literally was almost 10 months pregnant. And I needed to have a job. We needed both of us to be working. And so I went around and looked for a job before my daughter was born and then as soon as possible after my daughter was born. And a guy who I had done some transactions with, a, uh, lawyer, was the general counsel for the state treasurer, who at that time was the sole trustee in Massachusetts. And the guy who was the state treasurer was a Republican who had come in after Bob Crane, who was a famous sole trustee and Democrat treasurer in Massachusetts. And there were all kinds of things that had been alleged to have been going on. So we were. They were being investigated by everybody you could imagine. And so this guy I knew said, I, uh, know you don't know anything about investing, but this will be a great experience. You'll learn so much because it's bad here. And so that was, um. There used to be two pension funds in Massachusetts that was called Masters. And so I went to work at Masters knowing nothing. I remember going to my first meeting in New York with this guy and he said, so you know the difference between growth and value, right? And I'm like, I don't know what any of this is. Uh, so that is, it was purely out of necessity. I needed a job and he offered me a job. And I worked at the state pension fund for five years. And it was amazing.

Speaker A: You spent that time in the state pension fund, and then you spent a long time corporate pension fund at Lucent. What are the key lessons and differences you saw in those types of pools of capital?

Speaker B: Well, some of it's all the same right across the three different public corporate pension funds and endowment. We're looking for good managers and trying to find them. And the difference is that those pools of capital, you have liabilities and you have retirees that you are supporting. Whereas at, uh, Williams, we support over 50% of the operating budget. So it's incredibly important. But there, there are, like, people I knew who retired and were relying on what we did every day. And that was amazing. You know, you really felt the importance of what you did. And the other difference at the state pension fund is you get paid nothing. So it really is public service. You're doing it for the greater good. And that was amazing. I love that part of it. But you also have to worry about your name showing up in the paper every single day of your job. And so when I left there, that was like what we celebrated at, uh, my going away party is, uh, that they never got me. You know, you're just collateral damage for them going after the state treasurer. And it's like, oh, if we can embarrass that person, it might embarrass the state treasurer. And it's very tempting when you're not making much and people are offering you things. And a lot of people in public funds get in trouble for that reason. Um, and it's not a very glamorous part of this world. And people are really, their mission focused. The people who do those jobs, you've interviewed some of them, like my friend Chris Ailman, and it's an amazing bunch of people. Anyway, so that's different from the other two.

Speaker A: So if you go back to that time, what was the most outlandish thing you were offered?

Speaker B: So the pension funds up here are terribly underfunded and mismanaged. Each city and town has its own pension fund. And so the state one started doing well, and so then the towns could invest with the state. So there was actually a client facing part of it. And the guy who did the client stuff was offered a car by a manager. And he said that it was okay to take it because they had the name of the firm on the side of the car. So it wasn't actually that they were giving him a car. It was like they were giving him a pen or some other kind of swag because it had their name on it. So it was a joke in the office. As long as it has a firm's name on it, it doesn't matter what they give you. And there were certainly people who took full advantage of that opportunity.

Speaker A: Which firm was it that branded cars

Speaker B: There are a lot of big firms in Boston.

Speaker A: It was a long enough time ago. You think we could say, all right,

Speaker B: they're still in business, I'll tell you that much. So.

Speaker A: Okay, well, we'll keep the name quiet for now and maybe we'll share it with our premium members at the end of the recording.

Speaker B: Yeah, exactly. Exactly.

Speaker A: What was the impetus for moving then onto Lucent?

Speaker B: I'm from the Bay Area and we had two little girls and I was desperate to live closer to my parents to have more help, you know, both of us working full time and two little girls. So I started looking for something in San Francisco. And there was a guy at Goldman back in the day named Tom Healy who ran something called the Pension Services Group. And he covered pension funds very effectively. And he invited me to lunch one day and he said, oh, I know you're looking for something. I have the perfect job for you. There's this company that's spinning out of AT&T called Lucent. And I'm like, where is it? And he said, it's in New Jersey, Tom. New Jersey is not San Francisco. And so he kind of reeled me in. Goldman had done the IPO when Lucent spun out of AT&T. And he was very close to the treasurer, and it was just an amazing opportunity. Despite not being in the Bay area, they had $75 billion in AUM, um, and it was like the last piece of the spin out from AT&T. And the treasurer was a 40 year old woman. So in the AT&T world, that's unheard of. And she was amazing. And she convinced me to take this job. And, like, literally nobody knew anything about what I was doing. And they're like, here's a phone and a cube and $75 billion. Go at it. It just felt like the opportunity of a lifetime. And how could I pass it up?

Speaker A: What did the portfolio look like with your phone and $75 billion?

Speaker B: Well, it was hard to figure that out because AT&T was still managing the money for Lucent. So it took a while for us to make that transfer. And AT&T was one of the first corporate pension funds to invest in venture capital and private equity. So, you know, it started off in family offices and endowments and foundations. And then there were a small group of corporate pension funds like AT&T and GM&GE, and they were early to those asset classes. So we actually had a great venture and private equity portfolio. And so that was the illiquid part, which was a nightmare to separate because we had to go through each agreement and negotiate with the GP when we were splitting it apart. And Lucent was bigger than at&t. And so we were also negotiating with our largest client because AT&T bought more equity Lucent equipment than anybody else. It was just an interesting time, but a great, A great portfolio. We were incredibly lucky to get started with that.

Speaker A: How impactful could that have been in size relative to $75 billion of assets?

Speaker B: Well, part of the 75 billion was the defined contribution plan, which we invested in the separately managed accounts of the defined benefit plan. So if the defined benefit plan was probably 50, 50 billion, but. And I don't remember the numbers because it's been a long time, but there was a lot of venture and private equity. The returns on the portfolio had been very good. So I started there in 1998. We're getting a lot of distributions off of our venture portfolio. I used to make the joke that Lucent was really a pension fund with a little bit of technology on the side, which is what drove the earnings of the company for that whole time. But nobody thought that joke was funny except for me. But it was actually pretty close to the truth.

Speaker A: How did that influence how you invested the capital?

Speaker B: Well, we had liabilities. And so despite those liabilities, we still had a lot of equity in, um, our portfolio. The pension fund had two underlying groups of employees, one occupational, one management. And they both, at different points in time, were, well, overfunded their assets to their liabilities, which is unusual for corporate pension funds. So we actually suggested to the board of the company that they basically immunize the portfolio and lock in the gains after I left. One of them was in process when I was leaving, and the other one, I think got done after I left, but it didn't happen before various market corrections. So. But you actually have a number that you have to meet. It's different from an endowment or a foundation.

Speaker A: How long were you at Lucent?

Speaker B: About eight or nine years. Okay. When I started at Lucent, there were 150,000 employees. And when I left, there were 8,000 employees.

Speaker A: Wow.

Speaker B: It was quite a ride. So I was working at Lucent. I was living in Boston. We had moved. We had opened an office in Boston. And it was easier to hire people for that kind of work in Boston than in suburban New Jersey. And so my family, we all moved back to Boston rather than being in New Jersey. And Alcatel had announced a merger with Lucent, but it hadn't closed yet. And somebody from the Williams investment committee called me and Said, hey, we're going to start up an investment office, and how would you like to talk to us about it? He said, would you think about coming and starting the investment office at Williams? You started an investment operation at Lucent, obviously, on a much bigger scale. You know, you have the playbook. You can do this. And I said, no, no, no, no. This is. This is my team. I hired all these people. There were 25 of us. And, you know, you don't walk away from your team. And back and forth. And he finally said, you know, colleges don't get taken over, so this is actually a more stable job. And I'm like, it's not a takeover, it's a merger, blah, blah, blah. Anyway, um, so then I started meeting some of the Williams people, and I got completely sucked in after having said no to the initial phone call. The last person who I met in the process was the guy who was the president at the time, Morty Shapiro, who's now at Northwestern. And he's just an amazing guy and salesperson. I expected New England liberal arts college, bowtie. Not at all. Hilarious, cracking jokes, swearing, funny. Just wonderful guy. And he was the closer, I guess, because after that, I think that's when I said yes.

Speaker A: Yeah. So what did it look like when you arrived?

Speaker B: It was like the phone and the cube again, there was like, nothing. And so part of the plan was to set the office up in Boston, but there was nothing. So I had to go work in Williamstown for the first six months, which was great, except that I had to leave my family every Monday morning and come back on Thursday night. But Williamstown's amazing. And the portfolio was incredible because the way that the college invested the money is they had committees of alumni, volunteers, all in the investment business. There are a lot of Williams people in the investment business. And they got Williams into funds that they liked. And so it started off with Joe Rice at CDNR and a couple other people of his era, and they would sit around at the old Williams Club in New York and decide what to invest in. So they started off in stocks and bonds, and then one of the guys up here in Boston, Alan Fulkerson, who knew something about venture, said, you know, let's. Let's try a little venture. And. And so we did a little venture. And so this was like, I don't know, in the 70s or something. So we ended up with this incredible venture and private equity portfolio. Joe Rice's good friend was John Canning. So we were in, like, the earliest CDNR and Madison Dearborn funds And that was true, like, across the board, in every asset class, just like something special because of those incredible alumni volunteers who put the portfolio together.

Speaker A: It was just you and a bunch of great managers. So how did you think about what you wanted to put together?

Speaker B: So there's the structure of the portfolio and the structure of the team. Right. And you kind of have to do all of that at the same time. And so the first person I hired was a guy who I had worked with at the State and Lucent, who came to be our cfo. And so that was a critical hire. His name's Brad Wakeman. Amazing. He's still here. He's our CFO COO today. And he just brought order from chaos. And we had worked together for a long time, so we kind of knew what we needed to do and how to chop the wood. And then we built the team out from there. And then we had an analyst at Cambridge who covered Williams, who was a Williams alum, and we hired her as our first analyst. And she's now Managing director Abigail Watley. So. And then I hired my assistant, Kristin Corrigan, who's still here today. So that was kind of the core at the beginning. And then as far as the portfolio, we probably had too many managers. You know, the problem with having committees put portfolios together is they love putting stuff in, but they really don't like taking stuff out. And it's hard to agree on what to stop doing. And there wasn't really what I would call a, uh, policy portfolio. I came from this world in the corporate pension fund and public pension fund, where you have a policy portfolio and you manage to a target and you have ranges around a target, and that was important, and liquidity was important. And organizing things in that way, which hadn't really been the way it was done. And so fortunately, we had one manager who was sort of like a balanced manager. And it was a significant part of the endowment when I started.

Speaker A: What's significant? Just to calibrate.

Speaker B: Well, it was more than 30% and one manager. Yeah.

Speaker A: Okay.

Speaker B: So I started in 2006. So we had that manager in the portfolio when we went into the financial crisis. And it was the only separately managed account we had. And it was basically large cap S&P 500 stocks. So it was amazing because we're sending money to the college, like 8 out of 12 months, and I barely have figured out where my office is, let alone the portfolio. And we have this, um, incredible liquidity gift that we didn't even know was going to be important. And so that helped us get through the last financial crisis. Um, and we had these amazing managers. And the other thing that was really fortuitous is the people who were on the investment committee and our advisory committees had all been involved for a long time. So there was this huge sense of stability. It's like, we're going to be okay, don't worry about it. We got this, which is nice. When you're new in a job and you go into a situation like that

Speaker A: when the governance structure always comes up as something that's a challeng, you have the committee and then you have these advisory committees by asset class or category. How do you work with them?

Speaker B: So that structure was in place before we had the investment office. And so that's how they invested the portfolio is they'd have a marketable committee picking long equity managers. And they had a committee called the Special Strategies Committee which was the inception of the hedge funds. And amazing people on that committee. So the chair of that committee was Bill Simon is famous for almost being the Republican governor of California. He's a wonderful person and a dear friend. He chaired that. And then people on the committee were like Andreas Halvorsen and Paul Singer and just very successful investors who like to get together and argue about what to put into the portfolio. So we kept that structure in place, but those committees became advisory and they didn't actually vote on anything, but they helped us with the portfolio. And then the investment committee is the fiduciary committee. It's a standing committee of the board and they actually vote on hiring managers and that kind of thing. And so one of my jobs at the beginning was to make that all work. And honestly, that is one of the most fun parts of my job. It's like I have 24 bosses. I love all of them. They all help us in different ways. And I tell people that that's the secret sauce of the Williams investment program is we have these alum who are on these committees and they love helping us and they don't have an axe to grind, they're not trying to sell us something. Or it's like you can call them and say what do you think about this manager? And you get sort of a thumbs up, thumbs down, unbiased. They love Williams, they want it to go well and us have good performance. And so it's really incredible. I mean, other people call me from time to time at similarly sized schools and they'll say someone on my committee heard about your structure and they want us to do this and sounds like a nightmare. And I said, uh, I love it and it's super helpful when you have a small team and you're covering the world.

Speaker A: So take me back, say 10 years, you get out of the crisis, you have the liquidity to match and now you can put in place the policy portfolio that you think makes sense. What did that look like and what does it look like today?

Speaker B: Well, I wish it were as you described, Ted, that we got through the crisis and then we got to get started. But we were actually doing all of that starting in 2006 through the crisis. And coming out the other side wasn't like they said, okay, just like hang out here and wait for this to be over. So we're in the crisis. We had just set up our investment office. We had just moved the files from Williamstown to Boston. And I don't know if it was the weekend of Lehman or Bear Stearns, it was one of those weekends. And we're in the office looking for our contract to see what we can do in the situation with all of these managers. And we had some contracts. So it was an interesting time when you're, you know, it's a new office and you have long standing relationships and you're trying to figure out what is going on here while the world's coming apart all around you. But coming out of that, what did we do? We really didn't do much differently. We had sort of core fixed income going into the crisis because of this manager who was kind of a balanced fund. So that was helpful. And we had added to that fixed income going into the crisis because you look at how much we support at Williams and it was like, wow, we might want to have some fixed income in here. So that was helpful. And then we also had put in some credit, non investment grade credit in the portfolio, not because we had any view on the market, but just had added that going into before the crisis and that all performed like equities during the crisis. And so that was helpful. But then coming out of the crisis wasn't like we took this most liquid part of the portfolio and went crazy with it. We just, you know, like we have the whole time just tried to find very, very good managers and not too many of them. You know, when I started the pool was 1.5 billion and now it's 3 billion over 14 years. And we've tried to keep the number of managers the same as when I started. That was sort of our philosophy.

Speaker A: How many managers is that today?

Speaker B: Across the portfolio it's just over 60. So when I started if you went through the portfolio and you said, you know, this private equity fund, we've already passed on, so it's not active. But if you counted the active relationships, we're kind of at the same number as we were then.

Speaker A: Yeah. So walk me through real quick what the kind of asset allocation structure looks like today.

Speaker B: Well, it's mostly equity. It's almost all equity. We no longer have the fixed income that we had back then. We still have some credit, but it's just all forms of equity. We have almost 40% of our portfolio in hedge funds and that is partly driven by just the hedge funds that we have. So it's kind of a bottom up fundamental. We have great managers and they happen to be global longshore, what we call absolute return managers. The private part of the portfolio is about a third of the portfolio, I want to say. And then we have what we call global long equity. So we have frictional cash. We don't have fixed income or cash. We really need the equity to grow the assets to support the college.

Speaker A: You know, that hedge fund portfolio, let's just start there, is quite a bit bigger than your peers. And yet for the decade where hedge funds have been under the microscope, to say the least, your returns have been right up there with the best. And so I'm curious how you've gone about that. I mean, you mentioned we have great managers. Everyone, everyone likes to think they have great managers.

Speaker B: Well, it's not like we said, okay, let's have 40% and go fill the bucket. You know, we have these amazing managers and do we want to have a little bit more or a little bit less of that? We're not very tactical and we don't make a lot of changes in our policy portfolio. We look at it every year and review it with the committee. Maybe like a 1 or 2% change. It's kind of at the margin. Uh, you know, all of our value add is in manager selection. It's not in calling the market or anything like that. When we do the attribution work, it's all manager selection.

Speaker A: How many different managers do you have across that? 40%.

Speaker B: Hedge funds, maybe 10 or 15.

Speaker A: Walk through what that process is like when you do make a change, putting

Speaker B: a manager in or taking a manager

Speaker A: out, it, uh, could be both. Two different decisions.

Speaker B: It takes us about a year between the time we meet someone and recommend putting them into the portfolio. So we're pretty careful. Like I said, we really try to manage the number of relationships in the portfolio, in part because we don't Want to dilute away returns by having too many managers. And in part because we're just this lean mean team here of not a lot of people covering a lot of the world. So we've gone back and run the numbers and it's about a year from, you know, I meet you and by the time we do all the work and we meet you a few times and make a decision about investing and then bring a recommendation to the investment committee, it's pretty slow.

Speaker A: Outside of the basics of you want to get to know the people and the strategy and how they go about it. What do you think are the most important aspects of a manager you're trying to tease out in the ones that do make it to their portfolio versus the ones that might be close but don't.

Speaker B: I mean there are a lot of good investors in the world, right? And we don't need to be invested with all of them, but the ones that we have need to be really good. So that's how we kind of think about it. We do lots and lots and lots of meetings. We track the number of meetings. We do like 500 meetings a year between our current and potential managers and we only will add a small handful of new managers every year. So part of it's just meeting so many different people that you start recognizing things. And I've been doing this for a long time so you start recognizing things and you also remember where people came from and what they used to do and when they changed the name of their firm so people wouldn't know what they were doing and that kind of stuff. So that's definitely helpful. It's years and years of experience, but some of it's art and some of it's science. You know, there's a lot of what my team calls desk work that you can do and that might tell you part of the story, but it's really meeting people and does their strategy make sense for what they're saying they're doing and for their assets under management? And. And we've done a lot of investing with first time funds or a day one investor, about a third of our portfolio. When I went back and looked, we were in Fund 1 or invested with somebody who started. So a lot of times the track record isn't really available or the most important thing.

Speaker A: So what is the most important thing?

Speaker B: Somebody who's honest, somebody who you can trust, somebody who you're not going to lose sleep at night. What's important for us is understanding what our managers do and being able to explain it to the investment committee. So I always sort of felt like if I can't explain to these guys what we're doing and why something went wrong, then I shouldn't be in this job. So as a result, we don't have a lot of black box, macro, quant kind of stuff in our portfolio. A lot of fundamental bottom up kind of managers where you can understand most of what they're doing.

Speaker A: What are your conversations like with the kind of long standing managers in your portfolio on a routine basis? What are you trying to dig into to learn about?

Speaker B: Well, if you ask my team, they would answer that one way. If you ask me, I would answer it a different way. So I've done one manager meeting during COVID I was in San Francisco a couple weeks ago and I met with one of our managers out there and we spent more time talking about everything but the portfolio. And this manager, they're fabulous investors, they're not crushing it right now. But I didn't really want to go talk to them. Like, can we go position by position? Can you tell me why this isn't working and why this is working? And we talked about a lot of stuff. We talked about the election and Covid and their lives and what's been going on. And I feel like I walked away from that knowing a lot more about how they're thinking about things without having talked about the position. And your team, that would be very different. They want to have like the notes in front of them, um, and their iPad and taking notes and asking position by position and that's appropriate. I'm responsible for nothing and everything. And I've been doing this for a long time. And if we had performance that wasn't great, it's my responsibility. But the people on my team are the ones who do all of the work to get us there.

Speaker A: If you're having a meeting one on one, you can cover certain personal things that might not get covered as much in a meeting with say three or four of you. Managers have limited amount of time they spend with each client. So how do you think about what are you trying to tease out and when over time in one of these relationships?

Speaker B: Well, I would say we're very respectful of our managers time. We like to see each manager at least once a year, if not twice. And many of the managers we have in our portfolio we've had for 20 years or something like that. Our practice is to see them at least once a year. My team definitely does that. And they're in touch with them much more by phone. And that kind of thing. But we Try to be LPs or clients who are not kind of overstaying our welcome. And I think that's worked out well for us because then when we are looking at a new firm or trying to get into a fund and they're doing their due diligence on us, I think that's what they hear about us, is that that we're not, you know, taking too much of their time. I meet every manager before we hire somebody, and then once they're in the portfolio, I travel about 50% of the time in normal times. And so I see a lot of people along the way, obviously the most important relationships and the trickiest relationship. But it's not like I parachute in when somebody's having performance difficulty and, you know, bring the hammer down. That's not how we do things. And I would say I probably do the least amount of talking when I go to meetings with my team and it's their relationship and they know these guys the best, and then I'll hear them say something and ask a question. And it's not a gotcha culture in our office. It's really like trying to understand what they're doing and is this what we hired them for?

Speaker A: Do you see any commonalities in that group of managers of either the way they invest or the size of the balance sheet that they're using, or their exposures that have been more conducive to success than others?

Speaker B: So the legacy of our portfolio was Andreas Halvorsen was part of the committee that started this portfolio. And there are a lot of Williams people who have worked at Tiger or Tiger Family firms. And so what that means for our portfolio today is there's kind of this fundamental bottom up kind of investing style. We have managers who were not part of Tiger, but there's definitely coming into Williams and never having invested in a hedge fund. I learned a lot from those people. And the culture of Williams is one of incredible accomplishment and success and incredible modesty and humility. And people really helped me when I got started. So when I look at our list of global, long, short, they're doing all different things and some move their exposures around and some do privates, and some are incredible at shorting. And we have a small number and they all do different things. So we don't need to have three firms all doing the same thing in a much bigger portfolio.

Speaker A: So when you turn over to the absolute return side of it, did Paul Singer serve the same purpose you mentioned earlier that Andreas did on the long

Speaker B: Short mean, did he influence the. What was in the portfolio? Uh, there are a lot of good stories about what happened in those committee meetings back in the day.

Speaker A: So care to share any one particular good one?

Speaker B: That was before my time. There was so much debate that I think the outcome was really good. There was no sort of polite, oh, yeah, I agree with you. That's, that's. Yeah, I think that's good too. So, I mean, Paul was an incredible MIDI member and served for a long time and he's not an alum. He has two sons who went to Williams, which is how he got involved and was an incredible non alum. Um, volunteer.

Speaker A: You mentioned earlier that you had a terrific group of venture capital managers from when you showed up. It's still a small percentage of your portfolio, both on an absolute basis and relative to some of your endowment foundation peers. I'm curious how you've thought about, you know, clearly an asset class that's done extraordinarily well with the managers you've had, whether or not you'd grow it and if so, how.

Speaker B: So our Target allocation is 6%. Our current allocation is like three times that. We haven't done anything differently. We have the same managers and we commit the same amount of capital when a fund is raised. So we have terrific managers and we look forward to them taking advantage of the IPO market and doing direct listings and returning capital to us. That's not a secret. Anyway, so between that and the private equity, it's 20 some odd percent of the portfolio. The allocation to venture and private equity haven't changed since I started with the college. And it really goes back to this need for liquidity because we support so much of the operating budget. So we spend a lot of time looking at liquidity and unfunded commitments and how we compare to peer institutions and how much they have in unfunded commitments and illiquid investments. So we are slightly less than the schools that have the best tenure returns, but not very different. And we haven't really moved off of those targets because we have to be careful about our liquidity. And we look at our unfunded commitment level moving around and what that means. And you know, we didn't get upside down in the last financial crisis and have to borrow because we couldn't get money in our portfolio. And that's just really important to Williams. The endowment is here to support the college. The endowment is not just here to be a pool of capital to invest.

Speaker A: Let me make sure I understand this. You have a 6% target that's grown to 18.

Speaker B: Well, call it 16.

Speaker A: 16. Was that a, uh, recent phenomenon in the last couple years with extraordinary performance or is that just something that's evolved over time and you haven't changed the allocation target?

Speaker B: It's all performance driven. So we really, we had some core relationships when I got here that we've been with for a very, very long time that have been great and then we've added a few names in our portfolio, but not a lot. And mostly first time funds in different parts of the world or here. But we haven't really added much as far as relationships. But when the funds do well, it grows. I mean we saw the same thing with our private equity portfolio where our target's 9% and it was well above that when buyouts were doing well. And now it's ventures turn. The good thing is we have all these people on our committee who have seen it before, as have I and my team that's like this too shall pass.

Speaker A: Well, there's a couple of ways that shall pass. Right. One is you get the distributions and it comes down. The other is, you know, less exciting.

Speaker B: Yes.

Speaker A: How, how have you thought about managing around those allocations when they move away from long, longer term targets?

Speaker B: We definitely talk about should we move the target as the actual has moved, but then it becomes tempting to add more relationships and make bigger commitments and then you've gone from the current target to a bigger target to, you know, so we just stay the course and it's bigger than the target. But as you said, it will come back down, hopefully for a good reason and not because valuations drop precipitously. So we're lucky to be in these amazing partnerships and we really value them. And our private portfolios have done really well over long periods of time and we don't try and reinvent it all the time. Our venture portfolio is kind of barbell between these very long standing relationships and then some new stuff. And that's been good to us because what was new 10 years ago now is very established and very successful.

Speaker A: What have you found in the newer stuff that has worked and hasn't?

Speaker B: I mean, listen, we all make mistakes. You haven't asked me that yet, but happy to talk about it. Hiring mistakes. Mistakes in the portfolio. I mean, you can't have one of these jobs without having a whole, you know, we could just talk about mistakes. So which wouldn't be, it wouldn't be a lot of fun, but let's have at it.

Speaker A: No, no, I think it's great. Talk about the mistake that you learned the most from?

Speaker B: Well, one of the mistakes was, you know, you have someone who you think is a good advisor and they say something to you like run, don't walk to this manager. And you do. And that is not necessarily a good thing to do. I mentioned earlier that we have sort of a slow, careful process for adding new managers and getting to know them. And sometimes when you move too fast and you don't do everything that you normally would because of, of not having the time to do that, and that doesn't necessarily end up well.

Speaker A: So do you have a particular story in mind about that?

Speaker B: I have a specific manager in mind.

Speaker A: So what was it that you missed that you think you would have gotten with more time?

Speaker B: Well, sometimes a lot of the best managers don't give you a lot of transparency on the way in. And it's a little bit of a trust me. And sometimes you just have to go with that. And you do as much reference, checking and talking to people who are investors and people who know that person or know the firm as you can. But there's a little bit of a, uh. Sometimes you just have to step off the clip and hope for the best. And most of the time that's worked out for us and sometimes it just doesn't. And so some of it's unknowable ahead of time. But if you are investing, by definition you're taking risk. And so if you don't take risk, you're not going to have return.

Speaker A: In tennis lingo, that's to some extent an unforced error. How about forced errors?

Speaker B: For me personally, it's, um, all your friends are doing it and you say, this doesn't feel right to me, but all the cool kids are doing this, so we're going to do this. And that's never a good strategy. And there are some big things that have blown up that we haven't been in and there have been things that we would prefer to not have been invested in. It's funny because in pension fund law, there's some protection for investing in something that everybody else is in here. It's not like that. Like if I said the reason we invested in Ted's firm is because all these really smart people were in it and even though we couldn't really get there, they're in it. That's like not a good answer.

Speaker A: How do you balance that with the reality that your venture capital portfolio, your hedge fund portfolio, generally speaking, these so called great managers that everybody loves.

Speaker B: Hm.

Speaker A: There are a lot of other great Investors alongside of you.

Speaker B: Mhm.

Speaker A: So it's not necessarily the case that in a lot of the managers that drive your returns, there isn't a good crowd alongside of you.

Speaker B: We're definitely careful about who we invest alongside because that can drive the outcome. Right. But you can be in things with other good investors and have a bad outcome. So we were in a, uh, hedge fund, kind of forgotten about this, but you're making me like think of all these bad things. We were in a hedge fund where the guy at like 5 o' clock on New Year's Eve day announced that he was turning the hedge fund from a hedge fund into a publicly listed security that was a holding company for all these underlying investments. We had all been trying to redeem and he wouldn't let us redeem. And he said, you have complete liquidity, it's a security. But he was the majority owner of the security, so the only liquidity came from him. And that was a long, drawn out, really bad, expensive legal fees experience. And we were alongside some great investors, but there were also some large investors with just a different motivation and they were kind of driving what was happening there.

Speaker A: So what is it in your thought process that drives that situation where all the cool kids are there, but there's something telling you not to go with them?

Speaker B: I mean, part of it's, for me personally, it's instinct. And if you don't feel 100% comfortable with a person, like even if all those people are doing it or if you just don't get it, you know, sometimes people say, oh, you know, he's doing blah, blah blah, or she's doing blah, blah blah. And if I don't get it, then we shouldn't do it. And there are definitely things that a lot of other people are in and have done fabulously well with. And we're not in it in part because of that kind of experience or, you know, I've experienced this before in a different flavor or a different version. And sometimes it's like, I'm glad we didn't do it and sometimes I'm really sad that we didn't do it.

Speaker A: What's evolved in your process and thinking kind of over your time from when you first got to Williams to today?

Speaker B: You know, I think I'm a lot more comfortable taking risk. I mentioned that a third of our managers are first time fund or day one investor. And if you asked me in 2006, when I first got here, I would be like, there's no way we're doing that. And now I'm a lot more comfortable with that risk and can see, you know, 10 years from now why you want to be with that person today. And it doesn't always work out, but I'm much more comfortable with that kind of risk and meeting somebody and having a few meetings with them and understanding what they're doing and yeah, let's take that risk. And sometimes it makes my team crazy, I think, because, you know, I'm ready to step off that cliff before they are. But that's probably, for me personally, that's probably the biggest difference.

Speaker A: The whole world of technology keeps innovating in a lot of different ways. And in some ways asset management is a late mover. I'm curious, like how you thought about innovation in your process when so much of it is built on long term relationships with great managers. Stay the course.

Speaker B: I don't know if we're like the thought leaders on innovation. Uh, we did one thing that was innovative, I thought and saved us a lot of money and headaches is we moved away from a custodian and hired an administrator, which at the time we did it, nobody had done that in the endowment world and not very many people have done it since then. But we got so crazy about not being able to understand what our managers were doing for 20 or 30 days after the end of the month. And so we went with an administrator. And it's made a huge difference in how we look at the portfolio and can manage the portfolio and understand what our managers are doing. It's sort of like the plumbing underneath it all. We just tried to simplify. It's less expensive. I don't think that's what you're asking about. But, um, you know, it was something that made a big difference for us and our team and where we spend our time. So when you think about how you allocate your time and how important that is because you never have enough of it. But I don't know if we're the bleeding edge of innovation with regard to how we look for a manager or analyze a manager.

Speaker A: I know that people on your team teach this winter study every year at Williams. What does that curriculum look like?

Speaker B: Oh my God. That is. One of the best parts of the year is winter study. And it's really sad because we're not doing winter study this year. We are doing something called the Winter Experience. But winter study is a month of the year at Williams that students can take one course and they're encouraged to take something that's not related to their major. I think it's all pass fail. So people take knitting and winemaking and cartoons and stuff like that. And so we started teaching winter study eight or 10 years ago. And we started off bringing two or three students to Boston and having them work in our office five days a week. Then we realized that we could have more students involved if we did it on campus. So we do it on campus. And we basically do endowment, um management 101. They read David Swenson's book, they learn what an asset class is. Somebody different from the team is there every day talking about, this is what a hedge fund is, this is what private equity is. Our provost, who's fantastic, comes in and talks about the finances of the college and how the endowment supports it. When you think that the majority of kids at Williams are on financial aid. So they leave at the end of that month of January, understanding why what we do is so important to what they're able to do at Williams. And it's just fun. It's fun to get to be with these students, both in our summer programs and winter study and our full time analysts. We have a huge alumni base for Williams. It's close to 100 kids who have worked in our various programs. And they're all out in the world doing different stuff. A lot of them in the investment world, which is great coming out of a small liberal arts school that doesn't have anything business or accounting or anything like that. But these kids come out and they learn how to think critically and write and make an argument and put a mosaic of things together. And that's what investing is, right? So I keep telling these guys, you are the most well suited for investing or, uh, investment management. You don't need to go to Wharton or someplace like that. You guys have got it all going on here. So anyway, winter study is really fun. It's really cold and dark in Williamstown in January. And the other thing that we've done that's been a great success is we've brought some of our managers to Williamstown and they talk about what they do and they'll talk about a, uh, stock and the students will get some materials ahead of time and they'll have to talk about would they invest or would they short. Whatever.

Speaker A: Fantastic. All right, Colette, let's turn to a couple of closing questions and we'll go on with it. What's your favorite hobby or activity outside of work and family?

Speaker B: I would say the one thing that I really do pretty religiously now is make sure I get exercise.

Speaker A: Any favorite form.

Speaker B: Hiking, running. My Husband and I work with a trainer together, and we love it so much that we bought our own sled and we have a bunch of. We have a medicine ball and a bunch of other stuff, and we keep it in the trunk of the car. So when we were in Williamstown, working out there for the summer, we would, like, drive around to different parts of campus and do our workout, and people would go by and laugh at us. And it's great. It's great. It's something we can do together. It's a lot of fun. So that's. I would say that's not really a hobby, but it's something I like to do.

Speaker A: What's your most important daily habit?

Speaker B: You know, I would say the exercise. These jobs are great and they're a lot of fun, but they're super stressful. Regardless of what's going on in the market, going up or down or sideways, or things going on with your team or. I mean, this has been such a difficult time for colleges. You know, closing. Do we reopen? Williams reopened and has had great success with that. But there's just, you know, it's stressful. And so staying healthy and mentally, you know, on it keeps you calm, and that's better for everybody on the team and at the school.

Speaker A: What's your biggest pet peeve?

Speaker B: I would say my biggest pet peeve is people who lack humility, and that's both in the investment business and in life more broadly. I didn't grow up thinking I was going to be in the investment business. I wasn't. You know, I didn't have my little stock portfolio as a teenager. I kind of landed here out of necessity, and it's been incredible. I love it. But I'm also very humble about it and think, how did I get so lucky? You know, I get to go to China and India and meet all these people and support an amazing college. And I'm very proud of all of that and feel extremely humble about the whole thing. And you meet a lot of people in our business who are not that way. And so I would say that is definitely my pet peeve.

Speaker A: What teaching from your parents has most stayed with you?

Speaker B: I was with my family recently in California, and we were coincidentally talking about stuff that we learned from our parents that's really been impactful on us. And one of the things that I think was most important is to be positive. And it was something that my parents. Parents both were, and my siblings are. And. And it's just, you know, life is so much better if you're Positive, you know, bad things happen. But, you know, it was kind of like always, you'll get through this. It's not really Pollyanna ish, but, you know, the sun will come up tomorrow, there's another day. And in what we do, that's incredibly helpful because there's always something bad happening in our portfolio. Like, why do managers do what they do? And you kind of just like, you know what? It's okay. We're going to get through this. And so being positive, that was like, an incredible gift from my parents.

Speaker A: All right, last one. And we'll turn to a couple extras for the premium members. What life lesson have you learned that you wish you knew a lot earlier in life?

Speaker B: I think it's sort of tied to what we were just talking about, which was, when something bad happens, it's gonna be okay. You're gonna get through it. And when I was younger, it would just be so upsetting, and, you know, you kind of get caught up in the drama of it being upsetting. And I think I wish I'd learned much younger that it's like, you know, it's okay. It's all going to be good. This isn't going so well right now, but it's all going to be fine. And I wish I, when I was 40, that I had the confidence and the understanding of that, but I don't know how you get that life lesson any earlier than learning it over time.

Speaker A: Colette, this has been great. Thank you so much.

Speaker B: Thank you, Ted. This has been so fun. So much less scary than I thought it was going to be.

Speaker A: All right, let's continue on with, uh, just a few more here. What advice do you give early career professionals?

Speaker B: My usual response to that, which my husband tells me is, like, super basic, and I can't say this anymore, is, work hard, check your work, do a good job. I think that's profound. But that's for, like, right out of school. And we've had a lot of students working with us, so I know that that is not necessarily what students do when they get out of college, especially checking your work. And it's just like, not that sexy or deep. That's, like, stage one advice that's like, okay, you're your first year out of college, Just do a good job, work hard, check your work. Don't let your boss find mistakes in your work. I mean, it's going to happen. But, you know, and then later on, I think, and I don't know when the transition from stage one to stage two is, figure out what's the what for of what you're doing. You could be really good at spreadsheets if you're working in our office and you don't understand how important we are to Williams and why what we're doing matters so much and how that can influence your work. Figuring that out when you're still in your twenties would be incredible and make your job become a career instead of getting stuck on a job.

Speaker A: What kind of conversations are you having with your peers these days?

Speaker B: Frequent. Well, you know, it's funny, one of the things I really miss about not traveling is seeing all my friends, because, as you mentioned earlier, you're in these investments with other good investors and you become friends with them over time. And when you travel, you know, oh, I'm going to this annual meeting, I'm going to see so and so, or we're all going to China at the same time. And I really miss that. And so when Covid started, a lot of people made more of a concerted effort to like regularly check in on the phone, not on zoom. When I'm talking to my friends. It's sort of a reality check of we're going to get through this and, you know, what are you seeing or hearing or doing and. And it's kind of talking to each other about this. Actually isn't that different from pre Covid or I mean, it's easier to say that now than in late March and early April, at which point we were all talking about liquidity and is your line of credit going to be there if you need it and that kind of stuff. But it's more just reassuring each other.

Speaker A: What's your favorite book?

Speaker B: I keep track of the books that I've read in this app called Goodreads, which I love because I can never remember what I've read. And so I can go back in there and say, oh, I loved that book. So the book that I've been reading a lot during COVID and one book I read recently that I absolutely loved is a book called Circe. It's about one of the Greek gods who is a woman who is kind of thrown out and she goes and lives on an island with her son. And it's just fascinating. It's all about mythology and the gods, and that was a fantastic book. And I started thinking about other books that I like, and they mostly have women protagonists, and they also are all sort of succeeding against the odds. I don't know why that resonates with me, but apparently it does.

Speaker A: I'd have a reason or Two, so.

Speaker B: But that is just a fantastic book. It's fiction. It's written by a woman who's a historian, and I can't remember her name right now. It was like one of those books where you're at work or you're working at home and you just want to finish working so that you can go sit down and read your book.

Speaker A: All right, well, I'm going to ask you one more. Uh, we touched on this in some ways earlier, but what's the biggest mistake you've made? Could be investing. Could be life. And what did you learn from it?

Speaker B: I don't know. There's so many mistakes. There's so many mistakes in hiring in the portfolio and just, like, raising kids. I don't know. I feel like I've been so lucky in so many ways. You know, I think one of the greatest determinants of how your life is is who you're married to. And I feel very lucky to have my husband. And of course, we've made mistakes, you know, as parents, and I don't know, it's. It's hard for me to, like, single out just one because, Ted, there are so many. And I'm not dodging. I'm really not dodging your question. It's just like, ugh, uh, there's, ah, so many.

Speaker A: All right, let's leave it at that. Colette is so much fun. Thanks again.

Speaker B: Okay, thank you.

Speaker A: Thanks for listening to this episode. I hope you found a nugget or two to take away and apply in your investing and your life. If you'd like what you heard, please tell a friend and maybe even write a review on itunes. You'll help others discover the show, and I thank you for it. Have a good one and see you next time.