Dave Morehead

Husband. Father. Investor. Baylor University endowment. Thoughts on non-profit portfolio management.

[Dave Morehead @CIO_Baylor]

@shanas621 We have two 8-month old Rotties!

[Baylor University @Baylor]

#SicEm 💚💛

[John L. Bowman @BowmanJohnL]

Video killed the radio star…what will AI’s invasion mean for the investment profession? ⁦@ROIChristie⁩ and I examine the real industry implications with ⁦@CIO_Baylor⁩ of ⁦@Baylor⁩ and ⁦@EscobariMartin⁩ of ⁦@generalatlantic⁩ https://t.co/WsRi9q9Bon

[Dave Morehead @CIO_Baylor]

@GunjanJS @bespokeinvest And likely to continue as further rate cuts bolster smaller company prospects over the next 15 months…

[Baylor University @Baylor]

Pro Ecclesia. Pro Texana. Pro Mundo.

#SicEm

[Dave Morehead @CIO_Baylor]

@AliciaMcElhaney Good for you!!

[Dave Morehead @CIO_Baylor]

Following on from the last two posts…here’s how we think about this job and what are some predictors of success in this field…

Capability with numbers

Facility with puzzles

Innate curiosity

Willingness to pick up the phone

Putting the pieces together

Thinking about what comes next

Considering the knock-on effects

Tinkering with something new

Interest in mystery genres

These, and others, are traits or interests we look for in analyst candidates. We also like varied interests outside of work/class, along with some sort of service or volunteer experience. Willingness to say “I don’t know” is also a core characteristic we look for. Ego at any level is an immediate non-starter.

[Baylor University @Baylor]

These views never get old. #SicEm 🐻🌈

[📸: lindseyjohnson263 on IG]

[Baylor University @Baylor]

The best hour of the week returns! 🐻🍨

This is Dr Pepper Hour -- free DP floats from 3-4 p.m. every Tuesday!

[Baylor University @Baylor]

Summer skies. 🌤️💚💛

[Dave Morehead @CIO_Baylor]

@GunjanJS Agreed

[Dave Morehead @CIO_Baylor]

Following on from the last two posts…here’s how we think about this job and what are some predictors of success in this field…

Capability with numbers

Facility with puzzles

Innate curiosity

Willingness to pick up the phone

Putting the pieces together

Thinking about what comes next

Considering the knock-on effects

Tinkering with something new

Interest in mystery genres

These, and others, are traits or interests we look for in analyst candidates. We also like varied interests outside of work/class, along with some sort of service or volunteer experience. Willingness to say “I don’t know” is also a core characteristic we look for. Ego at any level is an immediate non-starter.

[Dave Morehead @CIO_Baylor]

So, then students ask, “what do you do in a given day?” It’s a relevant question as college students are used to “doing” things within a structured schedule. But ours is a “thinking” job with broad reach…as the general manager, we’re not sitting around and watching “baseball games”. In fact, we pay little attention to the players on the field, trusting them to play their positions at All-Star levels. So what do we do?

Strategy - consider new ways to make money for the endowment, investigate and then execute on such; consider new ways to structure the team (hitting singles/doubles consistently or swinging for home runs, etc.)

Exposure - knowing what we own and where it is and deciding if we want to continue to own such; buy low/sell high decisions as it relates to sector, geography, mkt cap, specific strategies, etc depending on what markets are doing

Markets - since we’re the general manager we need to keep track of what is going on in most all markets and sub-industries, so we read a lot and follow markets globally

Events - basically anything that can impact markets, we follow; if there is state-on-state conflict (recent example), we’re game-playing likely responses and market impacts in real time (at night or on the weekend) to determine what/where we might need to invest/divest come morning; same is true if there’s a hurricane or a country specific financial crisis (this is not a 9 to 5 job)

Players - we also have a constant stream of new players/strategies we’re considering/interviewing to see if we can upgrade our team

Reporting - there’s a regular schedule of telling our owners/fans what is going on with the team

Research - as new technologies such as blockchain, solid state batteries, autonomous driving, AI, and similar begin to emerge, we need to be up to speed on where we should be arraying our capital to take advantage of such; so again, a lot of reading

Financials - on a daily basis we’re moving money between accounts/managers as we re-position and provide capital to managers we have contracts with

This is a list of SOME of what we do…there is a lot more. But, in short, no day is the same. We’re both anticipatory and reactive to what is going on globally in an effort to drive returns for the university. We see the complete breadth of financial markets and are frequently making decisions about where the best risk-adjusted returns lie. People who like puzzles tend to do well in the allocator space.

[Dave Morehead @CIO_Baylor]

Again for Baylor (or other) students…it occurred to me that some of you might not fully understand how the industry breaks down. Let’s use a baseball analogy…

University - owns the baseball club, but only as a means to create excess revenue which is then used to fund a broader purpose or objective

Investment Committee - the owners group of representatives that has to sign off on big/significant hiring/firing/strategy decisions by the general manager

Allocators - the general manager that decides what players to hire/fire/trade and what strategy to employ to get the W (where endowment investment teams reside)

Portfolio/Asset Managers - the players on the baseball field (with specialties in certain positions/strategies)

Asset manager/3rd party marketers - asset manager “sports” agents (get paid if player makes it on the team)

Prime broker/investment bank - asset manager financier (lends money/securities to asset manager so they can implement the strategy…and is paid with/by interest earned)

Fees - contract with player/asset manager in return for performance on the field (general manager needs a significant number of players to play well in order to get the win)

Return rankings - aka W/L record is akin to how we do vs other endowment peers (but without taking into account how we SHOULD have done…no ranking includes risk taken)

Benefit of returns - creates more resources for the university so that it can achieve more of its stated objectives/mission

It’s not a perfect analogy, but it works pretty well (particularly for on the field strategy) and makes the industry more accessible to those who aren’t in it (fans?).

[Dave Morehead @CIO_Baylor]

@GunjanJS Rates down helps small caps v large; strong USD helps small caps v large; stronger economy helps small caps v large; and if Trump is elected, tariffs help small caps v large (since small caps are predominantly domestic v transnational)

[Dave Morehead @CIO_Baylor]

@GunjanJS We expect such to continue as interest rate cuts actually occur…there’s historical data to this effect

[Dave Morehead @CIO_Baylor]

@GunjanJS Nope

[Dave Morehead @CIO_Baylor]

@Zebra_XC We are always trying to increase our risk-adjusted returns…short and long term.

[Dave Morehead @CIO_Baylor]

I like this Peter Thiel quote…

“This is why I think competition is always this very two edged thing.  When you compete ferociously, you will get better at that which you’re competing on but you will always narrow your focus to beating the people around you.  And it often comes at this very high price of losing sight of what is more important or perhaps more valuable.”

In endowment land, the competition is definitively NOT between schools, but versus the internal team itself to increase the endowment’s dollar value. Students can’t pay for school with return percentages! Returns are just a means to get to a larger funding pool to enable more scholarships. That’s why challenging oneself, thinking outside the box, and ignoring the naysayers is so important!

[Dave Morehead @CIO_Baylor]

@iimag The wonderful, engaging Renee Hanna is mentioned here!!! Bravo Renee!!