Rebuilding the NYU Endowment – Michelle Knudsen (EP.513)

We've walked a little bit of the middle ground between a more traditional asset allocation and a total portfolio approach. At the core of our asset allocation, we've tried to hone in on what are the different types of assets and the different roles that we want our assets to play in the portfolio. To put some quick numbers around it, NYU's portfolio today is about $8,000,000,000. We've turned over a little more than a third of it in the last two years. We've reunderwritten another third of it. There's another piece of it. We're still figuring out what we're gonna do longer term. The profile of

I'm Ted Seides, and this is Capital Allocators. My guest on today's show is Michelle Knutson, the chief investment officer at NYU, where she oversees the university's $8,000,000,000 endowment. Michelle joined NYU two years ago after fourteen years as an allocator at Partners Capital and the Mellon Foundation with a mandate to build a best in class endowment from a clean sheet of paper. Our conversation traces Michelle's lessons learned working at Goldman Sachs, a growing OCIO, and a foundation that shaped her investment philosophy and views on portfolio construction, risk management, and manag

Thank you for having me. I've been looking forward to this.

Why don't you take me back to the start of your career? Walk me through the core steps that lead you to where you are today.

I did not set out to become an investor. I thought I was gonna go into public policy. My parents moved to Washington DC when I was in high school. I was fascinated by policy and government. My whole college career was internships on Capitol Hill, political science major. The fall of my senior year, I got a call from Goldman Sachs. They had an open slot in their San Francisco office for the following fall. Did I wanna come interview? I remember sitting there on the phone thinking, I've never taken a class in finance, but why not? I had a good appreciation for the role that markets play in the g

What did you take away from those two years that have carried through?

The biggest thing is you always have to be prepared for the bad case scenario. You don't have to like the bad case scenario. You do have to think about what it could look like and have at least the outline of a plan for what you'll do in that situation. A lot of that comes down to communication and expectation setting. When I think about working with our investment committee, being able to articulate what could go wrong and what is our plan for how we manage through that. Do we have the necessary pieces in place to get through it? Is a critical part of all of the work we do, whether that's at

Were there other key lessons you remember from that time?

Using your network was a critical component of making those good decisions. One of the things I appreciated at Goldman was you had so many smart people focusing on different things in different parts of the firm. They were all happy to talk to their colleagues even if you were in a completely different group and you'd never met them. Being able to leverage those different information sources to pull together a better picture of what was going on instead of just focusing on your small microcosm was an important lesson, especially as I went to smaller organizations where you didn't have that bui