Ghost of Charlie Munger

PM of multi billion $ portfolio. Recovering I-Banker. Not investment or any other kind of advice.

[Ghost of Charlie Munger @CioEnd]

@pmarca Going to be more like 99% cheap models and 1% on next gen models.

[Ghost of Charlie Munger @CioEnd]

@BuffaloBillCo @wtp345

[Ghost of Charlie Munger @CioEnd]

The point is you don’t get to choose the benchmark after the fact. The composite median for all endowments over the 10 years in question is 8.1%, ahead of the global 70/30. Large endowments with real investment offices have done significantly better. I’d argue that most endowments, particularly the smaller ones are under-risked relative to a 70/30. An easy benchmark would have been international large cap, Europe, HFRX or god forbid emerging markets. The idiots at GMO have been saying that EM is going to outperform nearly that entire decade. You’re so smart you would have ignored them? Give me a fucking break. You don’t get to pick a fund that is trying to beat the Russell 3000 and bitch about it not beating the Nasdaq 100. Yes, the ICs should have chosen a US 70/30 benchmark (in hindsight) but Cambridge, JPM, GS, GMO, etc. all recommended a global asset allocation at the time. I’m faced with two choices: you can’t admit that what you are saying isn’t supported by the facts …or you are a fucking moron. Yes, endowments have too many high-fee alt investments and are mostly way over-diversified but that doesn’t mean those investment offices haven’t done reasonably well given the mandate that was given to them by their ICs. I noticed you didn’t address the question on what you would choose looking forward to the next ten years? I’d choose a global 70/30 because i have no clue whether or not US markets will continue to dominate global returns.

[Ghost of Charlie Munger @CioEnd]

@BuffaloBillCo @wtp345 Pretty solid analysis. Except that SpaceX was significantly less than 1% at cost and I’m guessing they have had very little to no opportunity to sell it as a private company. You’re just proving my original 2 points.

[Ghost of Charlie Munger @CioEnd]

So that’s what you would use looking forward? Essentially rebalance out of a global equity index and move 20% of the portfolio into QQQ where the top 10 stocks are nearly 70% of the index and trading at the highest FCF multiples ever and just started massive capex cycles with very uncertain paybacks. Fucking genius idea. You should just stick to judging others performance in hindsight.

[Ghost of Charlie Munger @CioEnd]

@wtp345 @BuffaloBillCo Jesus Christ Toby. You have to deviate from an index to beat it. That’s how investing works. You can argue they have deviated too much or there is a better way to do it…happy to hear your financial wisdom.

[Ghost of Charlie Munger @CioEnd]

@BuffaloBillCo @wtp345 Back to the small dick energy…I don’t have a counter argument so I’m just going to say “it’s stupid and it won’t work because now everyone does it”. I’m still waiting for those nuggets of wisdom on how you would do it better.

[Ghost of Charlie Munger @CioEnd]

Toby, not sure what you’re saying here but this has strategy has worked for endowments for the last 3 decades which includes many drawdowns and bear markets. Generally the world has been in a secular bull market for the past 300 years. That’s why they use a “global” strategy and not solely US so they have exposure to markets that could do well if US assets are in a bubble that could implode any day. I would argue this strategy likely won’t continues to outperform in the next 20 years because the median PE, VC and HF is a lot shittier than the median was 20 years ago and most of the good historical ones have gone into asset gathering mode (Bain, Sequoia, Blackstone, Viking, A16Z, etc.) so will be way less likely to produce the historical “alpha” they once did.

[Ghost of Charlie Munger @CioEnd]

Tell me you’ve never sat on an IC or constructed multi-asset class portfolio without telling me. You start with the LT goal and risk budget like 70/30. That’s STEP 1. Then you have to decide how you can outperform. You have to differ from the benchmark to outperform it…even you can probably understand that. Endowments do this generally by taking technology, business model, growth and illiquidity risk (private assets) and by replacing a mix of the bond/equity risk profile allocation risk with a mix of low beta HFs, private credit, real estate, infrastructure and a chunk of cash to keep the lights on. There is no free lunch. It’s obviously a riskier portfolio in many ways..particularly less liquid. The leverage is probably higher on a look through basis as well though lots of global ACWI companies have leverage. You can argue this is stupid of them to do it this way and there are smarter ways to do it. Fine. Give us all your secret pearls of wisdom. I’m all ears. What I’m saying is this has generally been successful over that 3 decades since Yale implemented and Cambridge started charging stupid fees to help other schools do the same thing. What you can’t do is change the benchmark/goalpost, after the fact, to the best performing index over the last twenty years and stupidly say, like a dipshit, “they would have been way better off in just the S&P or Nasdaq”.

[Ghost of Charlie Munger @CioEnd]

@wtp345 @CioEnd That’s because it doesn’t make sense / is deliberately chosen as an easy benchmark to say you beat

[Ghost of Charlie Munger @CioEnd]

Except for the fact that you are not at all accurate. 70/30 over last 10 years is 7.3%. So WashU outperformed by 240 bps per annum. This conversation is disappointing. They would have had significantly less volatility as well though the private marks obviously make this comparison less relevant.