Blackstone's King of Hedge Funds on Alt Investing Right Now

Joe Dowling (0:02)

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Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

So Joe, you know what I realized? Two months ago, just two months ago, we were still getting a bunch of headlines about how private credit was the hot new thing on Wall Street and how multi-strategy hedge funds, podshops were huge and growing. And we've done quite a few episodes on these respective topics. But just a couple months later, the headlines are starting to look very different. And there's concern that if we get a substantial economic slowdown, you're going to get some sort of big blow up in private assets and things like private credit, private equity. A lot of people have been predicting that might happen for a while. And then when it comes to multi-strat, we've already seen a lot of talk about pain at the pod shops, given all the recent market volatility. So everything is feeling a little different right now.

Joe Weisenthal (1:18)

Well, we are recording this on April 22nd, and we got a headline. This has been in the news for a few days, but I guess it's just been confirmed. So speaking of the asset allocators, where's the real money come in from, right? And they're like wealthy families and wealthy. But the real big money is in these huge pots of money, whether we're talking about teachers, which if those in the know, the Ontario teachers' pension, or of course university endowments. We got a headline today. Again, it's been out in the news for a few days. Yale considering selling in the secondary market some of its private equity stakes. So these huge pools of money that are really upstream from the private credits of the world and upstream from the hedge fund multi-strat of the world. They're in a new era for all kinds of different reasons. And so to even understand these various alts, we have to understand how the people who fund the alts are thinking right now.

Tracy Alloway (2:15)

I am so glad that you mentioned all of that because that was a perfect intro, but also Yale specifically, because we all know that the emphasis on alts was pioneered by David Swenson over at Yale. And since then, you know, alts have been a big thing, not just in university endowments, but in lots of different types of institutional investing. So I am very pleased to say that we do, in fact, have the perfect guest to talk about all of this. We're going to be speaking with Joe Dowling, Blackstone's global head of multi-asset investing. He previously ran Brown University's endowment, and this was one of the best performing endowments at that time.

He did that for a decade before he joined Blackstone about four years ago. He's been called the king of hedge funds in some of our own Bloomberg coverage. So really, who better to talk about things like alternative investing, university endowments, and what's going on right now in private assets than Joe. So Joe, Joe D, welcome to the show.

Joe Dowling (3:19)

Thank you, Tracy and Joe. Thanks for having me.

Joe Weisenthal (3:21)

Can we make this a four hour episode? I already have so many questions. Anyway, go Tracy.

Tracy Alloway (3:26)

Okay, so first off, I'm going to have to be very careful in how I address each Joe respectively. But other than that, okay, so one of the things, Joe and I have kind of nibbled at the edges of the university endowment model. And one of the things that we know for sure right now is that they are very large pools of capital, worth billions and billions of dollars. And for that reason, we often see them compared to things like pension funds, maybe sovereign wealth funds. In your experience, are there differences between running a university endowment, investing for an endowment versus investing for traditional large institutional funds?

Joe Dowling (4:09)

Absolutely. But let's set the table with just how big the universe is because I think that will help us.

Tracy Alloway (4:15)

Please.

Joe Dowling (4:16)

There are 650 US endowments with a combined assets of 875 billion. That's from Nacubo. I'm using Nacubo data. But the average endowment is only 1.3 billion in assets under management, and the median is 235 million.

Tracy Alloway (4:38)

I appreciate that you came prepared with numbers.

Joe Weisenthal (4:41)

When you see a headline, Yale considering a private equity stake amid its funding turmoil, some reports have said it's up to $6 billion. How big of a deal is this? Like how much of an earthquake is that this entity, which we associate with long-term willingness to hold on to illiquid stakes, timber, so forth, how big of a deal is this?