Carrie Thome – Nothing Ventured, Nothing Gained at WARF and beyond (Capital Allocators, EP.160)

Active vs Passive

Carrie Thome's investment strategy at WARF involved a nuanced balance between active and passive approaches. She explains that while futures were used for large, mid, and small-cap US equities, active management was preferred for emerging and frontier markets due to their complexity and potential for higher returns 1. This strategic blend allowed for efficient exposure while maintaining flexibility in asset class decisions. Thome emphasizes the importance of setting a stable allocation and building long-term relationships with active managers to introduce portfolio tilts 2.

We focused where we thought we could add value, which is setting an allocation, but not monkeying around with it.

--- Carrie Thome

This approach ensured a robust portfolio capable of weathering market fluctuations.

   

Alpha & Beta

The separation of alpha and beta strategies was a cornerstone of Thome's portfolio management. She describes the complexity of managing these portfolios, ensuring that active management did not inadvertently incorporate market risk, which was reserved for the beta piece 3. This required a careful balance of liquidity and strategic allocation, particularly in private markets where opportunities were selectively pursued 4.

We were going to seek very hard to make sure we weren't paying for beta in the alpha piece.

--- Carrie Thome

By maintaining this separation, Thome could focus on maximizing returns without unnecessary risk exposure.

   

Governance & Volatility

Governance and volatility management played a crucial role in WARF's investment strategy. Thome highlights the challenges of aligning stakeholder risk appetites with portfolio decisions, particularly when considering increased volatility through leverage or riskier equities 5. The governance structure allowed for innovative approaches, such as maintaining consistent volatility while seeking higher returns, which ultimately led to a more balanced and less volatile portfolio 6.

We ended up delivering significantly less volatility.

--- Carrie Thome

This strategic governance enabled WARF to adapt and thrive in varying market conditions.