[REPLAY] - Larry Kochard – Endowment Professor (Capital Allocators, EP.11)

Long-Term Focus

Larry Kochard emphasizes the importance of maintaining a long-term investment approach, especially when collaborating with extraordinary managers. He believes that partnering with managers who are actively involved in shaping the future of companies is crucial for creating value at the company level. This approach requires discipline, particularly when deciding whether to hold or fold investments during challenging periods.

People have become much more short term in their focus, trying to maintain that discipline of being a long term investor.

--- Larry Kochard

Kochard highlights the need for price discipline, ensuring that investments are rebalanced when necessary to maintain a growth-oriented portfolio 1 2.

   

Risk Management

Risk management is a critical aspect of Larry Kochard's investment strategy, focusing on both individual manager performance and overall portfolio allocation. He stresses the importance of understanding drawdown risks and maintaining a policy portfolio that aligns with the university's risk tolerance. This involves a careful balance between public equities, bonds, and real estate to ensure stability during market downturns.

It's hard to, even though people still do look at it over a one year period, such a big chunk of our portfolio now about 32%, and then even more so of our peer portfolio are in privates.

--- Larry Kochard

Kochard also acknowledges the challenges of assessing performance relative to peers, given the varying levels of risk embedded in different portfolios 3 4.

   

Strategic Allocation

Strategic asset allocation is pivotal in achieving desired performance and managing liquidity within large portfolios. Larry Kochard advocates for playing to strengths rather than mimicking peers, emphasizing the importance of aligning investments with institutional capabilities. This approach involves a qualitative assessment of risk tolerance and a focus on long-term strategies that may differ from peer institutions.

If we're good at something, let's do more of it. If we're not really bad at something, let's either not do it or try to figure out what we can do to get better.

--- Larry Kochard

Kochard highlights the need for continuous evaluation and adaptation of strategies to ensure they meet the institution's objectives without succumbing to short-term pressures 5 6.