Don Lindsey, George Washington Universitys cio, is hanging out at the back of a truck in the photo thats been picked out for his LinkedIn page. He scans an expansive landscape under harsh sunlight, looking rather like an adventurer or geologist on a mission.
The explorer may be an apt self-image for a cio who says he doesnt believe in target allocations and instead emphasizes that we look for every opportunity in world where there is a dearth of capital, he said at the University of Virginia Investment Conference last week. Youve got to talk to people in the trenches every daythat in itself will generate ideas. (According to UVIMCO cio Larry Kochard and co-author Cathleen Rittereiser in a profile of him, Lindsey consumes trade publications and has stuck out like a sore thumb at highly industry-specific events like feed and grain conferences, where people are more likely to be talking hogs than the Yale Model. Everybody looked at me like I was crazy, according to his recounting of an event in the book.)
Long-time acquaintances of Lindsey echo how his view of the world and portfolio management is, well, different. Lindsey resists the idea that asset allocation is the starting point for decisions on putting endowment money to work. Instead, themes and structural changes in economies and industries take center-stage in how GWs roughly $1.4 billion endowment invests.
I dont believe in asset allocation; its too fixed and too constrained. I like to take a top-down and bottom-up view. I look at what are people doing out in industries around the world and then we decide should we do it in debt or equity, private or public form, he said in Virginia last week. The third part is manager selection and how to implement the theme.
Lindseys theses, known typically to play out over at least five years, can be quite specific. Look at the markets where Lindsey has been eyeing opportunities: container shipping right now, commercial aircraft in recent years. The view that he takes on the American economy, and its shale gas and manufacturing industries, is unapologetically bullish. At the plush auditorium at the UVA Darden School of Business, he spotlighted the employment opportunities for truck drivers that could come with pockets of growing U.S. output: Its not the type of business that is cushy but there are tremendous opportunities out there and they are very much underappreciated by people around the East Coast.
Lindseys confidence has allowed him to sign off on moves that many would have found hard to stomach. At the conference, he said that GWs nine-person team is composed of generalists covering the world and the entire capital structure, rather than specialists. In the immediate two-to-three years after 2008, GW took steps to unwind its long/short strategies; its hedged exposures are zero now. It used the assets for cheap buy opportunities, like investment-grade corporate bonds (FEI, 12/08). In response to a comment by co-panelist and Edgehill Endowment Partners Ellen Shuman on the growing willingness of endowments to accumulate cash in a low interest-rate environment, Lindsey retorted: Ellen, youre wonderful, but I hate cash.
A strong stomach for illiquidity requires conviction and the ability to tune out the crowd. Something bad can really happen and well have a shock to the system. My portfolio could be down 20% but I still know its intrinsic value, because I know the value of the business, and the cash flows it is going to generate, Lindsey said. He also warns, If everything goes down, it may take a very time for the illiquid market to come back. Lindseys investment style is not for the faint of heart (or the cash-hungry).