ALO36: The Endowment Playbook for Long-Term Investing ft. Paul Chai

**Paul Chai** (0:01)
Finding a team of people who think very differently from you and making it inclusive where everybody have the audacity and the courage to speak up when they don't see things the way you do, these are things I look for when we are trying to make an investment decision. When I make a mistake, I don't try to sugarcoat. I try to be honest and try to explain what we can do going forward based on the lesson learned.

**Niels Kaastrup-Larsen** (0:28)
Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict.
In each episode, we go deep with some of the world's most thoughtful minds in investing, economics, and beyond to understand how they think, how they prepare, and how they decide, and the experiences that shaped how they see the world. No noise, no shortcuts, just real conversations to help you think better and invest with confidence.

**Alan Dunne** (1:01)
Welcome back to Top Traders Unplugged. My name is Alan Dunne, and this week I'm joined by Paul Chai. Paul is the Chief Investment Officer at Kansas State University Foundation, a $1.2 billion empowerment. He was previously a portfolio manager at a fund of hedge funds. He has a background in engineering, and has been previously studied at MIT.
Paul, great to have you with us here. How are you doing?

**Paul Chai** (1:29)
I'm doing great. Thank you so much, Alan, for having me.

**Alan Dunne** (1:31)
Oh, great. Great to have you on. Looking forward to it.
Well, we always like to start off by getting a sense of people's backgrounds, how they got interested in markets, what was their journey to becoming an investor. I mentioned that you studied engineering at MIT. What made you ultimately make the leap into investing?

**Paul Chai** (1:49)
So my path into institutional investing was not exactly a straight line. I'm a first-generation immigrant from Taiwan, came to the States when I was 14 years old, and was raised by a single mother. Eventually went to MIT, as you mentioned, I was an engineer by training, started as an aerospace engineer, actually a structural engineer with a company called Pratt & Whitney that makes jet propulsion engines for airplanes as my first job. While I was an engineer, I realized that early on engineering was probably not my life's passion. Ended up going to business school at Carnegie Mellon, got an MBA degree, left my job at Pratt & Whitney, and moved back to Taiwan. I had an interest of becoming a management consultant. After some searches, I ended up at a company called PSMC which makes semiconductor chips.
I was an internal management consultant within PSMC where I led multi-division projects and looking at business processes and trying to identify ways to improve efficiency within PSMC in terms of how they run certain workflows and business processes. I was recruited by my former roommate from college to join his family office in Los Angeles in 2006
Initially, I was brought in as a jack of all trades to really help run the operations within the family office. I was managing investor reporting. I was also managing internal operating systems, looking into IT, as well as managing accountants and valuation process. But then 2008 hit. It was a difficult time for our family office's portfolio, which is essentially the hedge funds portfolio that was highly levered. The patriarch of the family decided to go semi-retired and step into more of an investment committee chairperson rule and left me with the task of managing our legacy from the hedge funds portfolio, while my former partner was said to look at other asset classes for us to invest in, including multifamily properties and direct private equity deals. That was really my first foray into investing. From 2009 through 2017, I was managing initially the Legacy Fund of Hedge Funds portfolio and then a new Fund of Hedge Funds portfolio incorporating some of the lessons we learned from during the GFC. And eventually also participated in some of the other investments the family does within multifamily real estate management, as well as some of the messaging financing deals that we have participated around the time.

**Alan Dunne** (4:42)
Very good. And at some point then obviously you made the Leap to Kansas State University Foundation. So tell us a bit about your old era.

**Paul Chai** (4:50)
Yeah. So I was age 40 back in 2016
I was having a little bit of a midlife crisis and started thinking about the purpose of my life and where I want to be 10 years from there. Part of the reason was my son was turning four years old, actually five years old, and he started to become curious about what I do for work. I was not inspiring myself with the description of I help wealthy people become wealthier. So eventually I took a strong interest in philanthropy, investing on behalf of philanthropy. I tend to think that that seed was planted within me early, where I was a beneficiary of philanthropy. I received scholarships while I was in college and had teachers and mentors who saw potentials in me before I necessarily saw it myself. Each of them planted the seed and today I joined in Kansas State was really part of my work is making sure that these seeds continue to be planted for somebody else. So I was fortunate to join the team back in 2018 We work on a very small team of three investment professionals, the CIO, myself, and we had an investment analyst.