Scott Wilson - Non-Traditional Endowment Investing

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money.
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**SPEAKER_2** (1:54)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (2:19)
My guest today is Scott Wilson. Scott is the CIO of Washington University's Endowment, which manages over $13 billion.
In this conversation, we discuss WashU's non-traditional endowment model and cover a variety of asset classes and geographies.
We talk about the qualities Scott looks for in managers, lessons from investing in Asia and emerging markets, and red flags in the venture space. Please enjoy this conversation with Scott Wilson.
I had the great benefit of being with your team live in New York City yesterday and we were laughing over breakfast about how to begin this conversation. I can't remember who said it, but somebody said, Patrick, I think this is the first time you've had an Alaskan quant fixed income trader, longtime Japan liver, now leading endowment investor on the podcast. I thought, yeah, that's probably right. I thought we could take some of those fun points in turn and talk about how each has shaped your investment philosophy for what you're doing now, leading WashU's very large endowment as I think one of the more innovative endowment investors out there today, if not the most. Maybe starting with quant fixed income trading, that seems about as far from, in the investing world at least, as far from managing an endowment as just about anything could be. What was that experience like? What did it teach you about markets that carries over to what you do now?

**Scott Wilson** (3:35)
I think it's a good background to have. I'm not sure how useful it is managing endowment, but it certainly teaches you a lot. Just running a trading desk, I think, teaches you about risk management and teach you about markets, it teaches you about how markets react to stress, what happens to bid offer, what happens to market participants.
For me, my biggest takeaway has probably been more in portfolio construction than ultimately if you think about running a basket of risk and whether you're sitting on an endowment or in my case, I was trading interest rate derivatives for most of my career. And really what you want is this portfolio of trades or investments that you think have positive expected value, hopefully have positive convexity, meaning the capital you have at risk is small relative to the amount you could ultimately make on each trade. And then you want uncorrelated outcomes.
If you have a portfolio that's constructed like that, whether it's an endowment or interest rate options, that portfolio is probably going to do reasonably well over long periods of time. For me, that's probably been the biggest takeaway. I mean, I met great people and learned a ton about various things. But in terms of what we apply today, it's probably more on portfolio construction and risk management than anything.