Lane MacDonald – Teamwork, Alignment, and Investing at the Highest Levels at SCS (EP.483)

24:25That being said, that was an institutional push that happened at Harvard to eliminate all oil and gas investing. When you take a capital intensive sector where many people are running and not employing capital, that becomes a very attractive sector. The loss to Harvard by not investing in a sector of oil and gas over the last eight, 10 years is very meaningful because it was a target rich environment for returns that go to support the financial aid for students. Those are some of the challenges that people don't think about when they look at these endowments. They're great people running these places and they try to optimize within those parameters, but there are some constraints that exist because of the institutional biases.

25:04So we circle back, that phone call comes in. What was the phone call? The phone call was from the family that owns Fidelity Investments. One call becomes meetings. They're a wonderful family. It was a unique seat in terms of leading their family office, which is for their family, but also probably for some other owners of Fidelity and the other employees. It was a unique opportunity to be the chief investment officer of a platform like that in Boston with a family that has done so much for the city of Boston philanthropically and otherwise. It was a compelling opportunity. So you go from an endowment to a large family office.

25:42What was the breadth of investment activities that you were involved with for the Johnsons? If you think about the endowment model, basically the asset classes were the same. Public equities, private equity, net resources, real estate. The expression was different as it is in most family offices. Once again, with the Johnson family, they had the ultimate advantage as well of duration of capital. In their case, you had some flexibility within that mandate, reputational benefits with that family and how unique as they are in scale. very few families really have enough scale to really optimize the platforms.

26:19They did. What was the expression of those asset classes inside the office? It really was more about a willingness to accept concentration. In certain asset classes, they were very high concentration. Different families have different priorities. Some families go to the endowment model and they want to partner. Some families like to do things more directly. The Johnson family, as entrepreneurs, lean more directly. as opposed to investing through managers. That was obviously, in hindsight, wonderfully complementary to what I did with Harvard, but very, very different. What did you see as the strengths and drawbacks of investing directly across asset classes in a seat like that compared to Harvard portfolio of managers?

27:03It comes back to where I kind of true north in terms of domain expertise. My view is be the best or partner with the best, but have the humility to know which bucket you're in. If you're going to invest directly, you better be the best. It's so competitive out there. The flaws in many family offices, they don't hire the teams. If you're going to focus on direct investing in an area like private equity, in a sector like manufacturing, you better hire a world-class team who's got a real edge, experience, top quartile track record, have the team that can execute and deliver really outstanding returns.

27:40Otherwise, you're a tourist investor or worse. And you're showing up, you're looking at things in different sectors, and you're taking risks you don't really understand. Many family offices who do direct, some do it well. Some rely on less capable teams to do direct investing. That's where you set yourself up to fail. Now you have another seat where, by all intents and purposes, you can imagine you thought you were going to be there forever too. What led you to end up coming over to SES? Back to my teamwork, that to me is so central. I've never been someone who felt like I have all the answers.

28:14In the family office construct, I felt we weren't prepared to partner with the best. In many family offices, there aren't enough checks and balances on the decision-making process. The family calls the shot. That leads to suboptimal decision-making. Back to the view of, I want a team to make the best decisions. Those who have the most expertise on my team, I want them leaning in, helping to drive that. always the family has the head size view on those things. In some cases, you may want to invest directly, but in many cases, you really want to partner. When you were thinking about bringing together the best of what you saw at a place like Harvard, the best of what you saw at a big family office, what were the most important principles that you encapsulated that you wanted to bring to the table at SCS?

28:58The opportunity to truly partner with leading investors. Playing hockey, I like to play with the best. It makes you a lot better. Oh, you partner with the best. Alignment's really important to me. I want to be aligned with everyone around me in terms of from a team standpoint, but also from a capital standpoint. I'm not trying to pitch you something that I do well, you don't do well. I also think if you're going to try to optimize a platform, you need enough scale to matter where you can write real checks to drive terms in some cases, drive structure in some cases, lead to co-invest in some cases.

29:29It's important to me to not be so big that you can't do the small, nimble, niche-y things. We're all victims of our past or beneficiaries of our past. Being in platforms like HMC, which was$30,$40 billion when I was there,$30 to$100 is the sweet spot where you can have enough capital to matter. But if a$5 or$10 million opportunity comes up that's compelling, you still have the ability to do that. It was really around those things. The last piece, which is perhaps the most important piece, team. You need a great team. If you want to be a leading investor and you want to try to do something that you are proud of, it helps to be surrounded by a great team.

30:05As you came in to SES, let me take a step back and talk about the history of the firm and where it was to the point where you joined a couple years ago. Like so many things in life, I could take zero credit for the success of this firm. But I'm good at picking partners and teams. The firm had started over 20 years ago. Pete Mattoon, Tony Abbiotti, Doug Ederley, great group of folks had come from the traditional model, Goldman, Morgan Stanley, and just didn't believe in the model. They thought, If this was my money, working with ultra high net worth folks, families, how would I do it? They built a model based on alignment.

30:38We're not trying to pitch a stuff. We're going to think in your best interest. We're going to provide the scaffolding for a family office, real reporting, balance sheet reporting, everything. All the estate trust, tax management, getting beyond our wealth planning, education around for your kids. What many people failed to do and really didn't invest in was the investment side of that. So how do you build a compelling investment platform for these families? You have three legs of the stool. You've got the scaffolding of family office. You've got the estate planning and wealth management and the investment side.

31:11That was the vision. They started with one client and then over time built it to when I joined, I believe we were$35 billion and have grown since then. That was the foundation of the firm. Alignment and to try to deliver all three legs of the stool to families in an aligned way. And what did you see as your role was here coming in? To take a platform that I liked, and I was an investor before I became an employee. I worked on a number of investment candidates, one of those. We chose SCS. That was when I was working for the Johnsons three and a half years before, where I saw what was here and was impressed.

31:47Coming in was to take what was here. Pierre Lockley built the private thing. He's done a great job building this private platform. Steve Perry runs Publix. He is a gifted investor and I love working with him. My view was what I bring is the best of family offices, the best of endowments to bring some of that learning to help continue to evolve this platform. So the things that I could do in the family office world in terms of partnering with other family offices that are only for the multi-billion dollar families that I can now access. I love this platform. Hopefully I can make it better and bring all the mistakes I've made and all the learning I've had to help evolve it.

32:29So we pull the thread on the investment side. How did you think about the building blocks of that allocation model and how you wanted to implement? This was my last chapter. I spent a lot of time on this, making sure we were like-minded because the last thing you want to come into an organization and be like, okay, we're ripping this thing up. I wouldn't have joined if I didn't believe in it, but two examples of things that were really important that are probably the two most important building blocks. Public equities here, we are largely tax managed passive. I work for the Johnson family, so I know Active very well.

33:01I was lucky to lead the public markets team at HMC too, so I've been around the sector. I have become increasingly concerned about the consistency and the opportunity to generate alpha. Fundamentally, in low dispersion asset classes, like public equity is, the beta is very attractive. I still believe there's alpha out there, but we're 70 % tax managed passive. And if you can generate 100 to 200 basis points of tax alpha, and there are now extension strategies that build upon that, if you're thoughtful about it and don't put too much leverage on it, there's effectively some tax alpha that you get for free.

33:33The consistency of that is a foundational piece in public equities around the margin. Are there some gift to public investors? There sure are. Generally, in less efficient parts of the market. It could be small mid-cap. It could be Europe. It could be Asia. That really became foundational. Where there's dispersion, you go active. Where there's low dispersion, like public equity, you go passive. Contrast that. Private equity, high dispersion. And given my history with HMC and being a private equity, there you're active. You lean in, trying to find the alpha in the best managers in the world. Because what you get, as we all know, for being top quartile in the outperformance that exists there is worth it.

34:14When you think about the implementation here, or anything, but the two biggest asset classes of public equity and private equity couldn't be more different in terms of the implementation. That was important to me as a foundational piece. We're going to take a quick break in the action to tell you about private equity investing at Brookfield. With 100 plus years at owner-operators and a$1 trillion ecosystem, Brookfield focuses on essential industries and business services that help shape modern life, yet are often overlooked. It takes independent vision to see their potential, perspective to acquire with precision, and expertise to build lasting value.

34:53It takes industry. Learn more at brookfield.com slash ittakesindustry. And now, back to the show. On the public side, so that 30 % that's an active, given the high bar, because you can generate that tax alpha on the passive side, How do you think about the duration of time where you're trying to measure sufficient alpha that you're willing to pay the fees for an active manager? It's clearly a multi-year period. We're very lucky being able to access world-class managers. We write big enough checks to matter. So you get mindshare, you get opportunity. And underwriting ends up being back to this piece about just spending the time, understanding what is unique about that manager.

35:42track record, team, their process. The investment process is what you're underwriting. So many times though, people change and evolve the process, whether it's public or private. When that happens, you're re-underwriting a whole new strategy or a whole new manager. Having managers who stick to what they do really well, interdiscipline around that, and have a humility around it too is really important. On the private side, I'd love to pick your brain on co-investing. You started as a direct investor. You saw some of that as a rebuild at Harvard, Fidelity. What works and what doesn't in a co-investment program, particularly private equity?

36:20foundationally at Harvard, you had the benefit of all the history, all the co-investments that had been done within Harvard's history and across multi-asset classes. The track record was compelling. That led us to do a lot more work as we were rebuilding and lean into it. If you take the mean return in most vintage years from a Cambridge associate and you back out fee and carry, that's top quartile. I term that structural alpha. If you are smart and thoughtful, partner with mean GPs, do mean co-investments. Absent fee and carry, your top quartile. That's the foundational piece number one. The math is working for you.

36:57Then you get into the selection within that. I have a 10-point checklist around co-investing. It starts with the GP, who the GP is, and is it a sector where they have true domain expertise? Some GPs are in four sectors. They're great in one or two, but not always great in three or four. Then it gets to the partner. is the partner a true alpha generator. Not every partner and every private equity firm is created equal. Some are truly gifted investors and some are more beta investors. Trying to align yourself with those truly gifted investors who are leading the transactions in the sector where they have true expertise.

37:30You want the sector in the industry to be wind at your back, but then you continue to roll through. Not far down that list further is alignment. You've got to be aligned. If a co-invest comes to us and the GP's putting in a small check and looking for us to put in a bigger check than them. That's not happening. If it doesn't work, I want it to be a lot more painful for them than it is for us. That's not rocket science, but the tool of all these sectors investing, you want to be aligned with smart people. It could be a great deal. If I'm not the expert, I'm insecure about not knowing what I don't know.

38:04Then if I don't have alignment, I'm worried about if this doesn't work, who's going to be working this deal? That part is really important. The next part is giving people a quick answer. If it's going to be a no, give them a quick no. Don't drag things out. What are some of the other more subtle points on your checklist? The structure is important. The size of the deal is more subtle in the size of the opportunity. If you think back when co-investing became big in the late 2000s, all of a sudden it became anchored with a lot of big deals. Big GPs doing big deals and leading to co-invest. The bigger the deal, the less excitement about co-investing.

38:40Is it a beta deal? number one. Two, with that, finding those managers who are doing smaller deals who give you the opportunity to co-invest. That generally means it's a smaller fund. Then it becomes manipulating that, what's a meaningful check to them and what's going to be the check to us. Deal size is underappreciated. I'm a believer that the alpha is in the smaller end of the market, mid-cap, small-cap, micro-cap funds. If you're going to try to pursue alpha in co-investing, that's where your co-investment should sit. How do you think about the co-investment opportunity as a factor in underwriting a manager that you want to partner with?

39:18It is one of the gifts of co-investing. Having been a GP as well, I've seen so many GPs and how they underwrite deals. You learn so much about who's really gifted in terms of what they see, what they think, the optionality that may be embedded, the catalyst for outsized returns. returns, that part of it is incredibly informative of getting in the trenches. The point of co-investing is not to re-underwrite the deal. It's to benefit from what they're doing. But what they've done and how they share is incredibly informative to let you know about how deep they are, how knowledgeable, what their edge is.

39:57How do you think through the chicken and egg of do you use a co-investment opportunity to get to know the manager or do you have the relationship with the manager so that you can understand the better through the co-investment opportunity? Now we'll look at co-investments where we're not an investor in the GP. Historically, we had been limited to the GP. We've broadened that aperture because you can see deals outside of your existing GP in order that it becomes too limiting. That being said, the bar is the same. It is a GP that you would love to partner with. In that GP, it could be a family office, someone who's got true domain expertise, that your conviction in them is very high as a lead investor, and they are really compelling.

40:33That is still the bar. both tax-efficient passive investing in the public markets and then co-invest in the private markets. You describe a form of structural alpha or getting at excess return. I'm wondering if there are other aspects of structural alpha that you've identified in your investing. Be a great LP. Pick great managers. Not easy, but hopefully you do it really well. You can be top quartile. Number two, the co-investing that I described, structural alpha. Number three, we do a bunch of this, which is seeding emerging managers, helping to launch emerging managers. 20 % of each of our platforms that we raise every two years are emerging managers.

41:11If you're going to lean in and do that, why not own a piece of it? You can't do that with a$10 million check. But if you have a manager who's going to spin out of somewhere, you can de-risk it. And we, in an endowment, maybe another family office show up with 150 million bucks, and they're going to raise 250 or 300, and we're going to help them with introductions. In that point, can you own a piece of the GP for that value add? I'm hesitant to make that a strategy where we're going to do eight seeds or we're going to do eight of these, because I think that's more bespoke. If an opportunity comes up, many talented emerging GPs don't need that.

41:42They can raise the money on their own. You don't want to have the adverse selection, but where those things align, you can de-risk it and you can own a piece of the GP going forward. That is where you can find more structural alpha. Under the lens of partnering with the best, what are some of the things that you've found that help you identify the best compared to someone that is good or maybe even great? The math piece, which is statistically significant sample size, you better be doing this for a period of time and a very hard adventure. There aren't many Mike Moritzes out there. You start there with a great track record, but then you come down to the other pieces.

42:20Integrity to me is so important. These are partnerships that are going to be long-term. It's a little bit like getting married. It's a long-term relationship in private equity or hopefully within public markets. You're going to be an investor for 15, 20 years. The integrity of the firm, the quality of the people of the firm, the culture of the firm are all those things that are part of the mosaic that you need to build. But the end of the day comes back to domain expertise, proven ability to capture inefficiencies, understanding investment process-wise, how you get to that. One of the challenges for me had been, okay, GP has a$5.1 fund.

42:58They do great and they're focusing on two sectors. Now they're in hot demand. Next thing you know, it's a billion 250. Now you're underwriting something very different, fishing in a different size pond, writing bigger checks. They're going to add a sector. They're going to add more people. Now what you're underwriting is something very different than when you underwrote before. With GPs who rationalize raising more money without being intellectually honest about it is a first indication that you should be thinking about heading for the exit. When you put that lens on how to organize the team to your operations here, I'd love to hear, based on all of what you've seen in managers and the organizations you've worked with, how you thought about optimally organizing the investment effort at SCS.

43:46When I tell a lot of the young men and women who I mentor, you need to think about your career like an investment. It's the most important investment you're going to make. Be thoughtful about every step along your career. Create optionality. I did a lot of work before joining, so I knew the team. But I am a believer in domain expertise. You can't tell the GP you want domain expertise and then not walk the walk. Domain expertise really matters. from a structure here, we have 11 folks on our private investment team. We have 10 on our public markets team. Within privates, we've got folks who focus on venture.

44:17We have folks who focus on buyouts. We have folks who focus on more of an opportunistic bucket and then real assets. Public equity is very similar. Domain expertise wins. So structurally here, we are focused around that. Pattern recognition wise, when a new equity long short manager comes in, I want our team who has seen every equity longshore manager for the last 15 years to be looking at that. Now, we all need to evolve because things change, times change. You need to be thoughtful about that. But I want that depth of knowledge and expertise. I want to be like the GPs we back, where we have an edge.

44:52We can capture the inefficiency. That's structurally how we're organized to make sure that we're making the best decisions we can make. It doesn't mean they're all be right, but the best decisions we can make with the most information. When you have someone on your team that's the most knowledgeable about long-short equity or venture capital, how do you bring in enough insight so that it is a team and you're getting the best of the insights that everybody has and not just that one person who marching orders say, yeah, they want that manager because they know the most and that's the manager should make in the portfolio.

45:27It's such a great balance. You need to have a culture of people who want other opinions. The most knowledgeable person may have the strongest voice. It's the flaw in family offices where the system of checks and balances isn't there to try to optimize the decision. There has to be healthy debate around all of it. If people aren't pushing me on things that I'm supporting, I start worrying about, wait a second, what are we missing? The senior members of the team have a bigger voice, but you need to have the checks and balances. I'm a big believer in investment committee and not investment committee of one.

46:02Finding the environment where you can really encourage debate is important in making the best decisions. Over the course of a week, month, quarter, whatever the right cadence is, how have you set up the team specifically and what meetings you have that lead from initial research on an opportunity to a decision? The way our privates team works is that we have two meetings a week. There, the flow is so significant. Looking at funded sponsors, search funds, trying to canvas that part of the universe as well. There's a lot of flow in addition to the larger and existing managers. Then the co-invest piece.

46:38We've got to be connected. We have two meetings a week. Those meetings are an hour, hour and a half. In that way, you stay connected. The public's team meets once a week. From a process standpoint, that is where the flow happens. Oh, I had a good meeting last week with so-and-so. We should put them on our list. They go on our list of something that we're serious about. Who drops off that list? Because what you want is a capacity-constrained environment for investing. I want it with my GPs. I want it for us, where you're having to make hard decisions about what GPs you're backing in the equity long short space, private space, co-investment space.

47:13The only way to do that is with constant communication in the meetings, vetting this. At the same time, it's important that the team is out there meeting everybody. That's where it all starts. Sourcing to me, whether you're a GP or an LP, too few LPs take the GP mindset. As an LP, you better have a GP mindset and you better source. You better be out there finding opportunities. Peter Lachialate, that's what he's done. He's gifted at building relationships. And he spoke relationships with some of the best investors in private equity because he's gifted at sourcing. He's gifted in relationships.

47:48He loves these people in many ways. That's his gift for each of the team. You take 11 people on a private team and they're all out there networking, sourcing. You're going to see a lot of really interesting things. So when you have a team that sees a lot that they like, how do you roll it up into your portfolio? It's an enjoyable process because it just ends up being best ideas. There are times where you do think about sizing, where you really love something, but you don't have much space. So you may size it down back to having enough capital battered and not so much that you can't do small things.

48:17It ends up being one of getting the best expression that you can in the portfolio. Those discussions, I find, are some of the most enjoyable discussions. You've got good manager A and really good manager B. How do they fit? Now, sometimes there's an exposure piece because we're very conscious about how much tech do we have, how much healthcare, where are we in terms of buyout growth equity venture in our independent return bucket, how much equity loan short do we have? That ends up being foundational. The ultimate ends up being the expression of trying to find the best managers. Using the lens you mentioned earlier of the importance of sector getting the trends right, I'd love to ask you about your opinion of where we are in the private markets.

49:01How are you looking at the opportunity set in private equity today? I am still a private equity bull in efficiencies continue to exist there that are much harder to find in the public markets. From a math standpoint, if you look back over any 10-year rolling period, that privates have over-performed publics by 580 basis points. Over three-year rolling periods, 500 basis points. This last three years is one of the rare three-year cycles that hasn't. It's been an extraordinary period. When you look at private equity, all the managers that we get to meet, the funded sponsors, the emerging managers, there are lots of inefficiencies out there.

49:34There are hundreds of thousands of companies that exist in various parts of this economy in that inefficiencies exist. That is where the alpha is in private markets, And the question is, how do you access it? On the bigger side, there's some real challenges. As a sector, private equity needs to give money back to folks. The DPI is not great. One other byproduct of co-investing is from a J-curve standpoint and velocity of capital standpoint, co-investing is more attractive. You don't have to go through a fund investment cycle. Private equity at the higher end, there's just some real challenges in terms of getting capital back.

50:13Overall, I don't think there are as many efficiencies there. There's now this democratization of aughts that I have real questions about in certain asset classes, particularly private equity and the expression of it in public markets. I'm a believer that inefficiencies will continue to exist in the lower end of the market. Now, I think venture is slightly different in that there are those handful of larger funds, crossover funds who continue to access many of the leading companies. with that becomes more franchise value, I believe, in venture than in the buyout space. Some of those firms that are bigger, I still believe, have an opportunity to perform given their access to the leading companies, whether it's OpenAI, Anthropic, Cognition.

50:51There's more opportunity for the larger venture funds, frankly, to continue to perform than on the buyout side. So as opposed to Harvard or Johnson Family Office, you come to SES, it's part of a business. The private wealth business has become really dynamic. I would just love to get your sense of how you think from a competitive perspective, both on the investment side and on the business side, where you fit in with the dynamics that are playing out? It's been fascinating. I spent the first 13 years where we needed investors, then HMC and working for Fidelity where you didn't need money. Now being back in an environment where you're raising money has been an interesting change and I've really enjoyed it.

51:31This is a great business, the RIA business in itself. We're slightly different here at SCS because we focus on family offices. Our average client is$100 million. With that, they have the ultimate advantage of duration of capital. So we can lean into alts. Not many folks are in our category. So let's separate us for a moment where we do something very different from an investment standpoint. The broader market, in some ways, is similar to Fidelity. You start at the beginning of the year with a business that with just market growth on average, you're going to be up 4 % to 5 % per year, assuming fixed income is part of that equation.

52:07Maybe it's five or six. So your organic growth is just five, six percent before you do anything. There'll be corrections over long periods of time. Number two, you add clients. That's highly accretive. Number three, you go inorganic and do M &A. Now you've got a business that you can grow without doing anything too heroic. Call it 10 to 20 percent depending on how you're doing top line. Very attractive. Now you get the operating leverage in the business, which is a low capital intensity, high free cash flowing business, you're converting a lot of those growth dollars into free cash flow dollars.

52:40Hence, private equity was late to this game. Now there are over, I think, 60 private equity backed roll-ups in the RIA space. It's a great business. People have figured it out. Then the question becomes, within that morass, how do you differentiate? How do you think about differentiating? for us it's easy because we differentiate in the alts in private equity in the expression of publics but even independent return we view it as a fixed income replacement because it's not particularly tax efficient nor is fixed income therefore we try and construct a portfolio that has a low beta to public equities of 0.2.3 there's multi-strat in that there's equity long short but certain flavors to rightly construct something that is highly uncorrelated that is where you can really differentiate.

53:23If you're doing 60-40, 70-30, the democratization of all this is what you're delivering to the masses. That is hard to differentiate from an investment standpoint. You have to have good relationships and sticky relationship with clients. At this end of the market, you can differentiate much more from an overall relationship standpoint, the value you can bring to families, and certainly from an investment standpoint. When you put the whole package together, the investment side, the other two pieces, the stool. How do SCS's loyal clients describe SCS? They start with aligned into the foundation of the firm.

53:59They also really value the relationships with the client facing folks. Number three is the investment platform. We're so lucky here. Many of our clients are GPs, public, private. I love the conversations I get to have with us folks around investing. I learn every time I have the conversation. Those are the pieces that for our clients, they would highlight. As you came in to be the CIO, as you said, the last chapter of your career, as part of a succession from the original founders, what have you learned about succession that you use as a lens to evaluate money managers? Steve Orstaglio, who's a CIO before me, extraordinary person.

54:42He did a great job, and I'm so grateful for all the things he did. Then when I joined the Johnson family, Ned Johnson had done a lot. Stepping into a platform that he built was daunting. He was one of the greatest entrepreneurs of the generation. Fidelity is one of the greatest businesses created. They're a wonderful family. So that was daunting. This was less daunting, but very enjoyable. Once you become a big machine, the big Apollos, Blackstones, Goldman's, those are machines. More in the boutique area, which I describe as, it's more important. Certainly in the private equity realm, the succession of the leadership and ownership, I've seen that handled really well and really poorly.

55:23The most important thing for succession to be handled well is having founders who along the way share more than they should. Too many founders think it's them. It's ego. It's frankly hubris at times. And they think it's all about them. I have a relationship with the LPs. I'm the one who raises money. I'm the one who built the track record. Now, if you want to have an enduring business, you evolve from being an investment shop to a franchise, you better build a culture, a team, and a capability. But it starts with attracting and retaining the best talent, and that is by sharing more than you probably need to.

55:55As you joined in an asset size that feels like it's within that sweet spot for what you found, how do you think about the growth of the business over the next bunch of years? It's something our clients ask us about a lot and certainly very mindful of the growth because you want enough capital to matter, but not so much you can't do the nimble, niche-y things. We're not going to be doing a lot of M &A within our platform, but we will grow organically. I feel we've got a bunch of room to run. In some cases, there are benefits and there are concerns. On the concern side, it is, can you keep doing the small managers?

56:26Can you still write a$10 check into a great funded sponsor who came out of Summit Partners, who you think is world-class and has a great deal? you want to be able to do that and not get so big you can't. On the good news side, things like seeding GPs. If you believe in someone, you'd write a check as an LP. If you write a bigger check and can own a piece of the GP, you have the option to do that. You ask the opportunity to lean into some deals that you really believe in. An area like oil and gas can be chunkier where you can write more meaningful co-investments. It allows you more flexibility.

56:57Writing a little bigger check in some cases creates a little bit better access, but you need to balance those two. So it's imperfect. We can rationalize everything. You need to be intellectually honest about that. There are trade-offs to getting bigger and hopefully we'll do it at a pace that is consistent with allowing us to make really good decisions. But if we're$200 billion in three years, that would be a shock to me. In the time you've been here, what have been the biggest upside surprises and the biggest challenges that you might not have foreseen? Biggest upside surprise is access. I came from HMC.

57:30I had breakfast with Charlie Munger at his home in LA. SES, I knew about the platform, I knew about the portfolio, I knew about the managers. But the access to co-investments in particular has so vastly exceeded my expectations. That's been fun. I think it's interesting when you have clients who have a lot of money, how responsive they are to the public market. Now, one of the benefits of having a diversified portfolio is you're not 70-30. You're not 70 % and so the market's down 20 on a certain day in April. It is fascinating that when you have the benefit of duration of capital, people still worry very much about the short term.

58:05Part of my job is to continue to provide guidance and comfort to people that we're thinking about the long term here. We're not traders, we're investors. We're not macro-driven, we're macro-aware. We're trying to optimize for the long term. It's important to think about that. Don't react to short-term swings. If anything, marginally lean into that. What we do is bring one tranche forward if your dollar cost averaging into Publix. It's not trying to turn too many dials or be too tactical. It's really to be more strategic. Lane, before I let you go, I want to make sure I get a chance to ask you a couple of fun closing questions.

58:42Before we get to the closing questions, I want to tell you about one of our strategic investments. We've made a few, and each are working on a product or service we think will be valuable to our community. One is Oldwell Labs, or OWL. OWL is the very best software I've seen for allocators to find and track managers, and I've seen a lot of them. Trust me, it'll be worth the look. There's a link in the show notes so you can learn more. And here are those closing questions. What is your favorite hobby or activity outside of work and family? I love working out because I love pushing myself. If my daughter and I are going for a bike ride, which we do every Sunday in the summer in the Cape, we're going from where we live in West Falmouth to Woods Hole, and we time.

59:24All my kids are wired the same way. If I get on Peloton, I can't help but chase the leaderboard. I love to play hockey. I get to play hockey with people who are my age and these days with people who are younger, which is quite humbling. I love the competition. I love working hard. I love pushing myself. These days, when I play with the young guys, I may only make one good play during the course of the skate, but it's fun. What was your first paid job and what'd you learn from it? My first real paid job was caddying. My parents are from Nova Scotia, Canada, very small town. My dad loved to golf, so grew up golfing.

59:57They did a caddy program. This is like a public course. For tournaments, we'd all caddy. I got put on a bag of someone who everyone scared me to death. They were like, he's mean. Last year, didn't even pay the person who caddied for him. I caddied for him. Turns out he was a nice person. Number one, reputation doesn't always hold. Number two, if you're polite, thoughtful, respectful, and work hard, it generally works out. My parents instilled great values. I came away from that. He ended up giving me a good tip, and I ended up staying connected with him and see him around the course thereafter.

1:00:31I went from being afraid of him to really looking forward. That was a great lesson where I learned don't judge a book by its cover. Don't listen to everybody. What's the best advice you've ever received? My parents instilled in this and lived it. education is the greatest gift you can give a child. That was number one. And they lived it. My dad went to school for 14 summers, his undergraduate degree. My mom was a registered nurse, did not have the opportunity to pursue a traditional education. They almost overvalued education, but viewed it as the greatest gift. Hence, when I had the opportunity to go to Harvard, they leaned in.

1:01:01The second thing was humility. One comment is always stayed with me. If you need to tell someone how good you are, you're probably not that good. That's something that resonated. it, people want to give you your resume all the time. How's your life turned out differently from how you expected it to? I never thought I'd have a career in finance. I feel so lucky every day. Professionally, I do something that I really enjoy and love. My family and friends. It's been a great ride. I feel blessed that I've lived a life that I never thought was possible. Lane, last one. If the next five years are a chapter in your life, what's that chapter about?

1:01:36Start with kids, as always. I've got two kids who are still playing college sports, one who's launched, but continuing for the next five years, I stay engaged with them, get to every game I can. Seeing them get launched is number one. Number two is for this last chapter, having the opportunity to build something that I'm really proud of. I didn't really feel like I could do it at Harvard or in the family office space. Something that I feel is back to one of those enduring foundational platforms. That is going to be important. The last piece for me in the next five is making sure we have time for friends.

1:02:10We get so busy in life. You focus on family, career, but making sure we have time for friends. As time goes by, my parents are getting older. You're seeing death happen. It goes by fast. So try to enjoy that time on all fronts. Elaine, thanks so much for sharing your wisdom across these incredible experiences you've had. Ted, such a pleasure to be with you today. Thank you. Thanks for listening to the show. If you like what you heard, hop on our website at capitalallocators.com where you can access past shows, join our mailing list, and sign up for premium content. Have a good one and see you next time.

1:02:44All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions, insecurities discussed on this podcast. All investments include various risks, including loss of capital. This recording also contains certain forward-looking statements that reflect the participants' current views with respect to certain current and future events.

1:03:17These forward-looking statements are and will be subject to many risks, which may cause future events to be materially different from those forward-looking statements or anything implied therein. Forward-looking statements that reference past trends or activities should not be taken as a representation that such trends or activities will necessarily continue in the future. Any forward-looking statement in this transcript are based upon information available to the participants on the date of this recording and are not expected to be updated or revised, even if experience or feature changes.